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Can You Get a Personal Loan With a 550 Credit Score?

Can You Get a Personal Loan With a 550 Credit Score?
Susan Guillory
Susan GuilloryUpdated January 6, 2025
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A credit score of 550 is considered low, but it doesn’t necessarily disqualify you from obtaining a personal loan. While many lenders prefer higher scores, some specialize in loans for those with less-than-ideal credit. Securing a loan with a 550 credit score may require exploring alternative lenders, like online financial institutions or credit unions, and being prepared for higher interest rates or additional fees. Here, we’re explaining the options available for borrowers with a 550 credit score, factors that can improve loan approval chances, and tips for making financially responsible decisions despite credit challenges.

How Does a Credit Score Under 550 Impact Personal Loan Interest Rates?

A credit score of 550 or less is considered a low credit score. There are personal loans for those in this credit category. However, interest rates may be higher.Borrowers with lower credit scores are considered riskier by lenders. To mitigate that risk, lenders may charge higher interest rates than they would someone with an average credit score or a good credit score, which makes the loan cost more.However, the ways personal loans affect credit scores could benefit you. For instance, if you take out a loan when you’ve got a credit score under 550 and make your monthly payment on time each month, you may be able to improve your credit score over time. That may help you qualify for better loan terms in the future.

Tips for Getting Approved for a Personal Loan With a Credit Score Under 550

If you’re interested in applying for a personal loan with a credit score under 550, there are some practical tips that could help you secure funding. 

Find a Cosigner 

To improve your chances of getting approved for a loan with a lower interest rate, consider finding a personal loan cosigner. This person (perhaps a parent or another relative) shares the responsibility for the loan and will also sign the loan documents. Should you be unable to pay back the loan, your cosigner takes the responsibility for paying it off.Bringing on a cosigner who has a high credit score will help you qualify for more financing options and better terms.

Get a Co-Borrower 

Another option is to use a co-borrower. A co-borrower takes out a joint personal loan with you and shares the debt. This can strengthen your loan application and help you obtain better loan terms, especially if your co-borrower has a higher credit score.Recommended: Cosigner vs Co-Borrower: Understanding the Key Differences

Improve Your Credit

While it’s not a quick fix, working on building your credit score can have long-lasting benefits. For one thing, it can make you more eligible for loans with better terms in the future. Start by paying all your bills on time each month because a late payment can negatively impact your credit score. And avoid taking out too much debt, which can also lower your score.Recommended: 5 Factors That May Affect Your Credit Score

Pay Down Your Debt

Another strategy that can make you more attractive to lenders is to pay down your debt. This can help build your credit score, and it will also lower your debt-to-income ratio, which measures how much debt you have compared to your income.

Wait

It may not be easy, but putting off borrowing money might be your best bet. Waiting will give you time to build your credit. It will also help you build your savings. That way, if you do borrow money later, you won’t need to borrow as much.

Alternatives to Personal Loans 

If you don’t meet the qualifications for a personal loan, here are some alternatives you may want to consider to help you get the funds you need.

Family Loans 

If a 550 credit score personal loan isn’t an option, think about whether you have a family member who would be willing to lend you money. They might even offer you a loan interest-free.To keep your relationship intact, treat this loan as you would any other. Create a loan agreement that states how much you will pay each month and when the payment is due. And be sure to pay it off on schedule.

Credit Cards 

Using a credit-building credit card for unexpected expenses can be helpful and convenient. Many cards offer the option to earn points for purchases, which you can redeem for rewards. However, credit cards often have high interest rates, so try to pay off your balance in full each month to avoid these fees.

Cash Advances 

If you need cash, your credit card may offer a cash advance option. This allows you to withdraw cash from an ATM using a PIN. Keep in mind you’ll have to pay interest on the amount you withdraw, in addition to a cash advance fee.

Payday Loans 

Another alternative option to personal loans for a credit score under 550 is a payday loan. These loans are basically an advance on your paycheck and can help you get cash fast. However, payday loans typically have extremely high interest and they need to be repaid quickly — typically within weeks. If you can’t pay them back in time, you may owe additional fees.

Lines of Credit 

A personal line of credit is a form of revolving credit. You’re approved for a certain amount, and once you pay it off, you can borrow from it again. A personal line of credit may have a higher interest rate than a personal loan, and it might be difficult to qualify for a line of credit with a low credit score.

The Takeaway

If you have a credit score under 550, there are personal loans you may be able to qualify for. There are also some other options to consider for borrowing money, such as borrowing from family or using a credit card. Explore the choices carefully to determine what works best for you. Whatever you choose, make sure to repay the money you borrow on time, which may help build your credit score over time. If you’re considering a personal loan, Lantern by SoFi. With just one application, you can get offers from multiple lenders, making it easy to compare personal loan rates and terms.

Frequently Asked Questions

Can I get a loan with a 550 credit score?
What are the benefits of getting a personal loan with a 550 credit score?
Do you need a co-signer to get approved for a personal loan with a 550 credit score?
Photo credit: iStock/LaylaBird
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About the Author

Susan Guillory

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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