Trying to get a personal loan with bad credit can be stressful. If your credit score isn’t great, you might feel like you’re stuck with high rates or limited options. But here’s the good news: it’s definitely possible to get a loan that works for you, as long as you avoid some common mistakes.
I’ve seen so many people make these slip-ups, and it often costs them money or makes their credit situation worse. To help you out, here are the top 5 mistakes you’ll want to steer clear of when applying for a personal loan with bad credit — plus some tips to make the process smoother.
Why Is Getting a Personal Loan With Bad Credit Tough?
When your credit isn’t perfect, lenders see you as a bit of a risk. That means they might charge you higher interest rates or give you loans with stricter rules. But don’t let that discourage you — with some careful planning, you can still find a fair personal loan with bad credit.
Mistake #1: Ignoring the APR (It’s More Than Just a Number)
Lots of folks focus on how much their monthly payment will be — but the APR is where the real story lives. APR stands for Annual Percentage Rate, and it shows you the total yearly cost of the loan, including interest and fees.
If you only look at your monthly payment, you might think you’re getting a good deal when really, you’re paying a lot more over time. For people with bad credit, APRs can sometimes be really high — like 20% or more.
What to do instead: Always ask the lender what the APR is. Use a loan calculator online to figure out how much you’ll really pay back over the life of the loan. And don’t be shy about shopping around to find the best deal.
Mistake #2: Not Checking Your Credit Report Before You Apply
Your credit report might have mistakes on it. Maybe a late payment was recorded wrong, or there’s an account that isn’t even yours. These errors can drag your score down and make getting a loan harder.
Before you apply for a personal loan with bad credit, take a few minutes to pull your credit reports for free from AnnualCreditReport.com. Check them over carefully, and if you spot anything off, dispute it.
Fixing these errors can sometimes bump your score up enough to get a better loan deal.
Mistake #3: Applying to Too Many Lenders All at Once
It’s tempting to apply everywhere to improve your chances. But every time you apply and the lender does a hard credit check, it can ding your credit score a little.
Instead, look for lenders who offer prequalification with just a soft credit check — this won’t affect your score. Also, try to keep your serious loan applications within a short time frame (like two weeks) so all those inquiries count as one.
Mistake #4: Overlooking Fees and Hidden Charges
Interest rates aren’t the only thing that can make your loan expensive. Watch out for fees like origination fees, late payment penalties, or charges if you want to pay off the loan early.
These fees can add up quickly, especially on a personal loan with bad credit. Always read the fine print and ask questions if something isn’t clear.
Mistake #5: Borrowing More Than You Can Actually Pay Back
Just because a lender approves you for a big amount doesn’t mean you should take it all. Borrowing more than you need puts you at risk of missing payments, which can hurt your credit even more.
Be honest with yourself about what you need and what you can afford. Make a budget and choose a loan amount that fits comfortably.
Bonus Tip: Stay Away from Payday Loans
Payday loans might sound like an easy fix, but they usually come with sky-high interest rates and fees that trap you in a cycle of debt. If you see loans with APRs over 300%, run the other way.
Stick with reputable lenders who are upfront about their terms and treat borrowers fairly — even if your credit isn’t perfect.
Final Thoughts
Getting a personal loan with bad credit isn’t easy, but it’s far from impossible. Avoid these five mistakes, and you’ll be in a much better position to get a loan that actually helps you out instead of causing more problems.
Take your time, check your credit report, compare lenders, and borrow only what you need. With patience and care, you can use a personal loan to rebuild your credit and get back on solid financial footing.
Good luck — you’ve got this!
Frequently Asked Questions
Q. Can I get a personal loan with bad credit?
- Absolutely. Many lenders offer loans for bad credit, but you’ll usually pay higher interest. Being careful and comparing options can help you get the best deal.
Q. Will applying hurt my credit score?
- Each full application does cause a small dip. That’s why using prequalification tools first is smart — they don’t impact your score.
Q. Are payday loans a good idea for bad credit?
- Usually no. They’re expensive and can make your money problems worse.