Published On: Tue, Jan 29th, 2019

New Loans with Bad Credits Made Possible

One of the factors used by lenders and credit unions to assess the approval or disapproval of credit application is your credit score. Basically, credit score is a way of evaluation of credit risk from a prospective debtor – the ability of the debtor to pay, the likelihood of either payback or default payments or even non-payment of the debt applied for. Credit scores may be classified as follows:

Credit Score Rating
550 – 649 Poor
650 – 699 Fair
700 – 749 Good
750 – 850 Excellent

Credit scores in the mid-range or lower can make it difficult for you to qualify for personal loans from big banks. Late payments of bills, pending or final judgments on civil cases against you, and maxing out your credit cards limits can reduce these credit scores. Most debtors within this range of credit ratings usually ask the following questions:

photo 401(K) 2012 via Flickr

What is Bad Credit?

Do you have outstanding balances on your debts? Have you missed two or more payments on your loans? Do you have tax liens, reported bankruptcies or legal judgments against you? – These are among the factors that may contribute to developing bad credit.

Bad credit is a record of your past failures to keep up with your payments on credit agreements. An agency called credit bureau collect your credit history and compile it in your credit file. Bad credit typically results in bad credit rating and inability to secure a new loan in the normal and usual credit terms you have enjoyed in the past. Once you have poor credit, lenders are less likely to lend to you due to the increased probability that you will not be able to settle and pay off a new loan. Your credit applications may either be denied or if luckily approved, will likely to have less favorable terms as to interest rates. The increased rates are a way of compensating themselves of the risk they have taken in loaning to you.

Bad Credit Applied New Loans

Having bad credit may be detrimental to your applications, but won’t necessarily mean that you won’t be able to get a new loan. Several credit unions and lending institutions cater borrowers with bad credit, however, this most probably comes with high interest. Here are possible strategies on how you can get a new loan despite bad credit:

  • Rebuild your credit

There is no better way to rebuild your credit score but to resume paying off your outstanding debts. A material reduction in your outstanding debts will affect major financial status indicators such us credit utilization ratio and credit ranking.

You should also start evaluating your financial habits. Create wiser saving techniques and smarter spending patterns.

  • Get quotes from bad credit lenders

Rebuilding your credit may take some time. If you really are into applying for new loans or credit lines, you may start inquiring from your prospective lenders.

  • Enlist a consigner

Consigner or more commonly known as guarantor is a person who has agreed to pay your loan if you should default on it. Consignors more often than not increase the chances of the approval of your loans. Common consignors are those who are financially stable or those debtors who have maintained a good credit standing for a period of time.

  • Ask loans from family members or friends

You can ask for personal loans from your relatives, friends or colleagues. This won’t require you of good credit score. However, you have to keep your word. Agree on terms and outline the details of the amount you will borrow. Most of all, ensure that your debt won’t affect your personal relationship.

  • Get a secured loan

The possibility of approval is more likely if you apply for a secured loan. You may check for these types of loans from your banks or credit unions.

Where can you get a loan despite bad credit?

Some financial institutions may be able to tolerate the level of your credit score that even if it ranges within the poor to fair rating, they would still allow you to borrow new credit line from them, with lesser eligibility requirements. The following types of loans may be granted to you:

  • Home Equity Line of Credit (HELOC) – This is a secured loan, collateralizing your home. To qualify for this type of bad credit loan, you must have a healthy debt-to-equity ratio, which may mean not more than 80%. Beware, you may lose your home if you default on paying your debts.


  • Credit Union Loans – For situations like these, it is easier to secure a loan from credit unions than in banks since credit unions have more relaxed standards on credit. Loans from credit unions, however, since they will be unsecured loans, have shorter loan periods and may require you to pay sooner.


  • Peer-to-Peer Loans – Typically fielded from peer-to-peer lending sites such as Prosper, Lending Club, and Peerform; this is a new reliable way to borrow money, especially if you have a low credit score. P2P has become relatively popular, though these sites require good credit and employment histories. P2P can offer loans with an annual percentage rate (APR) as low as 5.24%.


  • Co-signed Loans – Commonly known as a guaranteed loan, wherein, a guarantor promises to be responsible for your debt in case you fail to pay back.


  • Secured Loan – It may be easier for a person with low credit rating to get a secured loan or those that are covered with mortgages or collaterals. This is mainly for building up your credit integrity that you will be responsible for your credit.


  • Loan from a family or friend


One of the most common connotations on having bad credit is that you won’t ever be able to borrow money again. This is partially true and partially false. Your usual credit terms, likelihood and ease of application and approval may change, and the types of loans are limited to what is agreeable to your credit score. But bad credit won’t necessarily mean “NO”, but rather “NOT ALL”.

Author: Charlie Brown

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