Personal Loans for Bad Credit

Having difficulty in finding a personal loan due to bad credit? Here’s a quick overview of how to get personal loans for bad credit

If you are facing the trouble of having terrible credit or no credit history, getting a loan can be a very challenging task for you. Before being approved for a loan, you must submit an application detailing your income and consent to a credit check, as with most financial products. Candidates having a proven history of paying their bills on time and making enough money to stay on top of their debt while adhering to all terms and agreements are preferred by lenders.

You cannot get a personal loan unless you apply with a co-signer if you have terrible or poor credit, as defined by FICO (a score of 350 to 579). While some personal loans need credit scores of at least 670, some lenders, such as those on this list, are ready to lend money to those with credit scores of 580 to 600.

Personal loan interest rates fluctuate depending on your credit score, and if you satisfy the qualification standards, so you shouldn’t expect to get the best rates or terms if you have bad credit. If you have weak credit, though, you shouldn’t hunt for the lowest rates; the supplier who offers a loan that your credit score qualifies for is usually the best option. If you have several possibilities, compare loan limits and interest rates to select the one best meets your requirements.

What are bad credit personal loans?

A bad credit loan is like any other personal loan, but for people with a bad credit score. These loans have set interest rates and are paid back in regular installments. They’re usually unsecured, meaning they’re not backed by anything. Instead, while considering whether or not to give you money, lenders look at your credit score, credit record, and debt-to-income ratio.

If you deal with a lender who doesn’t demand strong credit or if you meet other conditions, you might be able to acquire a loan with bad credit. While your credit score is crucial, lenders may also evaluate your income, debts, collateral, and credit history before approving a loan.

What is a credit score?

A credit score estimates your likelihood of repaying debt on time. It is calculated using information from your credit report. Companies construct your credit score from the information in your credit report using a mathematical process known as a scoring model. Credit scores are used by businesses to determine whether or not to lend you a mortgage, credit card, vehicle loan, or other credit product. They’re also used to figure out how much interest you’ll pay on a loan or credit card, as well as your credit limit.

The following determinants help in developing a credit score:

  • Your history of bill-paying
  • Your present debt that has not been paid
  • You have a certain number and type of loan accounts.
  • How long have your loan accounts been open?
  • The percentage of your available credit
  • New credit applications are being submitted.
  • How long ago you had a debt sent to collection, a foreclosure, or a bankruptcy.

You must remember that there is no such thing as a universal credit score. It’s crucial to understand that you don’t have just one credit score and that you, as well as lenders, have access to a variety of credit ratings. Any credit score is determined by the information used to create it, which can vary depending on the scoring model, the source of your credit history, the type of loan product, and even the day it was estimated.

What is bad credit?

A credit score of less than 580 is taken as bad credit. A person with terrible credit is seen as a high-risk borrower because they owe vast sums of money or have a history of delinquent invoices and debts. Bad credit might make it challenging to obtain a credit card, a mortgage, or other loans. Most lenders employ credit ratings ranging from 300 to 850. You’re known as a subprime borrower with a fair credit rating if your FICO score is less than 670. A FICO score of less than 580 is considered very poor by the credit reporting firm.

It’s critical to realize that getting a personal loan with negative credit might be rather costly. Depending on your poor credit score, interest rates can easily reach the upper 30 percent level. You may encounter additional challenges when you have terrible credit, such as smaller loan amounts and shorter repayment durations.

How do you know your credit score range?

  • Excellent Credit: 800 – 850
  • Very Good Credit: 740 – 799
  • Good Credit: 670 – 739
  • Fair Credit: 580 – 669
  • Poor Credit: under 580

How bad credit affects your eligibility to get a loan?

Lenders may consider a credit score of less than 670 to be a negative credit score. Bad credit might limit your alternatives and make loan offers more expensive. Negative indicators on a person’s credit report, such as late payments or accounts that are past due or in collections, are common in people with terrible credit. The ensuing low credit score indicates to a lender that the person is more likely to skip a future loan payment, perhaps costing the lender money.

Some lenders choose to engage primarily with prime (excellent credit) consumers in order to reduce their risk. Others see it as a commercial opportunity, concentrating on lending to subprime (poor credit) borrowers. Some lenders provide loans to people with all types of credit.

In general, lenders that make loans to people with bad credit may compensate for their risk by charging a higher origination fee and interest rate, resulting in a higher annual percentage rate (APR).

Let’s understand that with the help of an example. Suppose you want to borrow $20,000 and repay over a period of four years.

  • If you have low credit, you may be offered a loan with a 5 percent origination charge and a 29 percent interest rate, resulting in a 32.8 percent annual percentage rate. By the time you pay off the debt, you’ll have paid $838 a month and $10,172 in interest.
  • If you have a good credit score, you might be able to secure a loan with a 1% origination charge and a 10% interest rate—a 10.69% APR. You’ll pay around $646 each month in interest and $3,232 in total.

The APR of a loan considers the interest rate, fees, and repayment duration, which is why comparing loan offers’ APRs can help you figure out which loan is the cheapest overall. Lenders frequently list an APR range with their loans, and the rates you receive may be based on your creditworthiness, the repayment terms, and the loan amounts.

Improve your credit before applying

If you don’t need an emergency loan, you should work on improving your credit before taking out a loan. Even a slight change in your loan’s interest rate can significantly influence your monthly payment and overall cost.

It could take months or years to improve your credit score from terrible to excellent. However, moving up in the fair credit range may provide you with more possibilities and better deals. To enhance your credit score, try the following suggestions:

Make timely bill payments

Making timely payments on your credit accounts (such as loans and credit cards) will help to improve your credit score. Some bills, such as phone or utility bills, aren’t usually listed on your credit report. However, being behind can result in a collection account, which can harm your credit.

Pay down credit card balances

Lowering your credit card balances can help you boost your credit scores by reducing your credit consumption ratio. This could be one of the quickest strategies to improve your credit ratings, depending on why you have terrible credit.

Your credit report will likely determine the steps you should take. When you check your credit score using one of the various online credit score agencies, you’ll be able to identify which aspects assist or hinder your credit score, and you’ll be able to develop a strategy to improve your credit.

How to get a personal loan with bad credit?

If this isn’t an emergency, the first thing you should do is improve your credit score so you can get the loan you need. Pay bills on time, especially credit cards, and keep credit card balances under 30% of the available credit limit. Finally, refrain from applying for new credit. Seventy-five percent of your credit score is determined by combining those three factors: on-time payments, minimal credit use, and no further credit applications. It’s not unreasonable to believe that focusing on those three areas could boost your score by 100 points in as short as three to six months.

If you have an emergency, and your loan application has been repeatedly denied owing to weak or no credit, it may be helpful to request an in-person interview with a bank or credit union loan officer to persuade them that you are creditworthy. If you get that interview, make sure you have evidence to show that you’re a better risk than your credit score says because lending institutions value consistency. If you presented proof that you’ve lived in the same house (or city) and performed the same job (ideally for the same employer) for numerous years, it will undoubtedly improve your case.

Getting a personal loan with a poor credit score is not impossible, but it may necessitate additional effort on your part. While the process will vary depending on your particular credit score and lender, the following are the typical steps to take:

Check your credit score

It’s critical to verify your credit score online through a credit-providing website or your credit card issuer before you start looking for the best lender. This will give you an idea of what you are eligible for and what you are not. It would be great to work on finding the inconsistencies in your credit score, such as a debt that isn’t yours.

Improve your score

Take time to raise your credit score if you discover it is too low before you submit an application for a personal loan. Repaying any outstanding debts and lowering your credit utilization are two easy strategies to enhance your credit score.

Prequalify with multiple lenders

Some lenders offer a prequalification method that allows you to see if you would qualify without undergoing a credit check and what conditions you would get if you were approved. You must go through the process of prequalification with multiple lenders in order to increase your likelihood of getting a loan with bad credit.

Add a co-signer

Add a co-signer to your application if you need to improve your chances of getting better terms. A co-signer is a second party who pledges to pay back the loan if you don’t, diminishing the risk you can cause to the lender.

Evaluate your budget

Examine your budget and determine how much of a loan you can afford before looking for the proper lender. If you take out a substantial loan, you may find yourself unable to make future payments requirements, further hurting your credit.

Submit your application

Submit an application online or in-person once you’ve selected the best lender for your needs. Prepare to supply personal information, including your Social Security number (SSN), residence, and salary.

Repay your loan

It’s time to start repaying your loan after your lender authorizes it and disburses the funds. Setting up autopay ensures that you don’t miss a payment.

Pros and cons of personal loan for bad credit

When taking out any loan, it’s understandable to be cautious, but if you already have low credit, don’t make things worse. Predatory lenders will gladly grab your money and make your life a living hell.

If the lender doesn’t demand a credit check, assess your income, or can’t be discovered for customer reviews or a Better Business Bureau rating, it’s time to search elsewhere. Those are red flags that you may have been the victim of loan fraud.

Before making a final decision, carefully consider the advantages and disadvantages of the scenario.

Pros of personal loans for bad credit

  • Personal loans for bad credit work faster. Most loan applications are available online, and responses are usually received within a few hours. You can get money in your account in as little as a day in some places.
  • If you can acquire a negative credit loan, it will almost certainly be at a cheaper interest rate than your credit card debt.
  • Every year, the number of peer-to-peer lending companies appears to double. You might be able to locate a loan with an interest rate you can afford if you wait and make lenders fight for your business.
  • Repayment terms could range from one to five years, depending on the lender.
  • Your credit score improves when you make on-time payments, making you a more appealing candidate the next time you need a loan.

Cons of personal loans for bad credit

  • Personal loans with bad credit have higher interest rates. Because you’re a risk, the lender expects a reward, perhaps a large one.
  • Pay attention to the small details of the loan agreement. Is there a charge for getting a loan? What is the penalty for being late? Is there a penalty for paying in advance? Check with your lender to see if there is a cost for paying by check.
  • Personal loans for bad credit occasionally require you to provide something as collateral. To get the loan, you may have to put your home or automobile on the line. If your payments are late, or you cannot pay the installment, you may lose your home or car.
  • Not every state requires an internet lender to be licensed. Before you start paying for their services, be sure the company you choose is certified in your state.
  • It’s critical to plan and make sure you can pay back what you borrow. Predatory lenders would be delighted to grab your money. Long-term advantages should be considered when making decisions. If you’re not sure, go to a credit counselor about your alternatives.
  • You must approach various lenders before finalizing your loan with one. The competition allows you to compare and research the firm you ultimately select.

Personal Loans for Bad Credit

Secured vs. unsecured personal loans for bad credit

If your credit score raises red flags, a secured loan may be your best option for getting the money you need. A secured loan is protected by any asset you own, such as your home, car, boat, property, savings, or even stocks. The asset will be held as collateral by the lender in case you default on the loan. Your asset will be in danger if you do not repay the debt. Compared to unsecured loans, secured loans provide lower interest rates, better conditions, and access to more considerable sums of money.

An unsecured loan is secured only by your commitment to repay it, and it can be challenging to obtain from most banks. Banks are happy to make unsecured loans to their best customers — those who can show they have the income and credit history to repay the loan – but they are wary of lending money to anyone else. Because an unsecured loan poses no danger to the borrower but a high risk to the bank, you should expect much higher interest rates and limited flexibility in qualification and loan terms.

Some banks will give you a secured loan based on your savings account balance or the value of any equities you own. The benefit of taking out a secured loan against savings or stocks is that you won’t have to sell the asset, so you’ll still own the savings or stocks once you’ve paid off the debt. Most financial counselors, however, recommend selling savings or assets as collateral and using the proceeds to pay off the debt. If the funds are available to avoid borrowing, why borrow at a high-interest rate?

Paying off the loan, whether secured or unsecured, will boost your credit score, which is good news for everyone concerned.

Online personal loans for bad credit

Personal Loan Lenders that have created an option for people with low credit ratings have emerged due to technological advancements and a large vacuum in the market. These lenders are essentially banks with no physical locations. They operate entirely online and provide negative credit loans for debt consolidation and house renovations, among other things. Their key selling point is that they work quickly. They can make choices in a matter of minutes and put money into an account within hours or days. Many do not charge an application fee or impose a penalty if you pay in advance.

There are various online services for providing personal loans for bad credit. They usually receive your loan application and help you connect with such lenders who will most likely accept you for a personal loan. Usually, you may fill out just one form and compare offers from a variety of lenders. Online personal loan applications are straightforward and simple to complete. Credit ratings are only used in part of the decision-making process, so if you have bad or no credit, online loans could be an exciting choice. Some personal loan providers, in fact, utilize their own credit-score formula rather than FICO ratings. Other considerations include whether you have a college diploma or your work history.

Direct lenders for personal loans for bad credit

Direct personal loans are provided by the financial institution that accepts your personal loan application, including many local banks, credit unions, as well as online banks, and direct lenders. If you have bad credit, you should only apply with direct lenders who are prepared to work with credit-challenged borrowers.

Payday loans for bad credit

You might want to consider getting a payday loan if you need money right away, require a small loan, or get denied from getting a personal loan due to your credit score. Small payday loans may be easier to apply for if you have bad credit. A payday loan is a small-dollar, short-term loan of $100 to $500. You usually give the lender a post-dated check or electronic access to automatically withdraw money from your bank account when you take out a payday loan. And, along with costs, the loan is usually repaid on your following pay date. However, they come at a very hefty price. According to the Consumer Financial Protection Bureau, the average APR on a $100 two-week payday loan is approximately 400 percent.

A payday lender may or may not run your credit through the major credit bureaus when you request a loan. While this may make it easier to obtain a payday loan if you have bad credit, the high-interest rate may make repayment difficult. In some states, high-cost payday lending is outlawed. Other states impose restrictions on the amount of money that payday lenders can lend and the maximum loan terms and finance charges. In addition, several local credit unions now provide payday loans as an option (PALs). Borrowers with bad credit scores may be able to get more cheap short-term borrowing through these loans. A PAL has a maximum interest rate of 28 percent.

Consider all available options before asking for a payday loan, such as borrowing from a credit union, enrolling in overdraft protection on your bank account, or engaging with a consumer credit counseling program to work out a payment plan with creditors. Instead of taking a payday loan, you may be able to borrow money more reasonably if you qualify for a personal loan with low credit. Even a rate of 36 percent, which is towards the top of the range for most personal loans, is significantly less than the typical fees charged by payday lenders.

Home equity loans & HELOCs for bad credit

You can consider a home equity loan or a home equity line of credit if you have equity in your home. Home equity loans can be secured regardless of your credit score because your home serves as security. Because the residence secures the loan, the interest rate is usually cheap. In most cases, the interest you pay on a home equity loan is tax-deductible.

It’s crucial to note that taking out a loan against your home equity puts your house in peril if you don’t pay it back. However, if your payment history is regular and has a steady source of income, it is a cost-effective option to borrow money from a trustworthy lender with bad credit.

Credit union loans for bad credit

A credit union, particularly one linked with your employer or located in your community, usually is willing to overlook a poor credit history and make a decision based on your character and ability to repay. Consider credit unions in the same way that you would a small community bank from the past. The most convincing element of a credit union loan is the 18% interest rate cap, which applies to everyone, regardless of credit score. A bank loan with a similar term may cost you up to 36 percent in interest.

Peer-to-Peer lending

P2P lending, or peer-to-peer lending, has been around since 2005. It’s an internet platform that lets you borrow money with bad credit from another person or group of people rather than from a bank. Potential borrowers disclose their loan needs on numerous peer-to-peer websites, specifying the amount and purpose. Investors go over the loan listings and select debtors to invest.

Your credit score is still taken into consideration for P2P lending, but because an individual investor has a lot more control over how criteria are weighted, these loans are generally more accessible to persons with bad credit. Traditional lenders’ lending rules are substantially more flexible, and interest rates are typically cheaper. Furthermore, peer-to-peer platforms assist lenders in assessing risk while also validating the lender’s credentials for the borrower.

Student loans for bad credit

If you need to pay for higher education, a student loan for bad credit is definitely the best option. Even though private student loans typically demand a high credit score, students with negative credit can obtain federal loans that do not require a credit check. Federal loans also provide the most liberal payback terms, including loan forgiveness if you work for the government or pick specified repayment plans.

Auto loans for bad credit

An auto loan is a form of secured loan in which you place your car as collateral. If you default on an auto loan or cannot meet regular payments, the lender can repossess your vehicle. Auto loan qualification standards differ from lender to lender and dealership to dealership, just as they do with personal loans. While a credit score of 670 is recommended for the best conditions, you can still qualify for an auto loan with a lower credit score provided you fulfill the debt-to-income (DTI) ratios and put down a bigger down payment.

How to pick the best bad credit loans?

Proper homework and thorough research about the available loan options help you make the best choices you can with your money. Before finalizing a lender, you must look at several personal loan lenders and compare their offers closely. You should evaluate various factors to shortlist the best lender for getting a personal loan, particularly when you have bad credit, including:

Annual percentage rates

Check the APR (annual percentage rate) of each lender. Try to sign with the lender with the lowest APR. The lower the interest rate, the better it will be for your financial situation.

Repayment period

You must know the length of your loan term and the repayment period. Try to get a flexible repayment plan or one that offers you a minimum monthly payment and won’t worsen your financial situation.

Loan amount

It is suggested to get a small personal loan when you have bad credit. Massive loan amounts come with a higher APR and poor credit score. If you already have bad credit, a more extensive loan amount may devastate your financial situation and put you in default.

Minimum credit score

With a bad credit score, the chances of getting qualified for loans narrow down rapidly. That is precisely why you should look for lenders with a minimum credit score. So you can have a better chance to qualify and get a loan even with your poor credit history.


Last but not least, do proper research about the credibility and trustworthiness of the lender before signing the personal loan agreement.

Alternatives to personal loans with bad credit

Although personal loans are a significant source of getting the get money quickly, there are some cheaper avenues are also available that can be used as an alternative to a personal loan in case of bad credit:

Ask friends and family

Instead of getting a personal loan when you have a bad credit score, an easier way is to seek help from your friends and family and ask for a loan. This may seem a little awkward, and you may feel hesitant, but it may help you get a loan with smaller payments than a loan from an official lender.

Get a credit card

Instead of getting a personal loan, you may also take the option of getting a credit card. Getting a credit card is particularly handy in a situation when your credit score isn’t in the best shape, and you can apply for a lower APR with a credit card compared to a personal loan lender.

An advance paycheck

Some banks will let you obtain your cheque a few days early, and you can use apps to get a portion of your payment that you’ve already received in a pay period. You can also request your company for a paycheck advance.

On the other hand, taking a paycheck advance isn’t free; you’ll almost always be charged costs deducted from your earnings when you receive them.

Get a part-time job

For improving your financial situation, you can also make some money by getting a part-time gig or job, such as rideshare and food delivery services. Working part-time will help you earn extra cash and improve your situation enough to dismiss the necessity for a personal loan.

Take help from a nonprofit organization

Many local nonprofit organizations and charity services offer specific programs which are specifically designed to provide short-term assistance for people in poor financial situations. You may also seek help from nonprofit organizations and charities in your locality to improve your financial circumstances instead of getting a personal loan which you will have to repay eventually.


When an unexpected expense arises, or you face a financial emergency, you don’t have to turn to a predatory payday lender just because you have a low credit score. Even if you have credit issues, you should compare all of your options because a better cheap option may be available. Many lenders are offering amazing personal loan deals for people with bad credit at a low interest rate. Do your homework, weigh your options, and get the best value for you!

Charles Bains

Charles Bains

Charles Bains started his insurance career as a marketing intern before pounding the pavement as a commercial lines agent in Orlando, FL. As an industry journalist, his articles have appeared in a variety of trade publications. His insurance television career, short-lived but glorious, once saw him serve as the expert adviser on an insurance-themed infomercial (yes, you read that correctly). Having recently worked for various organizations, coupled with his broader insurance knowledge, Charles is able to understand our client’s needs and guide them accordingly. He is a gem for Insurance Noon as his wide area of expertise and experience have been beneficial in conducting further researches to come up with solutions and writing them in a manner which is easy for everyone including beginners to comprehend.