Bad Credit Loan: 6 Ways to Borrow Money With Bad Credit

When money is tight, and you need a little more liquidity to ease the situation, you might need to get a loan. But what if you have bad credit? Bad credit can be a deal-breaker when it comes to getting the cash you need. In fact, some banks will turn you down for a personal loan if you have poor credit.

Having poor credit doesn’t automatically exclude you from getting a loan, though. There are ways to get a loan when you have bad credit.

Paying an Interest Premium

Before you head out to get a bad credit loan, it’s crucial that you understand the implications involved. Your loan is going to be a subprime personal loan, meaning that you won’t qualify for the best interest rates. You will be required to pay an interest rate that is much higher than you would pay if you had good credit.

Because your interest rate is higher, it means that you will pay more overall when it comes time to repay the loan. That is something that you have to be willing to accept if you decide to get a personal loan when you have bad credit and you borrow from an “official” lending institution.

Six Options for Getting a Bad Credit Loan

There are various options available to you when you have poor credit. Here are five options you can consider if you want to get a subprime personal loan:

1. Payday Loan

In reality, this type of loan should be a last resort. Payday loans are notorious for their high fees. However, many payday loan places won’t run a credit check as long as you can show that you have a job and a bank account. That can outweigh some of the drawbacks associated with what many consider predatory loans.

You can get an “advance” on your paycheck with little hassle. However, you might not be able to get as much as you would like. Many of the instant cash places have limits of between $500 and $2,000.

It’s important to be prepared to repay this loan quickly, though. Renewing regularly can result in a dangerous cycle.

2. P2P Loan

For those who have trouble getting approved by the bank, one option is the P2P loan. A P2P loan allows you to get funding from a variety of sources. If your loan is funded, you receive the cash and begin repaying the loan.

Many people who can’t get personal loans from a traditional bank are often able to receive money with the help of P2P lending. You have to be careful about the amount you ask for since you get none of the money if you don’t manage to fund your account fully.

3. Ask Your Friends or Family

If you are concerned about paying a high-interest rate for a subprime personal loan, you can turn to your friends and family. Even if you have to pay interest to a loved one, it’s probably going to be lower than you would pay at a bank, and certainly, it will be a better deal than a payday loan.

Just make sure that you are prepared to repay the loan. You don’t want this unpaid debt ruining your relationships with those you love.

Be prepared to take NO for an answer and look at this from their perspective — what does it mean to lend to friends and family.

4. Secured Loan

If you can’t get an unsecured loan with bad credit, consider a secured loan. With a secured loan, you put up something you own — an asset — as collateral for your loan. This means you agree that the lender can take the collateral if you fail to pay.

Some secured loans, like those attached to secured credit cards, use money in a savings account as collateral. But you can also get a car title loan, or go to a pawn shop and get a loan based on some other items that you have. If you have equity in your home, your credit doesn’t matter as much, since you can secure your debt with the house.

You have to be careful, though, since you could lose your assets if you secure your loan with them.

5. Get a Co-Signer

Finally, if you can’t convince someone to lend you the money, you might be able to get a co-signer. If someone with good credit is willing to back you, you might be able to get a personal loan if you have bad credit. Just make sure that you repay the loan since you don’t want to put your loved one on the hook for your default.

6. Credit Card Cash Advance

If you have a credit card, a credit card cash advance is another option to access cash quickly; however, this comes with its own set of issues.

Be sure you understand the disadvantages of credit card cash advances before you decide to move forward with this option.

Bottom Line

There is really no good option for a bad credit loan. In the end, your best bet is to find a way to reduce your expenses and increase your income. Once you’re able to resolve your immediate money problem, take the steps you need toward better finances.

Miranda Marquit

Miranda is a professional personal finance journalist. She is a contributor for several personal finance web sites. Her work has been mentioned in and linked to from, USA Today, The Huffington Post, The San Francisco Chronicle, The New York Times, The Wall Street Journal, and other publications. She also has her own blog at Miranda Marquit.