Loans and Financial Options When You Have Poor Credit Score

Are you in the habit of paying your bills past their due dates? If so, you won’t only face the consequences of paying hefty penalty fees; failure to make timely payments and other poor borrowing practices can damage your credit, affecting your ability to secure loans in the future.

Lenders and creditors use your credit score to determine your capacity to repay a loan on time. A credit score ranging between 300 and 579 is considered poor. Besides reducing your chances of approval for loans and credit cards, poor credit scores can make acquiring a cellphone contract, renting an apartment, or securing specific jobs more challenging.

But all hope is not lost. There are several ways to improve your credit score. But suppose you are in a tight financial situation and need financing now. Some lenders are also willing to work with borrowers with poor credit scores, so you may still be able to borrow money.

This article explores various loans and financial options you can qualify for, even with bad credit.

Personal Loans

Most personal loans are unsecured, meaning you don’t have to worry about pledging any of your assets to get approved for the loan. Traditional personal loans might be harder to acquire since banks and credit unions often have strict credit score requirements.

Fortunately, many online lenders offer personal loans for 550 credit score. There’s no restriction on how you use a personal loan. Hence, it’s an excellent option if you need to pay for an unexpected expense.

Secured Loans

These loans need some form of collateral as a prerequisite for borrowing. It can be a property or vehicle to secure the loan. Since the collateral reduces the lender’s risk, you will likely get approved even with a poor credit score.

You might also be able to negotiate for a lower interest rate. But always read the fine print to ensure you get the best deal. A secured loan is ideal if you need to borrow a large amount of money. The drawback is that the lender can seize your collateral if you stop paying the loan.

Payday Loans 

A payday loan is the easiest option to qualify for if you have poor credit. That’s because lenders pay little attention to your credit history. The approval of a payday loan primarily depends on your paycheck. However, the amount you can borrow is small, and you have to pay it in full within two weeks or by your next payday. 

Guarantor Loans

A guarantor loan is another excellent alternative, especially if you have difficulty getting a loan approval because of poor credit. You only need someone with a good credit history to guarantee the loan. 

A guarantor can be a family member, friend, or work colleague who agrees to cover the loan payment if you can’t. This option is riskier for your guarantor, as they must pay the loan if you can’t make the payments. But don’t use it as an excuse not to repay the loan. 

Other Financial Options to Consider

Even if you get approved for a loan, the lender may still consider your credit score a risk factor. There’s a chance that they may charge a higher interest rate on the approved loan, making the loan more costly. It’s possible to negotiate with a lender, but you might also want to consider the following alternatives first:

Borrow from a Relative or Friend

Borrowing money from a relative or friend is an excellent option, as you won’t need to go through a credit check. Depending on your relationship, they may choose not to charge interest on your borrowed money.

Suppose this option is possible for you. Ensure you make your monthly repayments to avoid strain in your relationship. Creating a written loan agreement to outline the terms and repayment schedule is also wise.

Take Advantage of Assistance Programs

Depending on your specific needs, there are various assistance programs you can take advantage of. Some government programs may include cash grants, housing assistance, and utility bill relief. If it caters to your needs, this option might be a good idea before committing to a high-interest loan.

Tap on Emergency Savings Fund

Loans or borrowing money are great financial tools when you need immediate financing. But an emergency savings fund will always come in handy if you have to cover an expense that you didn’t expect. This option may not be feasible for you at the moment. Even so, this might be an excellent time to consider starting to build one.

The general rule of thumb is to set aside at least three to six months of living expenses in your emergency fund. A dedicated fund for financial emergencies can help avoid incurring high-interest debt, especially when you already have bad credit.


A poor credit score can result in wide-ranging repercussions. Although specific lenders and creditors cater to individuals with bad credit, it’s not an excuse to ignore your credit score. You will be eligible for better financial opportunities if your score is in a higher range.

Hence, take proactive measures to maintain a healthy credit score. Ensure that you make timely payments on your bills and other financial obligations. You’ll surely reap the benefits in the future, if not now.


I am Finance Content Writer . I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. Linkedin

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