If a personal loan is not available to you right now, start with free help: nonprofit credit counseling, hardship programs from your current creditors, hospital financial assistance for medical bills, and credit union starter loans. Pull your free credit reports first, because errors on them are the cheapest problem to fix.
Start with the cheapest help
- Nonprofit credit counseling. Agencies affiliated with the National Foundation for Credit Counseling offer budget reviews and, when it fits, debt management plans in which one monthly payment is split among your creditors. Ask for fee schedules in writing before enrolling.
- Ask your current creditors first. Many card issuers, utilities, hospitals and servicers have hardship programs that lower or pause payments. A phone call costs nothing and does not require a new loan.
- Hospital financial assistance. Nonprofit hospitals must have a written financial assistance policy under IRS rules. Ask the billing office for the application and an itemized bill before borrowing for a medical balance.
- Credit unions. Member-owned credit unions run small-dollar and credit-builder programs aimed at members with thin or damaged files. Join the one closest to your work or home and ask about each program by name.
- Get your reports. Free weekly reports are at AnnualCreditReport.com. Dispute errors with the bureau and the creditor; fixing an error is the cheapest credit improvement there is.
Rebuild so the next request fits
A short list of habits moves most scores: pay every account on time, keep card balances well under the limit, avoid opening several new accounts at once, and leave older accounts open. These map to the largest parts of a FICO Score (payment history and amounts owed).
Who to call, by problem
| Problem | Where to start | What they can do |
|---|---|---|
| Behind on rent or utilities | Dial 211 or your county social services office | Point to emergency assistance funds |
| Credit card or other unsecured debt | A nonprofit credit counselor, such as through the NFCC | Review budget, propose a payment plan |
| Medical bill | The provider's billing office | Financial assistance, payment plan |
| Car repair | A credit union or a repair shop payment plan | Small loan or interest-free plan |
| Student loans | The loan servicer and studentaid.gov | Income-driven plans, deferment |
| Scam or fraud | ReportFraud.ftc.gov and your bank | Report and limit loss |
Credit unions
Credit unions are member-owned and many offer small personal loans, payday-alternative loans and credit-builder products. Federal credit unions cap the rate on their payday alternative loans, and membership requirements are often broad, tied to where you live or work. Ask about the amount, the term and the fees in dollars, and whether payments are reported to the bureaus.
Build a small buffer
Even a small cushion changes what you can handle. A common first goal is a few hundred dollars, then one month of essential bills. Automate a transfer on payday, even a small amount. Keep the cushion in an account that is easy to reach but not linked to your debit card.
Ask for help early
Creditors, landlords and providers are usually more flexible before an account is behind. Call, say what you can pay and ask what they can do. Keep notes and ask for any agreement in writing.
A closer look at four routes
Nonprofit credit counseling. A certified counselor reviews income, expenses and debts, usually in an hour, and can propose a debt management plan in which creditors reduce interest or fees and you make a single monthly payment to the agency. Ask what the setup and monthly fees are, whether the agency is a nonprofit and what happens to your accounts. The NFCC lists member agencies.
Hardship programs. Most credit card issuers, utilities and many medical providers have hardship teams. They can waive fees, pause payments or lower rates for a period. Ask for the program by name and for the terms in writing.
Emergency assistance. Local charities, community action agencies and faith-based organizations often provide one-time help with rent, utilities and car repairs. Dial 211 to find them.
Employer help. Some employers offer paycheck advances, hardship funds or financial coaching through an employee assistance program. Ask human resources.
A simple decision path
If your problem is a bill, call the creditor before you borrow. If it is a budget gap, talk to a counselor. If it is a one-time cost, look at savings, family and credit unions. If you still need a loan after those steps, use our guides to compare offers.
Keep a record of any help you arrange
Write down who you spoke with, the date and what was agreed. Ask for agreements in writing, and keep copies of payments.
Frequently asked questions
How long does it take to rebuild credit enough to qualify?
It depends on what hurt the score. Late payments and high card balances can improve within a few billing cycles once you are current and paying balances down, while a bankruptcy stays on a report for years. Check your reports and ask a nonprofit counselor for a personal timeline.
Is debt settlement the same as credit counseling?
No. Credit counseling usually means budget help and, sometimes, a plan with lower payments through creditors. Debt settlement companies negotiate for less than you owe and can damage your credit. Compare costs and read the contract before agreeing to anything.
Is credit counseling free?
Initial sessions at many nonprofit agencies are free or low cost. Fees may apply to a debt management plan. Ask before you enroll.
Do payday alternatives exist?
Many federal credit unions offer payday alternative loans with capped rates and smaller amounts. Ask a local credit union.