3 Tips for Getting a Personal Loan When Your Credit Score Isn't Great

Here's how to snag a loan even when your credit needs work.

The upside of borrowing money with a personal loan is that you can use your loan proceeds for any purpose, whether it's to fix your car, replace your laptop, or pay off your credit cards. But because personal loans are unsecured, it can be tricky to qualify for one when your credit score isn't so great.

Some types of loans are secured by a specific asset or collateral. A mortgage, for example, is secured by the home it's being used to finance. If you fall behind on your mortgage payments, your lender could force the sale of your home to get repaid.

A personal loan is unsecured, so it's not tied to specific collateral. As such, lenders take more of a risk with a personal loan. If you fall behind on your payments, your lender may not get repaid at all.

Credit scores play a huge role in qualifying for a personal loan. If your credit score is high, it means you're less of a risk to lenders. But a lower credit score means you're a riskier borrower.

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

1. Get a co-signer for your loan

When you enlist the help of a friend or family member to co-sign a personal loan, that person's credit information gets tacked onto your application. Lenders take that information into account when determining whether to approve your request 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're far more likely to get approved and snag a more favorable interest rate on your loan, because your co-applicant will then become responsible for repaying that debt the same way you are.

Of course, if you're going to ask someone to co-sign your loan, you'll need to really do your best to borrow in moderation and keep up with your payments. Otherwise, in exchange for doing you that favor, your friend or family member could end up on the hook for payments that are supposed to be on you.

2. Shop around with different lenders

If your credit score isn't wonderful, you may have to resign yourself to a higher interest rate on a personal loan. But it still pays to shop around for offers with different lenders. You may find one lender is able to offer a more attractive loan rate than the rest of the pack.

3. Borrow as little as possible

Though a personal loan can be an affordable way to borrow, if your credit score isn't so great, it can become less affordable if you're slapped with a higher interest rate. If you're going to take out a personal loan, aim to borrow as little as possible. Tempting as it may be to borrow extra for those "just in case" moments, the higher your loan principal, the higher your monthly payments will be.

Having poor credit doesn't have to stop you from taking out a personal loan. But these tips may make it easier to navigate the process and keep your borrowing costs to a minimum.