When Should You Apply for a Bad Credit Loan If you wonder when you should apply for a bad credit loan, it is reasonable to answer that these loans should be among your last options. First of all, your options and the pool of lenders will be more limited compared to financial institutions that offer standard loans and target clients with good payment history. This means that borrowing will be more expensive, with high interest rates and unfavourable conditions. If you are desperate for cash, it is even easier to fall into expensive traps; so, you may want to improve your chances of this not happening. If you are a credit union member, you may try getting a loan from it first. Credit unions are more likely to take into account your personality rather than just look at your application and credit score. Moreover, some credit unions offer lower interest rates and better conditions than banks. Still, keep in mind that you should not apply for a bad credit loan if you are unsure you can meet your monthly payments. Failing to maintain payments will affect your credit score, with things going from bad to worse. If you believe you will be able to pay back your loan, however, this can actually give a boost to your credit score. You are likely to get better terms and conditions, meaning that it is not that bad of idea to apply, if you can offer collateral or you have saved up a down payment. Regarding collaterals, you may offer a valuable item against the loan balance’s value. This can be some real estate, personal property, car, jewelry, or anything else that will lessen the risk for the financial institution. First of all, you are less likely to default if this means losing the collateral you pledged. Second, your financial institution is more likely to offer more agreeable terms. Second, if you apply for a sizeable loan, you will show financial responsibility by saving up a down payment. The lender takes less risk because you are less likely to default on a loan you already invested in. Having a cosigner is one way to obtain a bad credit loan under better terms and conditions. You should not apply, however, if you are unsure you will be able to maintain payments. Your consigner will have to pay back your loan if it happens that you default. Moreover, there is no sense in having a cosigner with a poor credit score, as this will not improve your chances of being approved. If these are not viable options for you, you may try peer to peer lending services or ask a friend or family member for help. With peer to peer lending, you borrow from a person and not institution. While this person may be more sympathetic to your situation, they will not be happy to lose their money. Peer to peer lending services are available online, and the marketplace is growing. You can apply for a loan with bad credit, and it will be less expensive to borrow. Individuals will bid on your loan, and you can choose the lowest interest rate. Family members and friends may be willing to take a chance and help you, given that they know you well. If you borrow from family and friends, however, make sure that everybody’s interests are protected.