
Whether you require a personal loan for emergency cash assistance, debt consolidation, or even to cover wedding expenses, your credit score significantly impacts your cost of borrowing. Credit scores range from 300 to 850, and scores less than 580 are considered poor or bad. Bad credit makes it challenging to qualify for loans, increases the chance of your loan getting denied, limits your borrowing to small amounts, or has lenders charge you high-interest rates.
While it is preferable that you raise your credit score by making full payments on time or become an authorized user on a family member or friend’s credit card, you also have the option to opt for bad credit loans. Let us discuss the types of bad credit loans you can secure.
1. Credit Unions
These are not-for-profit organizations that provide socially responsible financial services for people within a community or organization. Members may live in the same town or be part of the same religious group, trade union, or more.
You need to be a member or have a savings account in the union to borrow from them. They often look beyond your credit scores and consider your personal situation, character, and ability to repay. Profits made are returned to members through reduced fees, lower loan rates, and higher savings rates.ย

2. Auto Title loans
An auto title loan or car title loan is a short-term loan where you pledge your car as collateral. Lenders often have no credit requirements but require you to have complete car ownership. The amount loaned is often half of the current cash value of your car.
If you fail to pay back, the lender assumes ownership and may sell it to recover the money lent. You can easily get auto title loans for older cars too. Factors like mileage, the model, the year, the carโs condition, and your income and ability to pay your loan can affect the amount loaned.
3. Home Equity Loans
Home equity or a second mortgage allows you to borrow money by leveraging your home as an equity that serves as collateral for the lender. You can determine the amount by subtracting the difference between your mortgage balance and the homeโs current market value. You should have 15% to 20% equity in your home to qualify for a loan. Home equity loans have two varieties :
- Fixed rates loans: You are provided once with a sum of cash which you pay back at a fixed rate over a period of time.
- HELOCs (home equity lines of credit): Allows you to withdraw funds when needed (In limited amounts). They can have variable interest rates as you repay what you borrowed during the draw period.
The interest you pay here is often tax deductible.
4. Joint Personal Loans or Co-signer
Expert Gordon Simmons explains that each borrower has equal ownership over the repayment in a joint personal loan. Co-signers take responsibility without ownership; they will only bear responsibility for payments if you fail to repay.ย
You can ask a friend or family member with a good credit score to become a co-signer; here, the lender will set loan terms based on their credit score. The loan will appear on both of your credit reports; Missed payments will bring down both credit scores. Your co-signer should have the following to help you qualify:
- 700+ credit score
- Low debt
- High income
Endnote
You can find applications for bad credit loans online and even get money in your account within days. However, most loans are not long-term solutions โ they are only there to alleviate your immediate needs. Bad credit loans can be risky as people may fall victim to scammers: be wary of lenders who donโt do a credit or income check, look for proof of employment, or arenโt registered.