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Taking out a personal loan can seem overwhelming. There are countless lenders to choose from, each offering different repayment terms and requirements. Getting a loan can feel even more daunting if you have less-than-stellar credit or limited credit history because many lenders only work with borrowers who have good credit.
Fortunately, you may have options. Here's what you need to know if you’re looking for a personal loan and have poor credit. Plus, we’ve compiled a list of our top bad credit loans to help make comparing options less intimidating.
What’s a Bad Credit Loan?
Bad credit loans are typically unsecured or secured fixed-rate personal loans, but other loan types are also available. In most cases, the application process for a personal loan is simple and same-day or next business day funding may be available.
So what is bad credit exactly? The FICOⓇ Score, basically the gold standard for credit scoring, ranges from 300 to 850. Higher scores indicate better credit. Per the FICO model, a poor credit score is within the 300 to 579 range and "fair" is in the 580 to 669 range.
Lenders offering bad credit loans may be willing to work with borrowers struggling with poor credit or limited credit, but they'll likely face higher rates and shorter repayment periods.
Best Loans for Bad Credit
In general, loan options are fewer for borrowers with bad credit scores, as banks, online lenders, and credit unions may view them as a higher default risk. But that doesn’t mean there are no loan options available.
Here are some of the top loans for borrowers with bad or limited credit.
- Best for Fast Funding: Avant
- Best for Co-Borrowers: LendingClub
- Best for Secured Loans: Upgrade
- Best for Limited Credit History: Upstart
- Best for Small Loans: PenFed Credit Union
Loan results will vary based on creditworthiness, loan purpose, loan amount, and other factors.
Best for Fast Funding: Avant
Avant
- Loan Amounts$2,000 – $35,000
- Loan Terms12 – 60 months
- APR Range9.95% – 35.99%
- Minimum
Credit Score580 or aboveA credit score is used to indicate the creditworthiness of an applicant, but it is only one of several factors considered for approval. These credit scores alone are not guarantees for approval and should only be used as guidelines.
Avant offers small personal loans that are accessible to borrowers with fair credit, with funding available as soon as the next day.
Overview
Avant is known for its personal loans that can be used for a wide range of purposes and are accessible for those with fair credit. Funding can be completed as soon as the next business day once approved. The minimum APRs tend to be higher than competitors, but the maximum APR is comparable to other online lenders. A unique feature offered by Avant is their flexible payment due date, which allows a 10-day grace period without incurring a late fee.
Pros
- Loan terms up to 60 months
- Low minimum credit score requirement
- Flexible payment due date
- Next day funding available
Cons
- No physical locations
- Origination fee of up to 4.75%
- Relatively low maximum loan amount ($35,000)
- High minimum APR
- No joint applicant or co-signer
Best for Co-Borrower Option: LendingClub
LendingClub
- Loan Amounts$1,000 – $40,000
- Loan Terms24 – 60 months
- APR Range9.57% – 35.99%
- Minimum
Credit Score600 or aboveA credit score is used to indicate the creditworthiness of an applicant, but it is only one of several factors considered for approval. These credit scores alone are not guarantees for approval and should only be used as guidelines.
Borrowers in the fair credit range who need a small loan can appreciate LendingClub's quick funding and option for direct payments to creditors with debt consolidation loans.
Overview
LendingClub can be a good fit for those looking to consolidate high-interest debt, as they offer the ability to pay your creditors directly from your loan. You can also use LendingClub loans for almost any purpose, from home improvements to medical bills. Eligible borrowers who need some assistance qualifying can apply for a joint loan, and borrowers can expect to receive funding as soon as 24 hours after approval. However, APRs do start at relatively higher rates than some competitors.
Pros
- Low minimum loan amount
- Fast funding for personal loans (receive funds as little as 24 hours after approval)
- Joint loans allowed
- Direct payment to creditors
- Check rates without a hard credit inquiry
Cons
- Has origination fees
- No physical branches
- Lower maximum loan amount than some lenders
Best for Secured Loans: Upgrade
Upgrade
- Loan Amounts$1,000 – $50,000
- Loan Terms24 – 84 months
- APR Range8.49% - 35.99%
- Minimum
Credit Score560 or aboveA credit score is used to indicate the creditworthiness of an applicant, but it is only one of several factors considered for approval. These credit scores alone are not guarantees for approval and should only be used as guidelines.
Borrowers with less-than-stellar credit profiles may find Upgrade personal loans accessible, and its quick funding and flexible payment due dates convenient.
Overview
Upgrade offers personal loans that are accessible to those with not-so-ideal credit scores. The low loan minimum of $1,000 also makes it an easy choice for those with small financing needs. However, borrowers in certain states will be subject to higher minimum loan amounts. With this lender, you can expect to pay an origination fee. Borrowers can view their rate before applying without impacting their credit score. Overall, Upgrade is worth considering if you’re looking for a lender that is willing to work with lower credit scores and offers loans with competitive rates and flexible terms.
Pros
- Accessible to borrowers with bad credit
- Flexible loan terms
- Joint applications allowed
- Secured loan options
- Direct payment to creditors
Cons
- Has origination fees
- No physical branches
- Higher APRs than some competitors
Best for Limited Credit History: Upstart
Upstart
- Loan Amounts$1,000 – $50,000
- Loan Terms36 or 60 months
- APR Range7.8% - 35.99%
- Minimum
Credit Score300 or aboveA credit score is used to indicate the creditworthiness of an applicant, but it is only one of several factors considered for approval. These credit scores alone are not guarantees for approval and should only be used as guidelines.
Using artificial intelligence to help evaluate borrowers, Upstart is a unique lending platform that looks beyond your credit score for personal loan approval.
Overview
Upstart is a first-of-its-kind online lending platform that uses artificial intelligence to help make smarter lending decisions. This means the company considers factors beyond a borrower’s credit score to help determine creditworthiness. Upstart indicates its model has resulted in 43% lower rates for borrowers than traditional credit score models.
Beyond your credit score, Upstart will also look at your employment history, income and level of education when deciding whether to approve you for a loan. The company states that borrowers with credit scores as low as 300 might be able to get approved for a personal loan, though that loan may come with a relatively high APR.
Upstart’s rates are fairly competitive and loan funds are disbursed as soon as one business day after approval. This lender charges origination fees, so it’s important to read the fine print before applying.
Pros
- Considers factors beyond your credit score in lending decisions
- Loans up to $50,000
- Fast funding time
- Check rate without affecting credit score
- Low minimum credit score requirement
Cons
- No physical locations
- Limited repayment terms
- Has origination fees
- High maximum APR
- Not available in Iowa or West Virginia
Best for Small Loans: PenFed Credit Union
PenFed Credit Union
- Loan Amounts$600 – $50,000
- Loan Terms12 – 60 months
- APR Range7.99% – 17.99%
- Minimum
Credit Score700 or aboveA credit score is used to indicate the creditworthiness of an applicant, but it is only one of several factors considered for approval. These credit scores alone are not guarantees for approval and should only be used as guidelines.
PenFed offers no fees and small personal loans as low as $600.
Overview
While you will need to become a PenFed member if you decide to get a personal loan there, anyone can apply for membership and the process is quick and simple. Many lenders have relatively high minimum loan amounts, but PenFed offers loans as small as $600, with no origination fees and competitive APRs. If you’d like to view personal loan rates with PenFed, you can do so without impacting your credit score.
Pros
- Pre-qualification is available
- No origination fee, hidden fees or prepayment penalties
- Borrow as little as $600
- Allows co-borrower
- Funding as early as 1-2 business days after approval
Cons
- Must be a member to receive the loan
- No option for direct payment to creditors for debt consolidation
How to Choose a Bad Credit Loan
When choosing a personal loan with poor credit, there are certain things to pay attention to as you shop around, including:
Annual Percentage Rate
One important consideration is the annual percentage rate (APR) each lender offers. APR is the yearly interest a lender charges on top of the amount you borrow, and borrowers with less-than-perfect credit often get higher rates. While getting a higher rate is common if your credit isn’t great, avoiding predatory loan options with astronomical interest rates is best.
Fees
Personal loan fees are another important consideration that can increase your borrowing costs. While certain fees might be rolled into the loan’s APR, some may be charged upfront. For example, a lender may charge origination fees, application fees, late payment fees, and prepayment penalties.
Co-Borrower or Co-Signer Option
Certain lenders offer borrowers the option to apply for a loan with a co-borrower (sometimes called a co-applicant) or co-signer. A co-borrower applies for and is responsible for loan payments upon approval, essentially borrowing the amount with you. A co-signer simply agrees to pay back the loan if you default.
Borrowers with bad credit might choose to use a co-borrower or co-signer with a better credit history to increase the chances they’ll be approved for a loan.
Best Personal Loans for Co-Signers & Co-Borrowers
Prequalifying to Compare Rates
In addition to the option to use a co-borrower or co-signer, you’ll also want to determine if lenders offer a prequalification option. Prequalifying for a loan involves checking your interest rate without being subject to a hard credit inquiry, which could ding your credit score. Working with lenders that allow you to prequalify can help you compare options to find the best interest rates without damaging your credit.
Secured Loan Option
Many personal loans are unsecured, meaning they don’t require borrowers to use collateral, like their home, car or savings account. But unsecured personal loans have stricter credit requirements, so they can be hard to qualify for if you have bad credit.
While most personal loans are often unsecured, some secured options are available. Secured loans do require collateral, but they may have less strict approval requirements and offer better rates for borrowers with poor credit.
Lender Reputation
As you research your loan options, consider the lender’s reputation. Determine how long they’ve been in business, read customer reviews and look into whether or not the lender has any recent complaints in the Consumer Financial Protection Bureau’s Complaint Database. Doing your due diligence can help ensure the lender you’re comparing is reputable and has a decent reputation with customers, while also helping you to avoid personal loan scams.
Types of Loans to Avoid
Shady lenders often prey on people with bad credit, as they know fewer loans are available to these borrowers. For example, some target bad credit borrowers with payday loans, which can come with costly fees and APRs as high as 400%. Here are some loans to watch out for when shopping around.
Payday Loans
While a payday loan might offer fast funding and no credit check for borrowers, these loans can be dangerous. Interest rates are so high that it may be challenging to pay off your loan, and getting behind on payments can harm your credit score. Overall, it’s best to avoid payday lenders and instead work with reputable lenders offering loans with lower interest rates and manageable fees.
Car Title Loans
Car title loans are another loan you’ll probably want to avoid. Like payday loans, car title loans generally come with flexible qualifying criteria and astronomically high APRs. These loans also use your vehicle as collateral, so if you fall behind, the lender could repossess your car and leave you stranded.
If you're specifically looking for a loan to fix up your vehicle, check out our list of the best loans for auto repair to see if there's an option for your needs.
Alternatives to Bad Credit Loans
If a personal loan doesn't make sense for your situation, consider these other options.
Get a Credit Card With a 0% Intro APR
A credit card could be a good choice if the amount you need to borrow is relatively low. Look at the best balance transfer credit cards to find one with a long introductory 0% APR offer. This type of card gives you a time period, often 12 to 21 months to pay off your bill before you are charged any interest. Take some time to run the numbers first to be sure you can pay down the charges though, so you won't end up owing more than you can afford.
Save Up Over Time
If you don't need funds immediately, you can work on setting money aside over time. A high-yield savings account is an excellent way to save for a specific goal, and you can even set up autopay to transfer money each month to that account. Even a little bit can go a long way over time, and this option saves you from having to deal with interest charges or credit scores at all.
Improve Your Credit Score
Another option for long-term financial goals is to work on improving your credit. Here are the main steps to accomplish this:
- Check your credit report: You can see your report for free via AnnualCreditReport.com once a year. Make sure everything on there is accurate, both personal information and debts. If anything is wrong, dispute it and get it corrected.
- Make payments on time: This applies to any money you've borrowed, like with a credit card. (Utility bills and rent don't typically affect credit scores unless they are specifically reported.) Paying monthly debts in full and on time can have a huge positive impact on your score.
- Be strategic about new credit: Don't apply for cards or loans you don't need, but if you want to build credit, you could look into secured credit cards to start rebuilding your score. These offer few perks but are easier to get with bad credit.
For more in-depth information on building credit, including debt payment strategies and credit utilization ratios, check out our guide on how to improve credit scores.
Money Loan Apps
Some money lending apps such as Cash App's loan feature can loan you a small amount of money if you can't wait until your next paycheck. Some apps don't run credit checks, which can be more accessible for those with less-than-ideal credit. Do watch out for the fees though, as they vary depending on the app. You're also limited to a very small loan.
FAQs
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The loan amount you can get if you have poor credit varies based on the lender and your unique situation. For instance, some lenders may let you borrow up to $50,000 while others may offer smaller loan amounts. As you compare options, consider prequalifying with a soft credit check to determine which loan terms, rates and amounts might be available to you.
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Whether bad credit loans are better than using a credit card depends on a few factors. Consider the APR and your ability to repay the loan over a long period of time. If you're making a relatively small purchase and can repay it within a month, a credit card can make more sense. But if you qualify for a loan rate that is lower than a credit card APR, then a bad credit loan may be a better fit. Compare both options' cost and pros and cons before deciding which is right for you.
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If you have less-than-ideal credit, it might be easier to qualify for a secured personal loan than an unsecured personal loan. Remember that secured personal loans require collateral, like a savings account, or your home or car.
Also consider working with a lender that allows co-borrowers or co-signers to increase your chances of being approved for an unsecured personal loan with a decent rate and favorable loan terms. Compare bad credit loans from brick-and-mortar and online lenders to see which offers the best options.
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Credit score requirements for personal loans vary by lender. While some lenders might require a minimum credit score of 670, others might require a credit score of just 300. Research credit score requirements for each lender as you shop around for bad credit loans.
Checking your credit before applying for a loan is a smart idea, even if you know you have bad credit. Each of the major credit bureaus — Equifax, Experian and TransUnion — lets you access a free credit report each year through annualcreditreport.com.
Jessica Ullrich
Jess is a freelance personal finance writer. She's been creating financial and business content for over a decade. Before venturing into freelance writing, Jess was on the editorial teams at Investopedia, The Balance, and FinanceBuzz. She's created content across several verticals, including budgeting, credit, debt, insurance, investing, loans, and side hustles. In her spare time, you can find Jess reading about money, working in her garden, or spending time with family.
