Matthews says the credit union also will consider those who had a bankruptcy in their report, as long as it was some time ago. If a credit report shows a recent personal loan that wasn't paid back as agreed, that is a red flag, she says.
Charlotte Metro offers personal loans that range from $500 to $25,000 with a 60-month term. Interest rates are between 9.75 percent and 16.95 percent, Matthews says, with lower credit scores getting the higher rates.
A way to boost credit
For those with tarnished credit, a personal loan can actually be a way to help improve their credit score, says Ulzheimer. Lenders who offer personal loans report the payment history to the credit reporting agencies, meaning if payments are made on time, then the borrower's credit score will get a boost.
RATE SEARCH: Shop Bankrate.com right now for the best deal on personal loan rates.
He also notes that using a personal loan to pay off high-interest credit card debt will boost a person's credit, too. "It's still the same amount of debt, but you're converting it from a high-interest, revolving debt that is bad for a credit score into a low-interest, credit-benign installment debt," Ulzheimer says.
Using a personal loan to pay off high-interest credit card debt will boost a person's credit.
What if your credit is too low?
Sometimes a credit score is too low or credit history is lacking too much for a person to qualify outright for a personal loan, says Perc Pineda, senior economist at Credit Union National Association.
"A co-signer could be required or a personal loan could be a secured type of loan as opposed to unsecured loan," he says.
Co-signers would be equally responsible for the repayment of the loan. And if it goes into arrears, the late payments will show up on the co-signer's credit report, too, hurting their credit score. Matthews says co-signers are needed if the borrower's credit score is too low or the amount of the loan would be too much for just the borrower's income.
Lenders also can require the personal loan to be secured by a deed to a property, the title of a car or money put into a certificate of deposit. Ulzheimer says these programs are most common at smaller banks and credit unions that have more "nimble and less centralized underwriting." And with secured loans, the credit union may not even consider a borrower's credit in the approval process.
"Ultimately, if it's a CD-secured loan, we may pull credit," Matthew says, "but it may have no bearing on the loan." That's good news for the credit-disadvantaged.