How To Get Approved For a Loan With Bad Credit


Everyone tells you to have good credit, good employment, and excellent assets to get approved for a loan.

That is the case in most situations because they want to know how you can repay your loan. So you go to the bank and give them lots of documents.

Answer all their questions and hope your credit score is good enough and give them references most times.

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After all this work and sweat you find out you’re not approved. To make matters worse, they won’t even tell you why.

As a mortgage consultant for many years, and having worked directly with lenders, I got to see thousands of credit reports.

Sometimes I felt a client was going to get a loan with no problem after speaking with them, but later in the process came to find out they got disapproved. You can’t judge the book by its cover.

If they have disapproved you, don’t get down about it. Now is the time to find out why and how you can get on track to having a stellar credit rating for your future.

We know they’re looking for someone with good credit, good employment, good income, and excellent assets.

The reason is not to judge anyone but to simply ensure the borrower has what it takes, the capacity and willingness to repay the loan.

Keep in mind lenders are looking for five things. Put yourself in their shoes and think about the risk of losing money and not getting paid back.

They call these five things lenders are looking for the 5 C’s of Lending: Collateral, Capacity, Credit, Character and Conditions.

Each of these carries weight when a lender looks into lending you money. It’s not just one or two. It’s all five.

The first thing you need to do is find exactly what your credit says about you, so you will know how lenders are looking at you.

You can get a good idea by going to this link that follows but it won’t actually give you credit scores. It will however show what may be harming your credit. Go to: https://www.annualcreditreport.com/ for a free credit report.

But how do you get approved for a loan with bad credit? We will cover two options.

One is for a personal loan, but to work on your credit score for now and wait a little while until the fixes are complete.

The second is to use a business loan. That’s right, a business line of credit for your business. Don’t have a business currently? No problem.

We cover that here too. Let’s get started and you’ll learn how in this article.

How Can I Get a Loan With Bad Credit?

Assuming you don’t have bankruptcies, evictions or judgements against you, then you should spend a couple months getting credit repair or credit restoration.

This can make a big difference and change things fairly quickly. Keep in mind it could take a couple months to get things aligned so you can qualify for a significant loan, however.

To get started just google credit repair and credit restoration.

If you’re looking to get a car or house right now, then I suggest a different route.

In this case, you should get a Business Credit loan. Keep reading because we will get more into this later here.

If you have bad personal credit, then you may want to perform the first option of credit repair also, but with business credit you won’t need to rely on that while it’s in the correction process.

You can quickly get out of this situation and never need to lean on personal credit ever again. This will allow you to get a car or house quickly.

How To Navigate Through The Process If You Have Bad Credit

Start building a solid business credit profile. You can do it whether you’re an entrepreneur or current business owner or just getting started.

The first thing you need to do is to set up a business that can get funded. Many times this can be done is as little as one day. Here are the steps:

1) Name your business if you don’t already have one. You will want to choose whether to use an LLC, S corp or other type. We won’t be covering that here.

2) Get a business address. I’ve seen people use a box at a UPS store. I’m not saying to do this, but it’s a street address that receives mail and if your business doesn’t require a physical office, then this can work.

Also, you can use your personal residence address but ensure you report it on your taxes.

3) Go to IRS.gov and get your EIN number. It’s the social security number for your business. EIN stands for Employer Identification Number.

Getting away from your personal social security number is important, so don’t skip this step.

4) Get a business checking account. This is a big step because it unlocks many options to get funding for your business.

You need to know during this step they are going to ask for your personal social security number but don’t get too worried.

You’re still going to be able to build business credit if your personal credit isn’t very good and possibly get offered lines of credit on the spot.

Many times the business checking account will trigger offers for loans from many sources that you will receive in your business mailbox as well.

If you’re in the US, then there are lots of sources that are set up by the government to fund small businesses since they are the backbone of the US economy.

5) Get a business phone number. It’s also great, but not required immediately, if you can get a website up with several pages of good content on it. This content is what customers will gain value from.

Also get the required pages on your site which include links in the footer for the Privacy Policy page, Contact Us page, Terms of Service page, Cookies Policy page, GDPR page, and an About Us page.

This helps give your business credibility. Also, if you want to run ads later, they will be required to get online ads approved and running.

If you want to begin building business credit today take a look at this recommended resource.

Start Building Business Trade Lines

You will want to start getting some business trade lines added to your business.

There are three main types of business trade lines when it comes to business credit.

They are vendor credit, store credit, and cash credit. The vendor credit reports to Dunn and Bradstreet, and once this happens, the other two will start building. This is easy to do and can be done in weeks instead of years.

If you’re having a problem getting your business checking account set up because of terrible personal credit, then go to these companies that help business startups right now.

NorthOne Banking for small businesses and freelancers: https://www.northone.com/

NAV: helps you get business funding, go here: https://www.nav.com/pricing-2/

Nav Business Boost and Business Manager, go here: https://app.nav.com/registration/b-f-bi

Another company I’ll refer you to is called Five Star Processing. They can give you a merchant processing account and help you get business credit.

Loans For People With Bad Credit

If you really don’t want to do the business credit plan, then there are many options to get loans for bad credit.

A bad credit personal loan is a short-term financial fix for consumers who need to borrow money but have a bad credit score or poor credit history.

If you really want to use your personal bad credit history instead of a business loan, then here is how.

Keep in mind a bad credit loan is not a perfect fix. Interest rates on bad credit loans are higher.

In most cases, they are considerably higher. The terms are short, usually one to five years.

But for people whose credit score is poor and have significant financial needs, may find this loan can help them get their feet back on the ground.

Finding a bad credit loan can be a challenge so stick to the endeavor. If you put in steady due diligence, it will reward you.

The loan could come from your regular bank, but more affordable interest rates and flexible qualifying requirements probably can be found with, and not limited to, these following options:

Family or friends. It’s easier to qualify and hopefully has lower interest rates. Credit history also may not count as much.

Find a co-signer. Use someone else’s high credit score to sign along with you on the loan to lower your interest rate.

I used my dad’s credit for my first car as he co-signed for me. Of course if you default then they are held liable to pay in your place.

Credit unions. Which loan company is best for bad credit? You will just need to shop around.

Typically, they have more flexible lending standards than banks and may be willing to offer a small personal loan. Membership is easy to get, although you may need to be referred from a current member.

Some state credit unions work that way. In most cases, you can simply apply and usually get a membership on your own.

Peer-to-Peer Loans. These are loans from an individual or group of individuals rather than a lending institution. Terms will differ from companies. It could take some time to find one who will work with you.

Online Loans. This is a vast market of lenders, and they can be flexible in terms.

Be cautious of scams, however, because many will advertise with a promise like bad credit loans guaranteed approval or urgent loans for bad credit.

In a case like this, they will probably require you to provide names of people you know to be used as references and lots of other information.

Just be careful and don’t hand them too much cash to process a loan for you if they ask for it. Many times they will take your money and be gone like a leaf in the wind.

Negotiate an agreement with Your Bank. Chances are you have a checking account currently. Use a long-term relationship with your bank to get a short-term loan at reasonable rates.

Borrow from the equity in your home. Credit score is not usually a factor. If you have equity in the house, this is an easy loan option.

Cash advances. Of course, this requires having credit cards already. I do not advise this because it is an expensive option and should only be used to get emergency cash immediately if you have bad credit.

Martin Hamilton

Martin Hamilton is the founder of Guiding Cents. Martin is an Author, Entrepreneur, Marketer, Financial Researcher & Investor. He is a long time Mortgage Planning Consultant & Licensed Real Estate Agent.

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