How to get credit even if your credit is working.

Important points

• With a personal loan, you can borrow money for any purpose.
• Although it is possible to get a personal loan with a bad credit history, you may face some challenges.

The benefit of borrowing with a personal loan is that you can use your loan proceeds for anything, whether it’s to fix your car, replace your laptop, or pay off your credit cards. However, since personal loans are unsecured, it can be difficult to qualify for one if your credit history is not that good.

Some types of loans are secured by a specific asset or security. A mortgage, for example, is secured by the house it is designed to finance. If you default on your mortgage payments, your lender could force you to sell your home to get the repayment.

A personal loan is unsecured, i.e. not tied to specific collateral. Therefore, lenders take a higher risk with a personal loan. If you default on your payments, your lender may not repay you at all.

Credit scores play a big part in qualifying for a personal loan. If your credit score is good, it means you pose less of a risk to lenders. But a lower credit score means you’re a riskier borrower.

Now to be clear is possible to get a personal loan with a less than stellar credit history. But it can be more difficult to qualify. And when you do qualify, you could be stuck with a higher interest rate on your loan. With that in mind, here are three tips on how to get a personal loan when your credit score could be better.

1. Get a co-signer on your loan

If you enlist the help of a friend or family member to co-sign a personal loan, that person’s credit information will be attached to your application. Lenders take this information into account when deciding whether to grant your application and what interest rate to give you. If your credit score is in the low 600s, but you get a co-signer with a credit score of 800, you are much more likely to be approved and get a cheaper interest rate on your loan, since your co-applicant will then take over Responsibility for repaying those debts in the same manner as you.

Of course, if you want to ask someone to co-sign your loan, you must do so Yes, really do your best to borrow in moderation and keep up with your payments. Otherwise, in exchange for doing you this favor, your friend or family member could end up on the hook for payments that should be yours.

2. Shop around with different lenders

If your credit is not good, you may have to settle for a higher interest rate on a personal loan. But it is still worth looking around for offers from different lenders. You may find that a lender can offer a more attractive lending rate than the rest of the package.

3. Borrow as little as possible

Although a personal loan can be an affordable way to borrow money, if you’re hit with a higher interest rate, it can become less affordable if you have bad credit. When you take out a personal loan, try to borrow as little as possible. As tempting as it may be to take out extra credit for those “just in case” moments, the larger your loan amount, the larger your monthly payments will be.

Bad credit doesn’t have to stop you from taking out a personal loan. But these tips can make the process easier to navigate and keep your borrowing costs to a minimum.