5 Tips to Get a Private Loan if You Have Bad Credit

Borrowing with bad credit can be a big challenge. It takes a lot to get approved, and even so, you are probably going to pay more interest and origination fees. You may have heard about private loans, but are they really a good idea?

In essence, private loans fall under two categories: loans from a source other than a bank or credit union and student loans not sourced from the Department of Education. If you are interested in securing a private loan with bad credit, your priority should be finding the right lender.

How to get a private loan

Given the situation of your credit, banks and credit unions are likely to decline your application. These two sources are more comfortable lending money to people with perfect credit. So what can you do? You can look for other lenders, but always be cautious. Below are some tips that can help you out:

1. Check small banks or local lenders. These small institutions are often willing to lend when you have bad credit. You also have the chance to sit down with a person to discuss your situation and options.

2. Try online lenders. Peer-to-peer lending makes borrowing easier for people with less than perfect credit. Individual lenders are more flexible than large banks.

3. Ask from people you know. Talk to your family and friends. Maybe they have extra cash that they can lend you. Make it formal to protect your relationship. Have a loan agreement, specific repayment terms, and possibly even reporting to credit bureaus.

4. Look for federal loans. If you are seeking a student loan, your best option is often through the Department of Education. Outside of that, try federal student loans as they are more flexible and forgiving.

5. Get a private loan. If you cannot borrow as much as you need with a federal loan, consider a private student loan. Your best chance of getting approved is with a co-signer. Most students have little or no income, which makes it hard to show that you have the ability to repay.