How can I get a personal loan if my credit is bad?

Consolidating credit card debt? Renovating your home? If you need more financial flexibility or a fast influx of cash, you may want to consider taking out a personal loan. Personal loans are often considered “good debt,” because they generally come with lower interest rates than credit cards.

However, how fast and easy it is to get a personal loan depends on your creditworthiness. Lenders consider your credit score, your payment history and your income when they’re reviewing your application. If you have a credit score lower than 670, you won’t qualify for many traditional loans. 

But that doesn’t mean a personal loan is out of reach. These alternatives can help decrease your chance of rejection and help you meet your financial goals.

Related article: Considering a debt consolidation loan? Here’s what to look for

Find a co-signer for your personal loan

If you have a family member or close friend with good credit, you can ask them to co-sign for your loan. But you should be prepared to demonstrate your ability to repay the loan before you ask for this favor — your co-signer will be on the hook for your debt if you’re unable to make your payments. If you default on the loan, the lender can sue your co-signer, and your default will show up on their credit report for seven years.

Consider a credit union when applying for a personal loan

Credit unions tend to be more flexible than traditional lenders when it comes to offering small loans to people with poor credit. However, credit unions are more likely to lend to someone they already have a relationship with. So, consider opening an account with a local credit union to start building those ties before you apply for a loan.

Look to online lenders

Just because your credit isn’t good enough to qualify for a bank loan, there are some online lenders who work with borrowers with bad credit. But to avoid paying more than you need to — or more than you can afford — read the fine print and do the math before you sign on the dotted line. 

“Low credit score loans generally come attached to higher interest rates,” says Charles Phelan, a debt relief expert and founder of ZipDebt. “Make sure you know all the terms of the loan, how long it will take to pay back, the interest rate, penalty clauses, and so on.” 

Cash advance and “payday” loans can seem appealing when you’re in a tough spot, but the costs rack up fast. Plus, payday loan providers don’t report to the credit bureaus, which means these loans won’t help you rebuild your credit in the long-term.

Defend your creditworthiness

Make an appointment to speak with a potential lender before applying for a loan. Bring alternative data to the meeting that highlights your financial health. Tax returns, pay stubs, bank statements and your debt-to-income ratio can all help make the case that you are more creditworthy than your credit score suggests. If you plan to use the funds for something that will improve your financial health, such as consolidating high-interest debt, offering that information can also improve your chance of being approved.

Look at secured loans

Putting up an asset you own as collateral can encourage lenders to offer you a loan, even if you have a low credit score. If you’re making improvements to your home, for instance, you may qualify for a loan or line of credit that you can take out against your home equity. The more the asset you use to secure the loan is worth, the more you will be able to borrow. But be careful: If you fail to make your payments, your lender will have the right to repossess your property.

Related article: The pros & cons of secured and unsecured personal loans

Lean on peer-to-peer lenders

Peer-to-peer loans are funded by a group of individuals rather than a bank, and peer-to-peer lending sites often have lower credit thresholds than traditional lenders. However, these loans come with additional costs, such as origination fees for processing the loan. These loans also tend to take longer to finalize, because multiple reviewers may need to look over your application before your loan is funded. But many of these lenders use a prequalification process that helps you determine whether you’ll qualify for a loan before running a hard inquiry on your credit report.

If you can wait for the influx of cash, there are several ways you can improve your credit score so you can qualify for a low-interest personal loan in the near future. Reducing your revolving credit card balances, becoming an authorized user on another person’s credit account and making debt payments on time can boost your score in just a few billing cycles. It might be easier than you think to repair your credit — and a higher credit score can save you thousands of dollars over the lifetime of a personal loan.

Related article: 5 keys to successful debt consolidation