If you have a bad credit rating, it is still possible to get a loan, but it will be a lot harder than it would be for someone who had a better credit rating.

Credit ratings are used by lenders to help them predict who they can safely give loans to and who they should be worried about defaulting on their loans. A credit rating is just a guess, based on whether the person has a lot of available credit, whether they tend to pay their bills on time, and other metrics.

A low credit rating will either mean that you get turned down for a loan with most mainstream lenders, or that you are expected to pay significantly higher interest rates.

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There are some avenues that you can turn to for loans when your credit isn’t great. The options include credit unions, credit cards, and payday lenders.

Credit Unions

Credit unions are the best option for most people, because these are ethical organizations that will help you to borrow money at affordable interest rates. They are not motivated by profit, and they only serve customers who are based in their local area or who have ties to their organization in other ways.

Credit Cards

Credit cards are often offered to people with less than amazing credit histories and they can be used for short term borrowing, but they are not cheap, and you could end up paying them off for many years if you only pay the minimum each time, so they should be avoided unless you cannot access finance in other ways.

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Payday Loans

Payday loans are offered to people who have incredibly poor credit histories, but who do have some income. The problem with payday loans is that the interest rates are punitive and if you miss payments then you could end up facing huge charges. In addition, payday loans put you in a very bad position in terms of your credit rating – because they are viewed by lenders as a bad thing.

Having a payday loan shows that you are not able to manage your finances well. You would be far better off trying to find another way (Even a credit card with a ‘credit builder’ company) than you would be to take out a payday loan in most cases. So, think carefully before you borrow from them for anything that is not a dire emergency.