Financially speaking, a bad credit score can be a death sentence.
Interest rates for credit cards and loans will be higher than average for those with low credit, and if scores are low enough, an application for a loan or credit could be outright rejected.
Though bad credit can hamper efforts to borrow funds, don’t be intimidated by the process – search for solutions no matter how uncertain approval is.
“People seeking a loan must remember that they’re a customer buying a product and that they shouldn’t allow lenders to intimidate them or make them feel as if the lenders are doing them a favor by granting credit,” the Consumer Financial Protection Bureau notes.
Options such as secured loans, using a cosigner and borrowing a small amount of money can be ways not only to borrow money, but to improve the chances of better rates in the future.
Search Out Secured
Loans generally come in two types: secured and unsecured.
- Secured: Requires the borrower to provide collateral. A mortgage is an example of a secured loan – if the borrower doesn’t pay back their loan, the lender can take the house.
- Unsecured: Does not require collateral, making it riskier for the lender since it has no collateral if the borrower fails to repay.
Secured loans are a good fit for consumers with bad credit because the collateral they offer opens the door for borrowing. Examples of collateral used for secured personal loans include a savings account or a vehicle title, according to the Federal Deposit Insurance Corporation.
Another advantage of secured loans is that rates may be lower since collateral offsets some of the risk a lender would typically counteract with a higher interest rate.
“Lenders consider [unsecured] loans more risky than secured loans, so they may charge a higher interest rate than for a secured loan,” the FDIC notes.
Convince A Co-Signer
Lenders often give borrowers the option to add a co-signer to a personal loan. A co-signer is someone who shares responsibility for the loan – if the borrower doesn’t make payments, they can be on the hook for what’s unpaid.
Because they share responsibility for the loan, a lender will consider the co-signer’s credit score when assessing a loan application.
Borrowers with bad credit who bring in a co-signer with excellent credit might increase their chances of approval and/or lower interest rates, since together the two borrowers have a stronger credit profile than the borrower with bad credit.
From the lender’s perspective, there are now two people backing the loan, which spreads their risk across two people – one with a poor track record of handling credit and one with a good track record.
Co-signers should take the responsibility seriously, as co-signing for a risky borrower could damage their credit.
“Any missed payments could also appear on your credit reports and impact your credit scores, making it harder for you to get credit in the future,” the CFPB warns.
Look For Low-Credit Lenders
Certain lenders specialize in offering loans to borrowers with bad credit. Generally speaking, borrowers should prepare for higher-than-average interest rates – the loan will be more expensive over time because of higher interest charges.
The average personal loan rate through the first three months of 2026 was 11.40 percent, according to the Federal Reserve. The high end of personal loan rates – which include other factors such as the amount borrowed and repayment term – can exceed 30 percent.
For example, personal loan lender Avant’s annual percentage rates – interest rate plus additional charges factored into the loan cost – can be as high as 35.99 percent.
Payday lenders should be avoided, the government’s credit union information resource MyCreditUnion.gov recommends.
These lenders tend to charge proportionately high fees for loans – up to an APR of nearly 400 percent, in some cases, according to MyCreditUnion.gov.
Instead of a payday loan, consider a payday alternative loan from a credit union. The lender typically charges an application fee of up to $20 and provides loans of $200 to $1,000 repaid in periods of one to six months, MyCreditUnion.gov notes.
In general, borrowers have to be with the credit union for at least a month before applying for a payday alternative loan.
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