How to Get a Small Loan with Bad Credit

Date posted: Sept. 10, 2015

If you have bad credit, or if you have recently filed for bankruptcy or consumer proposal, you may find it difficult to get a small loan from traditional lenders. Despite this, some financiers will work with you to get you the money you need, and you will only need to meet a minimum set of requirements to qualify.

Option 1 – Small Installment or Personal Loans

The first option for getting a small loan with bad credit is a personal or installment loan. These are generally small to moderate amounts of money that you will repay over the course of a few months, or even up to a year. Private lenders and peer-to-peer lending services exist online to provide you with these funds, but it is important to do your research and study the terms of your loan offers very carefully. You should expect higher-than-usual interest rates due to the risk involved for the lender.

Option 2 – Payday Loans

Another way to get quick cash with bad credit is with a payday loan, but you should use these with extreme caution. A payday loan can provide you with access to instant cash with most lenders transferring your funds into your bank account in as little as one business day. Keep in mind that these loans come with incredibly high APRs (usually between 549% and 600%), so you should always repay them as quickly as possible. Review the terms of the agreement very carefully and never accept the loan if you cannot repay the entire amount on the specified repayment date. Otherwise, accruing interest charges and late fees become difficult to pay off.

Option 3 – Secured Loans

If you have something of value that you can put up for collateral, such as the title to your vehicle, expensive jewelry, or some other possession of value, a secured loan is another outstanding way for someone with bad credit to get a small loan. Briefly, you will take your collateral to the bank or financier, which will hold it in exchange for a cash loan. Then, once you repay the loan entirely, you can take your collateral with you. In the case of a title loan, you can still drive your car. The financier only holds the title, but it can use this to repossess your vehicle if you default on your payments.

Option 4 – Small Loans from Credit Unions

Finally, if you have bad credit but do not feel comfortable with any of the above options due to high interest and increased risk, another option you may have is a small loan from a credit union. Credit unions differ from banks in that they often rely on more than your credit history to make lending decisions. They will also take things like your income, your employment history, and the amount of your monthly payments to determine whether you qualify for a small loan. Often, credit unions will provide small loans when traditional banks will not.

If you have bad credit but you need a small amount of money in a hurry, you can go about getting it in a few different ways. Small loans from credit unions and secured loans will give you the best interest rates, but payday loans and small installment loans often give you a better chance at getting the funds you need.

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