Can I Get a Personal Loan with a Low Credit Score?

Bad credit happens. Maybe you missed a few payments during a tough time, maybe unexpected medical bills piled up, or maybe you’re just starting to build your credit history. Whatever the reason, ending up with a low credit score can be frustrating.

And when you need money for an emergency repair, an unexpected expense, or to consolidate debt, that low score can feel like a barrier. Still, having a low credit score doesn’t automatically mean you’re out of options.

What Counts as a Low Credit Score?

First, let's talk about what we actually mean by "low credit score." Generally speaking, credit scores range from 350 to 850, and anything under 650 is typically considered high risk. Once you're below that 650 mark, most traditional lenders start getting nervous. That's because your credit score is supposed to tell them how risky it is to lend you money. The lower the score, the higher the perceived risk.

Can You Actually Get a Loan with a Low Credit Score?

The short answer is yes, you can get a personal loan with a low credit score. However, it’s usually more difficult and often comes with higher costs compared to borrowing with good credit.

Here’s why. When lenders review your application, they’re assessing how likely you are to repay the loan. Your credit score plays a big role, but it’s not the only factor they consider.

Lenders also look at your income to see if you earn enough each month to cover your current expenses along with a new loan payment. They’ll review your employment history too, since a steady job shows consistency and reliability.

Another key factor is your debt-to-income ratio or DTI. This measures how much of your monthly income goes toward paying existing debts. A high DTI suggests you may already be stretched thin, while a lower ratio shows you have room in your budget to handle another payment.

Some lenders may also take collateral into account. If you’re willing to use something of value, such as a car, savings account, or other asset to secure the loan, that lowers their risk. In that case, if you fail to repay the loan, they can claim the collateral to recover their losses.

How to Improve Your Chances of Getting Approved

Getting a loan with low credit can be challenging, but there are a few practical strategies that can strengthen your application and improve your chances of approval.

Apply with a Co-Signer

One option is to apply with a co-signer. This is someone with good credit who agrees to sign the loan with you and share responsibility for repayment if you can’t make the payments. It’s a major commitment, so it usually needs to be someone close to you, like a family member or trusted friend.

Having a co-signer can increase your chances of approval because the lender looks at their credit history in addition to yours. Just make sure you can keep up with payments, since any missed or late payments will affect both your credit and your co-signer’s.

Offer Collateral with a Secured Loan

Another approach is to offer collateral through a secured loan. This means using something you own, such as a vehicle, savings account, or another asset, as a guarantee for the loan. Many credit unions offer secured lines of credit backed by funds in a savings account.

The money stays locked while you make payments, and as the balance goes down, those funds gradually become available again. It may not give you instant access to cash, but it shows the lender you’re dependable and reduces their risk.

Both of these options can make it easier to get approved when your credit score alone isn’t enough. They can also help you rebuild your credit over time. Since payment history makes up about 35% of your credit score, paying on time consistently can lead to steady improvement in your overall credit health.

What to Watch Out For

When your credit is low, it’s easy to feel pressure to take the first loan offer that comes your way. Unfortunately, that’s exactly what predatory lenders look for. These lenders target people who are struggling financially and offer deals that sound appealing at first but come with hidden fees, sky-high interest rates, or unfair terms.

Upfront Fees

Be cautious if a lender asks for money before you receive the loan. Legitimate lenders take their fees out of the loan amount or include them in your payments. They don’t ask you to send money through a wire transfer, prepaid card, or any other method before processing your application.

Guaranteed Approval

Avoid any lender that promises guaranteed approval. No legitimate lender can approve you without reviewing your financial details first. If they say yes before knowing anything about your income or credit history, that’s a major red flag.

No Credit Check Claims

Be skeptical of lenders who say they don’t check credit at all. Some legitimate lenders focus more on income than credit score, but skipping any kind of financial review usually points to a scam or a loan with extremely high interest rates and harsh terms.

Taking a little extra time to research and compare lenders can save you a lot of trouble later. Always read the fine print, ask questions, and make sure you fully understand the loan terms before you sign anything.

Read more: Understanding What You Can and Can’t Do with a Personal Loan

Final Thoughts

Getting a personal loan with low credit is possible, but it’s important to be realistic about what to expect. You’ll likely face a higher interest rate than someone with strong credit, your loan amount might be smaller, and the approval process could take a bit longer. Still, that doesn’t mean you should give up or settle for a lender with unfair or predatory terms.

If you’re exploring loan options, our local credit union can help. We not only offer a range of products but also provide guidance to support your overall financial goals. Credit unions often have more flexibility than large banks when it comes to working with members who have less-than-perfect credit.

Visit First Pioneers in Lafayette or New Iberia to talk with one of our team members. We serve the greater Acadiana area and are dedicated to helping our members achieve financial success. Sometimes a simple conversation is all it takes to find the right solution for your situation. And even if now isn’t the right time for a loan, we can help you create a plan to strengthen your credit and prepare for future opportunities.