Loan Options for People with Bad Credit

The Island Now


Lenders tend to look at credit scores to determine if borrowers can repay the loan in the long run. If you have bad credit, it might be difficult for you to get a loan. Furthermore, some lenders won’t lend you any money or offer you loans with higher interest rates and fees if you have bad credit.

What is Bad Credit?

It is vital to understand what bad credit really is. Bad credit refers to having a low or poor credit score. This is often caused by maxed-out credit cards, late payments, or short credit history. Moreover, making on-time payments and maintaining your low credit utilization low are ways to improve your credit.

Credit-scoring models, such as FICO and VantageScore, use different formulas to determine your credit score (mostly from a scale of 300-850). The credit-scoring model that will be used for your loan application will vary from one lender to another. Below are the score ranges that you should know about:


FICO Ranges
Credit Score Rating
300-579 Very Poor
580-669 Fair
670-739 Good
740-799 Very Good
800-850 Exceptional


VantageScore Ranges
Credit Score Rating
300-499 Very Poor
500-600 Poor
601-660 Fair
661-780 Good
781-850 Excellent


Loan Options You Can Consider If You Have Bad Credit

Here are the loan options you should know about if you have a low credit score:

Payday Loans

Lenders that offer payday loans don’t usually check your credit status during the loan application process. Hence, having bad credit is not a big deal and you can get up to $500 or less under this type of loan.

Payday loans are considered as short-term loans. This type of loan is usually due on your next payday and sometimes carries high fees. Furthermore, some US states banned payday loans, while other states chose to set limits regarding its fees and loan amount.

Car Title Loans

Car title loans are also considered short-term loans. This type of loan gives importance to collateral rather than your credit score status. Under this type of loan, the borrower needs to pledge the vehicle’s title as collateral.

Car title loans usually last for 30 days or less. This type of loan usually offers an amount that is 25% to 50% of the value of the car you are borrowing against. Since car title loans use your vehicle’s title to secure the loan, this means that you might lose your vehicle if you fail to repay the loan.

Personal Loans

Banks, credit unions, and online lenders offer personal loans. It can either be secured or unsecured. The main difference between the two is that the former requires collateral, while the latter does not.

Some lenders offer personal loans for borrowers with bad credit that may come with higher interest rates and fees. However, they can be less expensive compared to payday loans and car title loans. Furthermore, you can get more considerable funds and a more extended repayment period when you get a personal loan rather than a payday loan or car title loan.

Peer-to-peer Lending

This type of loan is also known as P2P lending or marketplace lending. This is a system where investors can fund loans to borrowers. Your credit score might not be reviewed thoroughly as compared to other financial institutions that offer to fund. Additionally, P2P lending can issue larger amounts, lower interest rates, and longer repayment terms than payday loans and car title loans.

Payday Alternative Loans

Payday alternative loans are available at some credit unions. This type of loan is also considered short-term, and the payday alternative loans have lower interest rates and fees than the traditional payday loans.

How to Improve Credit

If you think bad credit loans are not right for you, then you should work on improving your credit. Having a good credit score can help you get loans with favorable terms and low-interest rates. It can also help to reduce the overall cost of the loan. This will eventually save you some money in the long run. You can try the following to help boost your credit:

Check Your Credit

It is vital to keep an eye on your credit status. Your credit may have errors that you are not aware of. By checking your credit, you can quickly solve such errors and take advantage of your yearly free credit report so you will be able to check your credit.

Maintain Your Credit Utilization Low

The credit utilization ratio is an essential factor in your credit score. You can calculate this by dividing your total credit balances and credit limits. The more available credit that you spend monthly, the more it lowers your credit score. Moreover, you can improve this by paying down debts and getting a higher credit limit.

Be Wise About Credit Applications

You should know how to manage debts well. Most of the time, applying for new credit needs a credit inquiry that may negatively affect your credit score. However, having different kinds of credit can positively impact your credit score.


Having bad credit does not close your doors to getting a loan. There are still options left for you to consider. However, in deciding whether to get a loan with bad credit, you need to make sure to choose a loan that you can afford. You wouldn’t want to hurt your credit score even more.



Share this Article