Just because your credit isn’t great doesn’t mean you can’t borrow money. In 2025, there are still options for people with lower credit scores, from loans backed by the government to loans made just for your situation. Whether you want to buy a house, combine your debts, or get a car, here’s how you can qualify for a loan—and the best choices to think about this year.
How to Get a Loan Approved Even if Your Credit Is not the Best
- Try to Make Your Credit Score a Little Better: Even minor increases in your credit score can help you obtain better loan terms (the specifics of the loan, such as the interest rate), even though lenders frequently base their charges on how dangerous you appear to be. Pay your bills on time, lower the amount you owe on credit cards, and report any mistakes on your credit report. Even getting your score to around 580 could help you get an FHA loan with a low down payment (the money you pay upfront for a house).
- Think About Secured Loans: When you take out a secured loan, you pledge something you own as security, such as your money or vehicle. For the lender, collateral reduces the risk of the loan. For example, car loans are often easier to get even with bad credit, especially if you work with lenders who understand this.
- Ask Someone to Co-Sign A co-signer is someone with good credit who agrees to pay back the loan if you can’t. Having a co-signer makes it more likely you’ll get approved and could even get you a lower interest rate (the extra money you pay on top of the loan amount). This is applicable to school loans, personal loans, and mortgages.
- Look for Lenders Who Work with Bad Credit Not all lenders treat low credit scores the same way. Focus on banks or companies that offer loans specifically for people with bad credit, like American Pacific Mortgage (for houses) or Upgrade (for personal loans).
Top Loan Choices for 2025
- FHA Mortgages: A Great Option for Buying a Home:
- Why They Work: FHA loans usually only need a credit score around 580 and a small down payment (the money you pay first for the house), making them good for first-time buyers.
- Best Lenders: Companies like Rocket Mortgage and American Pacific Mortgage are good at handling FHA loans.
- VA and USDA Loans: Loans with No Down Payment:
- VA Loans: These are reserved only for active-duty military personnel and veterans. They frequently do not demand mortgage insurance, which is an additional fee you may have to pay when you obtain a mortgage, or a down payment.
- USDA Loans: These are for people buying homes in rural areas and who have a moderate income (not too high). You may frequently purchase a property with no down payment.
- Personal Loans for Bad Credit:
- Upgrade: For debt consolidation—the process of consolidating several obligations into a single loan—this is an excellent option. They have APRs (Annual Percentage Rates, the total cost of borrowing per year) starting at a reasonable rate and are flexible with credit.
- Upstart: If you have little credit history, this is good. They use special computer programs to look at things other than just your credit score.
- Best Egg: This company offers loans with set interest rates and can give you the money quickly, up to $50,000.
- Subprime Auto Loans: If your credit score is below 600 and you need a car loan, look for lenders who specifically work with people with lower credit. Some car dealerships work with these kinds of lenders to help you get approved.
- Debt Consolidation Loans: Experts suggest looking at consolidation loans from places like Upgrade or Best Egg to make it easier to pay off debts that have high interest rates.
Tips for Success
- Check if You Might Qualify Before Applying: Use tools that let you see if you might get approved without a hard credit pull (when a lender checks your full credit history, which can slightly lower your score).
- Compare Offers from Different Lenders: Websites like LendingTree let you see rates from many lenders in one place.
- Try to Improve Your Credit Score: Even small improvements can help you get better loan terms.
- Think About Hybrid ARMs: Some loans, like the one from Bank of America, have a low initial interest rate that can change later. This might be okay if you plan to refinance (get a new loan to pay off the old one) in the future.
In Conclusion: Getting a Loan with Not-So-Great Credit
Even though having bad credit can make things harder, there are still ways to get a loan in 2025. From FHA loans to personal loans that use new ways of checking if you’re a good borrower, you have options.
Focus on making your credit a bit better, look for lenders who understand your situation, and use programs designed for people with lower scores. Remember to start small, read all the details carefully, and stay away from loans with very high costs so you can build a better financial future.
