It’s no secret that acquiring a personal loan can be extremely difficult for someone who has a poor credit score. Not only do the options become limited, but even borrowing cash becomes overly expensive.

While there is no substitute to a healthy credit score, sometimes situations can go beyond our control, especially when money is involved. This, however, does mean the end of the road for those who need funds and are looking to take out a personal loan despite a bad credit score.

Mentioned ahead are a few alternatives in this regard.

Consider Credit Unions

When no bank is willing to entertain your request of taking out a loan due to your poor credit score, credit unions can come as a ray of hope. Even though they aren’t as big as banks, they are financial institutions that work more or less like one. If all goes well, they will seriously consider your request to lend you funds.

Credit unions are run by their members and if you want to borrow from them, you will have to become one too. They’re non-profit organizations that lend money with low interest rates to other members in need of money.

It, therefore, makes sense that you locate the credit unions nearest to you, figure out their terms and conditions and consider borrowing from them without wasting any more time.

Try Peer-to-Peer Lending

Peer-to-Peer (or Person-to-Person or P2P) lending is another option you can consider for taking out a personal loan when banks do not aid you. As the nomenclature suggests, you can directly borrow money from a person instead of an organization.

The processes for P2P lending are carried out online and are perfectly streamlined, i.e. borrowers pay lower rates and investors earn high rates. It is, therefore, a popular strategy with both the parties involved.

To take out a loan, the borrower is required to provide his/her loan details, which include his/her name, loan amount, and when and why he/she wants the loan. Once this information is submitted, potential investors verify it and review it to check whether or not he/she meets their criteria for getting a loan. Loan applicants are either screened out or selected in this way.

Home Equity Matters

Got poor credit? Cannot fix your credit score? Looking for a personal loan with low interest rates? If your answer to these questions is in the affirmative, then home equity can be of great help. However, there’s a flipside to it as well: it can land you in hot water in case you’re unable to repay the borrowed amount. You could lose your house. It would, therefore, be prudent to weigh all your options before you go for this one.

But, if you have a steady flow of income and are certain that you will be able to repay the loan on time, then home equity makes complete sense. Loans taken out on home equity not only attract lower interest rates, but the interest is tax-deductible. However, do ensure that you borrow from a reputable lender to steer clear of unwanted trouble.

Connect with Lenders

You may think it is impossible to find lenders when you have a bad credit score, but it really isn’t. You can start your search by inquiring with a few banks, beginning with the one where you have an account.

If your application is rejected at one bank, chances are it will be rejected by others as well. In such a scenario, you can check for online services that lend funds. Alternatively, you can also meet potential lenders in person as that will give you a better chance of explaining your financial situation to them.

Before meeting them, however, ensure that you have all the necessary documents in place. You will need your loan application, credit report, income statement, asset declaration form, and other documents as may be required by them. Know exactly what you’re talking about, convince them about your requirements, reassure them that they will be paid back on time, and they will be happy to lend you.

Get a Credible Co-Signer

A co-signer is someone who can increase the likelihood of your procuring a personal loan when you don’t have a good credit score. However, it is crucial that your co-signer is a credible person with a healthy credit score. Further, he/she should be willing to give a guarantee for your loan.

Finding a co-signer can be a tough task as there are several risks involved for him/her as well. For instance, if you are unable to repay your loan on time, your co-signer will end up damaging his/her credit score too. This can have several repercussions on your ties with him/her, which is why it is best to explain all the pros and cons of the agreement to him/her before taking this step.

Use Assets as Protection

Getting a personal loan even when you have a bad credit score can be possible if you have sufficient assets to protect you. They can be used as collateral. However, just as in the case of home equity, there’s the risk of losing your property here if you’re unable to repay the loan. But, if you’re sure of being able to repay the amount, then this can prove to be a good option.


Having a bad credit can never be a good thing, but taking charge of your finances can make things better. Doing so will make you more confident about your financial status. The above options can make you feel that much more secure about your finance being under your control. Of course, you can always work on enhancing your credit score for the best results. The bottom line is that having a concrete plan and going according to it can ensure that you’re not stuck in the ‘bad credit’ category forever.

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Author's Bio: 

Korie Cantor is a blogger and writer who blogs about fashion and lifestyle. She possesses a great sense of style. Being a fashionista, she loves to share her thoughts about fashion and it's latest trends.