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

Susan GuilloryUpdated March 12, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

If you don’t have great credit, you might assume that you can’t get a loan. But that’s not true. There are personal loans for a credit score under 550 available from certain lenders.So if you’re wondering “can I get a loan with a 550 credit score,” the answer is yes, but there are some facts that you should know.Read on to find out more.

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, you may have to pay higher interest on a loan.Borrowers with lower credit scores are considered riskier by lenders. To mitigate that risk, a lender may charge you a higher interest rate than they would charge someone with an average credit score or a good credit score. So the loan will cost you 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 increase your credit score over time. That may help you qualify for better loan terms in the future.Recommended: What is Peer-to-Peer (P2P) Lending?

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

Interested in applying for one of the personal loans for a credit score under 550? There are personal loan common uses that may make this option right for you. Here are some strategies that might help you get approved.

Find a Cosigner

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

Get a Co-Borrower

Another option is to use a co-borrower. This can also help you get a loan for a 550 credit score. 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.

Improve Your Credit

While it’s not a quick fix, working on improving 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.Monitor your credit score regularly so you can see it rise over time.

Pay Down Your Debt

Another strategy that can make you more attractive to lenders is to pay down your debt. This can help raise 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 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. But you’ll have to pay interest on the amount you withdraw as well as 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. Once you pay it off, you can borrow from it again. But a personal line of credit may have a higher interest rate. It also 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. 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 improve your credit score over time.

3 Personal Loan Tips

Shopping around helps ensure that you’re getting the best deal you can. Lantern by SoFi makes this easy. With one online application, you can find and compare personal loan offers from multiple lenders.
If the interest rates you’re being offered seem too high, try lowering the loan amount. Generally, the larger the loan, the greater the risk for lenders, who likely charge a higher interest rate for the increased risk level.
Don’t assume that if you have bad credit, you can’t get a personal loan. There are lenders who specialize in bad credit loans.

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

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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