Best Personal Loans for Bad Credit in 2020

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Having a bad credit score can make a personal loan seem impossible. But when it comes to debt consolidation or paying for a home improvement project, personal loans are the only way many people can cover the costs. While it might take longer to qualify for a personal loan with a low credit score, rest assured you still have options from a variety of lenders. To determine the best bad credit personal loans, we used our proprietary SimpleScore methodology to evaluate each lender’s rates, terms, customer satisfaction, customer support and fees.

In this article

The 6 best loans for bad credit in 2020

The best bad credit loans at a glance

Lender APR Loan Amount Terms Key Benefit SimpleScore
OneMain Financial 18%–35.99% Up to $20,000 Up to 60 months Same-day funding. 4.5/5
Peerform 5.99%–29.99% $4,000–$25,000 3 years Easy application process. 4/5
NetCredit 34.00%–155% Up to $10,000 6–60 months Low credit scores accepted. 3.2/5
Avant 9.95%–35.99% $2,000–$35,000 24–60 months Mobile application process available. 3.75/5
PersonalLoans.com 5.99%–35.99% Up to $35,000 90 days–72 months Short-term loans available if needed. 4.25/5
BadCreditLoans.com 5.99%–35.99% $500–$5,000 3–36 months Large affiliate network to fund your loan. 3.6/5

COVID-19 Update: We're keeping track of how the COVID-19 pandemic is affecting personal loans. Read more.

The best bad credit loans companies

Best for emergency funding: OneMain Financial

OneMain

When you’re in need of money for an emergency, OneMain Financial provides last-minute loans, approved in as little as ten minutes.

APR range
18.00% - 35.99%
Loan range
$1,500 - $20K
Term range
24 – 60 months
SimpleScore
4.25 / 5.0
close
SimpleScore
OneMain
4.25
  • Rates
    4
  • Loan Size
    5
  • Terms
    5
  • Support
    4
  • Fees
    3
OneMain Financial provides a variety of personal loans for all types of borrowers. Consumers with lower credit scores may not be able to qualify for all of OneMain Financial’s credit products, but will find products tailored to meet their needs. OneMain provides bad credit loans that consider other factors besides credit score. Furthermore, a borrower can put up a car, truck or other assets as collateral to qualify.
Full review

Our Two Cents — If loans were a car, OneMain Financial would be a fast one. But just like premium gas in the tank, you won’t save much on interest with the lowest APR at 18%.

Best peer-to-peer lending: Peerform

Peerform

Raise the odds of getting approved — your loan is funded by investors who monitor and choose loans to fund from Peerform.

APR range
5.99% - 29.99%
Loan range
$4k - $25K
Term range
12 - 36 months
SimpleScore
4 / 5.0
close
SimpleScore
Peerform
4
  • Rates
    5
  • Loan Size
    5
  • Terms
    5
  • Support
    5
  • Fees
    1
If you need a bad credit loan option and your credit score is poor but not outright terrible, Peerform is a lender you may want to consider. It’s a peer-to-peer lending platform, meaning borrowers are matched with individuals willing to lend money. It’s an interesting concept that takes traditional banks out of the equation and can sometimes offer lower fees due to reduced overhead.

Be mindful of the fact that Peerform will decline any application with a credit score below 600, which is all the more reason to raise your credit score. Because of this criteria, Peerform is able to offer loans ranging from $4,000 to $25,000 to potential borrowers with APRs ranging from 5.99% to 29.99%. One of the downsides to using Peerform is that it can take up to two weeks to receive funding. So, if you need cash fast, this may not be the best platform for you. Additionally, there is a 1% to 5% origination fee attached to the loan.

Full review

Our Two Cents — You won’t want to swat away this spider web of connections. PeerForm uses peer-to-peer lending to get borrowers money quickly, but their origination fees will stick.

Best for building credit: NetCredit

NetCredit

Even if you have less than perfect credit, NetCredit will consider approving you for a loan quickly.

APR range
34% - 155%
Loan range
$1K - $10K
Term range
6 to 60 months
SimpleScore
3.2 / 5.0
close
SimpleScore
NetCredit
3.2
  • Rates
    2
  • Loan Size
    3
  • Terms
    5
  • Support
    2
  • Fees
    3
NetCredit offers personal loans with much higher interest rates than many lenders, starting at 34% and soaring to 155% APR. A borrower’s APR will deThe good thing about NetCredit is it looks beyond just your credit score, sometimes accepting applications with scores as low as 550. Further, NetCredit has a suite of tools and guarantees that provide transparency and ease-of-use for customers, even allowing borrowers to return the loan the day after funding if they change their minds.

Its loans range from $1,000 to $10,000 with APRs starting around 34% — and in some cases ranging as high as 155%. If your offer comes with an extremely high APR like that, look into other options, such as a secured loan or using a cosigner. You could easily find a better bad credit loan elsewhere.

Full review

Our Two Cents — Like someone who looks past all their partner’s red flags, NetCredit helps borrowers get a loan, regardless of their score. But with some of the highest APRs out there, its got a few red flags of their own.

Best mobile app: Avant

Avant

Complete a loan application online or by using the mobile app for next business day funding.

APR range
9.95% - 35.99%
Loan range
$2K - $35K
Term range
24 to 60 months
SimpleScore
3.75 / 5.0
close
SimpleScore
Avant
3.75
  • Rates
    2
  • Loan Size
    5
  • Terms
    5
  • Support
    5
  • Fees
    3
Avant focuses on loans for borrowers with average credit — customers with a credit score between 600 and 700. If you fall in that range, Avant is good if you need your funds quickly, as you may get your loan as soon as the next business day after you apply. Avant also makes its customer support team available seven days a week, meaning customers can reach out and ask questions, even on a Sunday morning.

Loans from Avant range from $2,000 to $35,000 with APRs between 9.95% and 35.99% which is reasonable compared to other loans for people with bad credit. Furthermore, the loan terms offered are between 24 to 60 months. However, you should also be aware of an administration fee charged for loan origination that is 1.50% to 4.75% of the loan itself.

Full review

Our Two Cents — Tech-savvy customers rejoice! Avant’s mobile app allows borrowers to easily access loan details and contact customer service.

Best bad credit lender marketplace: PersonalLoans.com

PersonalLoans.com

When you don’t qualify for a loan, try the peer to peer service as a lending alternative to broaden your borrowing options.

APR range
5.99% - 35.99%
Loan range
$500 - $35K
Term range
90 days to 72 months
SimpleScore
4.25 / 5.0
close
SimpleScore
PersonalLoans.com
4.25
  • Rates
    2
  • Loan Size
    5
  • Terms
    5
  • Support
    3
  • Fees
    5
After completing just one online application, PersonalLoans.com will search its network of lenders to find one that matches your needs and financial situation. When the results return, you have to do a little extra research to find the best one for you. Be sure to read the terms and agreements of each offer, as they could all differ from one another.

APRs are competitive and there are several types of loans, which top out at a generous $35,000. Of course, this is a referral site, so your terms, fees, and APRs will vary depending on the lenders who contact you. This kind of information can be easier to determine with a direct lender.

Full review

Our Two Cents — Overwhelmed with it all? Take a break and let PersonalLoans.com do the legwork and connect you with lenders. But don’t forget to check its work and read the terms of each offer.

Best for really bad credit: BadCreditLoans.com

BadCreditLoans.com

Badcreditloans.com is one of the oldest personal loans for bad credit providers.

APR range
5.99% - 35.99%
Loan range
$500 - $5K
Term range
3 to 36 months
SimpleScore
3.6 / 5.0
close
SimpleScore
BadCreditLoans.com
3.6
  • Rates
    4
  • Loan Size
    2
  • Terms
    4
  • Support
    3
  • Fees
    5
When it comes to getting a loan with really, really bad credit, your options are limited. But BadCreditLoans.com is a site that has been connecting borrowers with poor credit to a network of willing lenders since 1998. Once you apply, you’ll receive offers from a network of lenders. You can choose which offer is best for you and your financial situation before moving forward in the process.

Keep in mind that depending on your situation, you may not receive any offers. On the other hand, you can reject any offer that doesn’t fit your needs. Once you accept an offer, typical loan amounts range from $500 to $5,000 with an APR of anywhere from 5.99% to 35.99%, according to its website. The repayment terms generally range from three to 36 months. Although the 35.99% APR can seem daunting, it’s better than a predatory payday loan

Full review

Our Two Cents — Because having really bad credit is bad enough, BadCreditLoans.com eases your worries about getting a loan. However, a low cap of $5,000 may not be enough to bridge the financial gap.

What is a bad credit personal loan?

Offered by online lenders, banks or credit unions, personal loans can be used for a variety of things. A bad credit score may rule you out for the best interest rates, but that doesn’t mean you won’t have access to the funds you need. In 2018, Transunion’s Q4 Industry Insights Report found balances on personal loans increased $21 billion, to close the year at a record high of $138 billion.

Personal loans for those with bad credit generally come with a higher interest rate, a shorter term and tighter restrictions. Only consider taking out a bad credit personal loan if you know you’ll be able to pay it off quickly.

Pros Cons
Eligible for many uses Many lenders charge fees
Better interest rate than credit cards Poor credit means higher APRs
Fixed monthly payments A lasting form of debt

Bad credit personal loan FICO credit ranges

Bad Credit (300-650)  If you have a credit score below 650, you’ll have a harder time qualifying for loans. The loans you do qualify for will have much higher interest rates.

Credit score Range Detail
Excelent Credit 760 and above Excellent credit will unlock the best rates across all lenders.
Good Credit 701-759 You’ll most likely qualify for a number of loans, though there is no guarantee you’re getting the best possible terms.
Fair Credit 651-700 A credit score of 700 means you’re in about the 50th percentile

What are the uses for a bad credit personal loan?

Unsecured bad credit personal loans can be put to any use. Whether you’re interested in debt consolidation to better your poor credit score or adding an extra room to your home, a subprime loan can help. Some of the most common uses for personal loans for bad credit are:

  • Paying off high-interest credit card debt
  • Debt consolidation
  • Home improvement projects
  • Paying off medical bills
  • Unexpected emergencies
  • Cover moving expenses
  • Pay for your wedding
  • Refinancing existing loans
  • Military Loans
  • Starting a business
  • Financing a car

Types of personal loans for bad credit

Secured vs. unsecured loan?

There are two types of personal loans:

  • Secured loan: Backed by collateral, secured loans generally allow for lower interest rates and larger amounts. The collateral you put down — your car, home or assets — will be taken by the lender if you do not pay back the full amount of your loan. Some lenders will require borrowers with fair to bad credit to secure a personal loan with some type of collateral because the bank or lender is at greater risk of not getting paid back.
  • Unsecured loan: Unsecured personal loans are backed by your credit, not collateral. It’s harder to qualify for this type of loan with bad credit, but there are options tailored to poor credit borrowers. Though unsecured loans will come with less favorable terms, they are generally favorable to putting up collateral.

When to use a secured loan vs. unsecured loan

You can typically borrow larger amounts of money at lower rates with a secured loan since lenders are more confident it won’t lose money if you can’t pay back your loan. Sometimes it can be more difficult to get approved for an unsecured personal loan. Unsecured loans also often come with less favorable terms and a higher interest rate than secured loans. But if you have good credit and a history of paying off debt on time, unsecured personal loans are favorable to putting up collateral.

Payday loans

Payday loans allow borrowers to get money fast — typically a small amount of $500 of less. With a short term, high rates and plenty of fees, payday loans shouldn’t be your first choice. They are extremely expensive and predatory, and borrowers usually end up in an endless cycle of debt. Payday loans are a last-resort, worst-case scenario and should be borrowed very rarely.

Installment loans

Set to be paid back in predictable monthly payments, installment loans have a fixed interest rate. While the name may seem unfamiliar, installment loans are anything but. Mortgages, auto loans and student loans are all examples of this type of loan. With a specific end date and consistent monthly payment, installment loans are more easy to budget for than payday or emergency loans.

Emergency loans

When unexpected expenses like hospital bills or auto repairs come up, emergency loans are sometimes the only way to cover them. Great for when you need money quickly, some lenders even offer same-day funding. However, some emergency loans do come with high interest rates, so consider all alternatives before you take out any money.

Home equity loan

As you make payments toward your mortgage, you build up equity in your home. When you have built up enough, you can take out a loan against the equity you’ve accrued with a home equity loan. With home equity loans, your home is considered collateral, so only consider it if you can reasonably pay it off.

Home equity line of credit

A home equity line of credit (HELOC) is similar to a home equity loan as it’s based on the equity in your home. Though you should think of it more like a credit card. A HELOC allows you to borrow money multiple times when you need it. Since HELOCs are a secured loan, they generally allow for lower interest rates than credit cards.

Cash advances

A cash advance is a loan borrowed from your credit card. Generally a short term loan, how much you can borrow against your credit line will vary from card to card. You can get a cash advance with a convenience check, ATM or bank. Though before you do, you should know cash advances come with steep fees and a high interest rate.

How do personal loans for bad credit work?

Personal loans have a fixed term and defined interest rate, which makes budgeting for repayment easy since you know what your payment will be each month. The term of your loan will vary from lender to lender, though repayment periods are usually between 24 to 84 months. A longer term means lower monthly payments, but more interest over time. Since bad credit loans often have higher APRs, you should expect to pay more in interest and fees.

Here’s the process of getting and repaying a personal loan:

  1. Evaluate how much you need: Try not to take out more money than you need. Don’t forget loans have interest and fees, so getting out more than you need can impact your ability to repay the loan.
  2. Check your credit score and gather financial documents: To start, you’ll want to go through your credit report to ensure there are no errors that need to be corrected. Gather things like pay stubs and asset information that will help lenders evaluate your financial history.
  3. Prequalify for a loan: Often done online, prequalifying for a loan lets you know exactly how much you can borrow and what the terms of the loan will be. Lenders will perform a soft credit pull, which will not impact your score.
  4. Finalize: To finalize your loan, the lender will perform a hard credit inquiry. Remember: too many hard inquiries will negatively affect your credit score.
  5. Work towards paying off your loan: Once you have your loan, make a realistic budget for repayment. Without a clear plan for repayment, it’s easy to fall behind on payments and damage your credit even further.

Check Your Personal Loan Rates

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

When is the best time to obtain personal loans for bad credit?

The best rates and terms go to those with good credit. If you have the luxury of time, try to build up your credit score before applying for a loan, especially if you are only a few points away from the next tier. A higher credit score will unlock better terms and rates, so do what you can within your time frame.

“The biggest problem with bad credit is what we call the catch-22: you have to get a loan to build credit, but you need good credit to get a loan. It’s hard to find a loan with bad credit, but that does not mean payday loans are the solution for your emergency cash needs,” says Jeff Zhou with FigLoans. “Payday loans advertise themselves as a quick fix but are often designed to trap borrowers in debt. Hidden costs in the fine print make payday loans exceptionally dangerous.”

When to avoid personal loans

Before you take out a loan, consider your entire financial situation. If you have poor credit, you’ll end up with a higher interest rate, so if you can, it’s best to avoid a personal loan until your credit is repaired.

You can get a personal loan for almost any reason, but they aren’t recommended for every situation. Things that aren’t an investment or emergency — vacations or big-ticket items — shouldn’t be paid for with a personal loan.

Tips to choosing the best bad credit loan company for you

Decide why you need a loan

Before you even start the process, you have to be realistic about your situation. Why do you need a loan and how much do you need? Defining these things will help you decide which loan to consider. Take an honest look at your financial standing so you know what you can afford to take on.

Shop around

Once you’ve decided a personal loan is the right move, you have to decide which lender to go with. Whether you go with one of the best online lenders for bad credit or go down the traditional route of banks or credit unions, you should see what options you have. Your monthly payments are based on the APR of the loan. Compare options and choose the lowest APR you qualify for.

Andrew Roderick, CEO of Credit Repair Companies, offers this advice for the best way to obtain a personal loan for bad or poor credit.

“When looking for a bad credit loan in 2020, it’s very important to find one that best suits you. There are straightforward payday loans, which usually have a higher percentage rate for pay back, but can easily get you through a couple of months,” he explains. “But they should only be used if you are sure your income is secure for the next couple of months, especially at these trying times, or you could face extremely high charges only making your situation worse.”

Compare terms and fees

Once you have all of your options laid out in front of you, take time to understand the advantages and disadvantages of each loan. The long-term implications of a loan with less favorable terms cannot be ignored. Personal loan comparison will help you evaluate the terms and fees, making sure whatever you choose fits your finances and doesn’t just solve the need for money. Remember, you always want the most favorable terms which will allow you to save money over time.

Consider what type of flexibility you need

Make a list of everything you need from your personal loan for bad credit. If you plan on paying your loan off before your term ends, look for a lender who doesn’t charge repayment fees. Fees and repayment flexibility will vary from lender to lender, so take the time to find a lender that checks off your list of needs.

Plan your repayment budget


Choose a personal loan that you can reasonably afford and pay back on time. Come up with a repayment plan so you never fall behind on payments or damage your credit. Even though your credit may be poor right now, it doesn’t have to stay that way. You can use your personal loan as a chance to rebuild your credit by reducing your debt and making payments on time.

What is an APR?

APR or Annual Percentage Rate is a way to evaluate the affordability of the loan. It includes both the interest rate of the loan and any additional fees you pay. For the second quarter of 2019, the average interest rate on a personal loan was 9.41%, according to Experian.

Personal loan rates range from about 6% up to 36% on average, with lower percentages being the most ideal. The APR you receive is determined by your credit score, financial history and loan details. Bad credit personal loans will have higher interest rates, but that doesn’t mean you have to settle for anything that comes your way. You’ll still be able to strategically compare options and find the lowest possible APR for your credit.

Fixed APR vs. variable APR

There are two types of APR: fixed and variable. With a fixed APR, the interest rate on your personal loan is the same for the duration of your loan. If you have a fixed rate of 5.99% on your loan, it will remain 5.99% until you make your last payment. Conversely, if you have a variable APR, the interest rate will fluctuate based on the prime lending rate, which is the lowest rate your bank can charge its customers to borrow money.

How to detect personal loans scams

Having a bad credit score can make it harder to qualify for loans. But you still shouldn’t jump at the first offer that comes your way. Keep an eye out for red flags that could mean a bad credit loan scam. The most common types of personal loan scams are:

    • No credit check loans: Your credit history is how lenders determine if you’ll repay the loan. Legitimate lenders will check your credit, beware of any lender who doesn’t. More than likely they are offering you a payday loan, which comes with steep fees and extremely high interest rates.
      • Requiring fees upfront: Many lenders do require fees, though legitimate lenders will take them out of the loan once it is funded.
      • Unregistered in your state: Lenders are required by the Federal Trade Commission to be registered in every state they do business in. If they aren’t registered in your state, avoid doing business with them.
      • No physical address: Even online lenders have physical offices. Watch out for lenders who don’t have an address or only a PO box address.
      • Email warning signs: Unsolicited emails with irresistible rate offers, emails with errors and the inconsistent email address are all ways to spot scams.

Check Your Personal Loan Rates

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

Bad credit personal loans FAQ

What are personal loans?

A sum of money you get from a lender, a personal loan is paid back over a fixed period of time at a fixed APR. Some of the most common uses are debt consolidation and covering emergency expenses.

How do you apply for a personal loan?

Today, it’s easy and quick to apply for a personal loan online. Even many banks and credit unions offer the ability to apply online in minutes.

How can I fix my credit?

One of the best ways to improve your poor credit score is to make debt payments on time. In addition to paying off high-interest balances, try not to take on any extra debt if you’re attempting to improve your score. For more Credit/Debt Management resources click here.

Do I need collateral?

Most personal loans are unsecured. But, if you have bad credit, you may only qualify for a secured loan, which is secured by an asset or collateral.

Can I get a loan if I’m unemployed?

It depends on the lender. Most often lenders will look at employment history when approving you for a loan. However, the biggest consideration is your credit score. If you have a long employment history and good credit, you may qualify for a personal loan. But, it may have to be secured by collateral so your lender knows it will be paid back. Visit Emergency Loans for the Unemployed to learn more.

Ask the Experts

Tiffany Aliche, Owner, The Budgetnista and the Live Richer Academy

What are things to watch out for with bad credit personal loans?

If you’re in a situation where you really need to take out a loan and your credit is less than stellar, here are some things to consider before signing on the dotted line.

First, is the loan absolutely necessary right now or can it wait until you’ve gotten your credit profile in better shape? This is an essential question because it is inevitable that people with damaged credit will pay more and, in many cases, feel cornered to agree to loan terms that aren’t great

Here’s what to look out for:

Interest rates – The lower your credit score, the more you will pay in interest fees.

Repayment length – Some lenders will entice borrowers to take out a loan with longer than standard repayment lengths. However, it’s important to keep in mind that the longer you pay on a loan, the more you pay the lender back in interest. And, for long auto loans, you will likely end up underwater on the car (owing more than the vehicle is worth).

Prepayment penalties – This is another way lenders can sneak in unexpected charges. Suppose you take out a standard 5-year loan but have the good fortune of being in a position to pay it off by year three? If the loan term includes prepayment penalties, the borrower will have to pay a fee (usually a percentage of the remaining balance) to get out of the loan early.

The bottom line is: please read all the fine print and determine the true, entire cost of a loan before making the financial commitment!

How has COVID-19 affected the behaviors of banks and lenders?

Pre-COVID-19, banks and lenders were a little less restrictive with the criteria they were using to determine consumer loan eligibility. Loan applicants with average or below-average credit profiles — although penalized with higher interest rates — were still likely to secure the loan that they applied for.

Today, over 40 million Americans have suddenly found themselves without jobs since the start of the pandemic in mid-March. This crisis has shot the rate of unemployment so high that we are surpassing what Americans who lived through the Great Depression experienced. In response, lenders are reflexively tightening the belt on who they lend money to in fear of an avalanche of missed or defaulted loan repayment scenarios by consumers who can’t afford to keep up with what they own. They’re now most likely to agree to do business with customers perceived as being a less risky repayment bet — those with higher credit scores and more assets.

If I get denied for a bad credit personal loan, will it make my credit worse?

Not getting approved for a loan isn’t what impacts your credit. Your credit report will have no definitive information on whether a submitted loan application was approved or denied.

However, most lenders will check your credit report with one (or all) of the major credit bureaus when you apply for a loan, resulting in a hard inquiry. Hard inquiries stay on your credit report for up to two years and can cause a minor drop to your score. The good news is that the impact on your score decreases as each month passes.

Although more hard inquiries on a credit report do lead to larger credit score drops, it’s still smart to shop for loans from different lenders to get the best interest rate and terms. Credit scoring models recognize this and will typically only count multiple hard inquiries as one inquiry as long as they are done within a specific loan shopping time window and are for the same loan type.

Siva Mahesh, Dreamshala.com

What is your advice for finding the best loan for someone with bad credit?

First comes finding the potential lender, just know an important fact here. Having a bad credit score doesn’t mean you can’t take out a loan. There will always be a hand for you to clap further. I recommend you to find a potential lender with patience.
Taking a second opinion with a partner bank is what you must consider as a follow-up, show them you’re serious by improving your credit score in less time, and finally never repeat your past mistakes.

What steps can one take begin improving their credit score if denied for a bad credit loan?

First, you should never bog down after you got denied for the loan. Then you can shift your key focus on how to improve your credit score. Analyze your past financial steps, make a report on them, and start working on it to improve. Right after, start clearing the clutter by paying bills on time and start creating additional sources of income. If you lack financial discipline, never hesitate to spend a penny on a financial adviser to keep you balanced. Finally, keep an eye on the durability of credit and opt for new to fix the old one.

What are the most common considerations for banks and lenders when considering the approval of loan applicants?

There are a few common considerations:

      1. Your past credit score
      2. Genuinity of your cause
      3. Your inward and outward flow of money
      4. Legal documentation
      5. Value of your collateral
      6. Mode of repayment and time period

Randell Yates, CEO, The Lenders Network

Can a bad credit personal loan help improve your credit score? If so, how?

Any loan or line of credit is reported to the Credit Bureaus. Each time you make your payments on time, it helps your overall payment history, which is the largest factor in determining your credit score.

If I get denied for a bad credit personal loan, will it make my credit worse?

Credit inquiries have little impact on your credit rating unless you have a significant amount. Check out the credit requirements and see if the lender can run a soft credit inquiry to see if you’re pre-qualified. Soft inquiries do not affect your credit negatively.

What steps can one take to begin improving their credit score if denied for a bad credit loan?

First, pay off credit debt. Most people are not aware that carrying high credit card debt severely lowers your score. Before applying for a loan, you can improve your chances of being approved by paying down your card balances to 30% of their credit limits or less.
Second, dispute old accounts. If you have negative accounts on your report that are bringing your credit score down, you can dispute them directly with the credit bureaus. The creditors have 30 days to verify the account, or it must be deleted by law.

What are the most common considerations for banks and lenders when considering the approval of loan applicants?

Income is the most important factor lenders look at when issuing loans. Credit is second. Someone with a 600 credit score and a 60k salary is more likely to get approved for a personal loan than someone with a 650 score making less than 30k a year.

Logan Allec, CPA, Founder, Moneydoneright.com

What is your advice for finding the best loan for someone with bad credit?

First, cast your net as wide as you possibly can. It’s not easy to get a loan with bad credit, so plan to speak with a large number of lenders as you look for one that will be willing to give you a loan. Do an online search for lenders in your area and make a plan to call and discuss your options. You can even set online chat meetings with at least 50. This way, you are mentally setting yourself up for an arduous process.
Secondly, try to visit credit unions first instead of regular banks. Credit unions are owned by their customers, not-for-profit shareholders. As a result, you often will find an easier path to a loan from these smaller institutions.

How has COVID-19 affected the behavior of banks and lenders, particularly with respect to making personal loans to those with bad credit?

One thing is clear: banks and lenders are extremely hesitant to issue credit right now. With the economy showing clear warning signs, and the United States officially in a recession, lenders will want significant reassurance that they will get their money back. As a result, the few loans banks will give out will likely go to people with fantastic credit. Also, many banks are working overtime right now to issue PPP loans for the government. In practice, that means loan officers might not have the time to get to your loan application. If you want to submit a personal loan, it could make sense to apply through a bank that isn’t issuing PPP loans.

Erin Ellis, Financial Counselor at Philadelphia Federal Credit Union (PFCU)

What are things to watch out for with bad credit personal loans?

Usually, loans for people with bad credit are expensive! Interest rates on personal loans are often very high. The terms may be extended to make the payments more manageable, which also increases the amount you must payback.

High-interest rates and long terms result in very expensive loans. You should not only check the interest rate but also look at how much you are paying back in interest. For example, if you borrow $5,000 for five years at a high rate of 35.99%, you pay more in interest than you borrow!

Can a bad credit personal loan help improve your credit score? If so, how?

First, check with the lender to see if they report to the three major credit bureaus. Any loan that reports to the three major credit bureaus has the potential to help improve your credit score. As long as you make your loan payments on time every month, your score should increase over time. A good idea with any loan or credit card is to set up automatic payments from your checking account so that you will not accidentally miss a payment and potentially damage your credit score.

What steps can one take to begin improving their credit score if denied for a bad credit loan?

I commonly see two reasons people have low credit scores. First, they have no new credit card or loan history and need to build credit. The second reason is they have used too much of the available credit on their credit cards.

If you have no loan history and need to build credit, I recommend using a Credit Builder or Secured Loan. Secured credit cards are also a good tool to build credit, but beware that they come with the same pitfalls and dangers of any credit card. Secure credit cards require education and consistency. If you maxed out your credit, paying down the balance and keeping it low is the best way to help improve your score.

Too long, didn’t read?

The best personal loans for bad credit may take time to get, but if you need money for consolidating other high-interest debt, paying for a wedding, hospital bills or many other things, they can be a good solution. Low credit loans by default will have tighter restrictions, more fees and a higher APR. This is why finding terms you can reasonably repay is essential for building your credit and paying off your debt.

Keep reading

Methodology

The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For bad credit personal loans, we compared interest rates, loan terms, loan amounts, customer support and fees for every major lender. Our ratings are meant to be a directional tool to help you in the process of choosing a personal loan provider. Be sure to continue your research and shop around for the best personal loan that fits your specific needs.

We welcome your feedback on this article and would love to hear about your experience with the bad credit personal loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

COVID mask

The impact of COVID-19 on personal loans.

The coronavirus pandemic has already changed the financial industry, and personal loans are no exception. For example, U.S. Bank is offering personal loans of $1,000 to $4,999 at 2.99% APR for all eligible borrowers. Likewise, HSBC Bank is deferring personal loan payments and waiving late fees for 120 days from the time you enroll in HSBC’s hardship program.

Many online lenders are also offering help to people affected by COVID-19. LendingClub is allowing customers to defer two months of payments when they apply for a payment plan. The company is also not charging late fees or reporting late payments to credit bureaus.

More resources

Taylor Leamey
Taylor Leamey
Personal Finance Reporter

Taylor Leamey is a personal finance reporter at The Simple Dollar who covers banking, savings, mortgages, loans and credit cards. Her writing has also been featured at Reviews.com, Interest.com and ISP.com.

Reviewed by

  • Courtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.

Best Personal Loans for Bad Credit in 2020

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Having a bad credit score can make a personal loan seem impossible. But when it comes to debt consolidation or paying for a home improvement project, personal loans are the only way many people can cover the costs. While it might take longer to qualify for a personal loan with a low credit score, rest assured you still have options from a variety of lenders. To determine the best bad credit personal loans, we used our proprietary SimpleScore methodology to evaluate each lender’s rates, terms, customer satisfaction, customer support and fees.

In this article

The 6 best loans for bad credit in 2020

The best bad credit loans at a glance

Lender APR Loan Amount Terms Key Benefit SimpleScore
OneMain Financial 18%–35.99% Up to $20,000 Up to 60 months Same-day funding. 4.5/5
Peerform 5.99%–29.99% $4,000–$25,000 3 years Easy application process. 4/5
NetCredit 34.00%–155% Up to $10,000 6–60 months Low credit scores accepted. 3.2/5
Avant 9.95%–35.99% $2,000–$35,000 24–60 months Mobile application process available. 3.75/5
PersonalLoans.com 5.99%–35.99% Up to $35,000 90 days–72 months Short-term loans available if needed. 4.25/5
BadCreditLoans.com 5.99%–35.99% $500–$5,000 3–36 months Large affiliate network to fund your loan. 3.6/5

COVID-19 Update: We're keeping track of how the COVID-19 pandemic is affecting personal loans. Read more.

The best bad credit loans companies

Best for emergency funding: OneMain Financial

OneMain

When you’re in need of money for an emergency, OneMain Financial provides last-minute loans, approved in as little as ten minutes.

APR range
18.00% - 35.99%
Loan range
$1,500 - $20K
Term range
24 – 60 months
SimpleScore
4.25 / 5.0
close
SimpleScore
OneMain
4.25
  • Rates
    4
  • Loan Size
    5
  • Terms
    5
  • Support
    4
  • Fees
    3
OneMain Financial provides a variety of personal loans for all types of borrowers. Consumers with lower credit scores may not be able to qualify for all of OneMain Financial’s credit products, but will find products tailored to meet their needs. OneMain provides bad credit loans that consider other factors besides credit score. Furthermore, a borrower can put up a car, truck or other assets as collateral to qualify.
Full review

Our Two Cents — If loans were a car, OneMain Financial would be a fast one. But just like premium gas in the tank, you won’t save much on interest with the lowest APR at 18%.

Best peer-to-peer lending: Peerform

Peerform

Raise the odds of getting approved — your loan is funded by investors who monitor and choose loans to fund from Peerform.

APR range
5.99% - 29.99%
Loan range
$4k - $25K
Term range
12 - 36 months
SimpleScore
4 / 5.0
close
SimpleScore
Peerform
4
  • Rates
    5
  • Loan Size
    5
  • Terms
    5
  • Support
    5
  • Fees
    1
If you need a bad credit loan option and your credit score is poor but not outright terrible, Peerform is a lender you may want to consider. It’s a peer-to-peer lending platform, meaning borrowers are matched with individuals willing to lend money. It’s an interesting concept that takes traditional banks out of the equation and can sometimes offer lower fees due to reduced overhead.

Be mindful of the fact that Peerform will decline any application with a credit score below 600, which is all the more reason to raise your credit score. Because of this criteria, Peerform is able to offer loans ranging from $4,000 to $25,000 to potential borrowers with APRs ranging from 5.99% to 29.99%. One of the downsides to using Peerform is that it can take up to two weeks to receive funding. So, if you need cash fast, this may not be the best platform for you. Additionally, there is a 1% to 5% origination fee attached to the loan.

Full review

Our Two Cents — You won’t want to swat away this spider web of connections. PeerForm uses peer-to-peer lending to get borrowers money quickly, but their origination fees will stick.

Best for building credit: NetCredit

NetCredit

Even if you have less than perfect credit, NetCredit will consider approving you for a loan quickly.

APR range
34% - 155%
Loan range
$1K - $10K
Term range
6 to 60 months
SimpleScore
3.2 / 5.0
close
SimpleScore
NetCredit
3.2
  • Rates
    2
  • Loan Size
    3
  • Terms
    5
  • Support
    2
  • Fees
    3
NetCredit offers personal loans with much higher interest rates than many lenders, starting at 34% and soaring to 155% APR. A borrower’s APR will deThe good thing about NetCredit is it looks beyond just your credit score, sometimes accepting applications with scores as low as 550. Further, NetCredit has a suite of tools and guarantees that provide transparency and ease-of-use for customers, even allowing borrowers to return the loan the day after funding if they change their minds.

Its loans range from $1,000 to $10,000 with APRs starting around 34% — and in some cases ranging as high as 155%. If your offer comes with an extremely high APR like that, look into other options, such as a secured loan or using a cosigner. You could easily find a better bad credit loan elsewhere.

Full review

Our Two Cents — Like someone who looks past all their partner’s red flags, NetCredit helps borrowers get a loan, regardless of their score. But with some of the highest APRs out there, its got a few red flags of their own.

Best mobile app: Avant

Avant

Complete a loan application online or by using the mobile app for next business day funding.

APR range
9.95% - 35.99%
Loan range
$2K - $35K
Term range
24 to 60 months
SimpleScore
3.75 / 5.0
close
SimpleScore
Avant
3.75
  • Rates
    2
  • Loan Size
    5
  • Terms
    5
  • Support
    5
  • Fees
    3
Avant focuses on loans for borrowers with average credit — customers with a credit score between 600 and 700. If you fall in that range, Avant is good if you need your funds quickly, as you may get your loan as soon as the next business day after you apply. Avant also makes its customer support team available seven days a week, meaning customers can reach out and ask questions, even on a Sunday morning.

Loans from Avant range from $2,000 to $35,000 with APRs between 9.95% and 35.99% which is reasonable compared to other loans for people with bad credit. Furthermore, the loan terms offered are between 24 to 60 months. However, you should also be aware of an administration fee charged for loan origination that is 1.50% to 4.75% of the loan itself.

Full review

Our Two Cents — Tech-savvy customers rejoice! Avant’s mobile app allows borrowers to easily access loan details and contact customer service.

Best bad credit lender marketplace: PersonalLoans.com

PersonalLoans.com

When you don’t qualify for a loan, try the peer to peer service as a lending alternative to broaden your borrowing options.

APR range
5.99% - 35.99%
Loan range
$500 - $35K
Term range
90 days to 72 months
SimpleScore
4.25 / 5.0
close
SimpleScore
PersonalLoans.com
4.25
  • Rates
    2
  • Loan Size
    5
  • Terms
    5
  • Support
    3
  • Fees
    5
After completing just one online application, PersonalLoans.com will search its network of lenders to find one that matches your needs and financial situation. When the results return, you have to do a little extra research to find the best one for you. Be sure to read the terms and agreements of each offer, as they could all differ from one another.

APRs are competitive and there are several types of loans, which top out at a generous $35,000. Of course, this is a referral site, so your terms, fees, and APRs will vary depending on the lenders who contact you. This kind of information can be easier to determine with a direct lender.

Full review

Our Two Cents — Overwhelmed with it all? Take a break and let PersonalLoans.com do the legwork and connect you with lenders. But don’t forget to check its work and read the terms of each offer.

Best for really bad credit: BadCreditLoans.com

BadCreditLoans.com

Badcreditloans.com is one of the oldest personal loans for bad credit providers.

APR range
5.99% - 35.99%
Loan range
$500 - $5K
Term range
3 to 36 months
SimpleScore
3.6 / 5.0
close
SimpleScore
BadCreditLoans.com
3.6
  • Rates
    4
  • Loan Size
    2
  • Terms
    4
  • Support
    3
  • Fees
    5
When it comes to getting a loan with really, really bad credit, your options are limited. But BadCreditLoans.com is a site that has been connecting borrowers with poor credit to a network of willing lenders since 1998. Once you apply, you’ll receive offers from a network of lenders. You can choose which offer is best for you and your financial situation before moving forward in the process.

Keep in mind that depending on your situation, you may not receive any offers. On the other hand, you can reject any offer that doesn’t fit your needs. Once you accept an offer, typical loan amounts range from $500 to $5,000 with an APR of anywhere from 5.99% to 35.99%, according to its website. The repayment terms generally range from three to 36 months. Although the 35.99% APR can seem daunting, it’s better than a predatory payday loan

Full review

Our Two Cents — Because having really bad credit is bad enough, BadCreditLoans.com eases your worries about getting a loan. However, a low cap of $5,000 may not be enough to bridge the financial gap.

What is a bad credit personal loan?

Offered by online lenders, banks or credit unions, personal loans can be used for a variety of things. A bad credit score may rule you out for the best interest rates, but that doesn’t mean you won’t have access to the funds you need. In 2018, Transunion’s Q4 Industry Insights Report found balances on personal loans increased $21 billion, to close the year at a record high of $138 billion.

Personal loans for those with bad credit generally come with a higher interest rate, a shorter term and tighter restrictions. Only consider taking out a bad credit personal loan if you know you’ll be able to pay it off quickly.

Pros Cons
Eligible for many uses Many lenders charge fees
Better interest rate than credit cards Poor credit means higher APRs
Fixed monthly payments A lasting form of debt

Bad credit personal loan FICO credit ranges

Bad Credit (300-650)  If you have a credit score below 650, you’ll have a harder time qualifying for loans. The loans you do qualify for will have much higher interest rates.

Credit score Range Detail
Excelent Credit 760 and above Excellent credit will unlock the best rates across all lenders.
Good Credit 701-759 You’ll most likely qualify for a number of loans, though there is no guarantee you’re getting the best possible terms.
Fair Credit 651-700 A credit score of 700 means you’re in about the 50th percentile

What are the uses for a bad credit personal loan?

Unsecured bad credit personal loans can be put to any use. Whether you’re interested in debt consolidation to better your poor credit score or adding an extra room to your home, a subprime loan can help. Some of the most common uses for personal loans for bad credit are:

  • Paying off high-interest credit card debt
  • Debt consolidation
  • Home improvement projects
  • Paying off medical bills
  • Unexpected emergencies
  • Cover moving expenses
  • Pay for your wedding
  • Refinancing existing loans
  • Military Loans
  • Starting a business
  • Financing a car

Types of personal loans for bad credit

Secured vs. unsecured loan?

There are two types of personal loans:

  • Secured loan: Backed by collateral, secured loans generally allow for lower interest rates and larger amounts. The collateral you put down — your car, home or assets — will be taken by the lender if you do not pay back the full amount of your loan. Some lenders will require borrowers with fair to bad credit to secure a personal loan with some type of collateral because the bank or lender is at greater risk of not getting paid back.
  • Unsecured loan: Unsecured personal loans are backed by your credit, not collateral. It’s harder to qualify for this type of loan with bad credit, but there are options tailored to poor credit borrowers. Though unsecured loans will come with less favorable terms, they are generally favorable to putting up collateral.

When to use a secured loan vs. unsecured loan

You can typically borrow larger amounts of money at lower rates with a secured loan since lenders are more confident it won’t lose money if you can’t pay back your loan. Sometimes it can be more difficult to get approved for an unsecured personal loan. Unsecured loans also often come with less favorable terms and a higher interest rate than secured loans. But if you have good credit and a history of paying off debt on time, unsecured personal loans are favorable to putting up collateral.

Payday loans

Payday loans allow borrowers to get money fast — typically a small amount of $500 of less. With a short term, high rates and plenty of fees, payday loans shouldn’t be your first choice. They are extremely expensive and predatory, and borrowers usually end up in an endless cycle of debt. Payday loans are a last-resort, worst-case scenario and should be borrowed very rarely.

Installment loans

Set to be paid back in predictable monthly payments, installment loans have a fixed interest rate. While the name may seem unfamiliar, installment loans are anything but. Mortgages, auto loans and student loans are all examples of this type of loan. With a specific end date and consistent monthly payment, installment loans are more easy to budget for than payday or emergency loans.

Emergency loans

When unexpected expenses like hospital bills or auto repairs come up, emergency loans are sometimes the only way to cover them. Great for when you need money quickly, some lenders even offer same-day funding. However, some emergency loans do come with high interest rates, so consider all alternatives before you take out any money.

Home equity loan

As you make payments toward your mortgage, you build up equity in your home. When you have built up enough, you can take out a loan against the equity you’ve accrued with a home equity loan. With home equity loans, your home is considered collateral, so only consider it if you can reasonably pay it off.

Home equity line of credit

A home equity line of credit (HELOC) is similar to a home equity loan as it’s based on the equity in your home. Though you should think of it more like a credit card. A HELOC allows you to borrow money multiple times when you need it. Since HELOCs are a secured loan, they generally allow for lower interest rates than credit cards.

Cash advances

A cash advance is a loan borrowed from your credit card. Generally a short term loan, how much you can borrow against your credit line will vary from card to card. You can get a cash advance with a convenience check, ATM or bank. Though before you do, you should know cash advances come with steep fees and a high interest rate.

How do personal loans for bad credit work?

Personal loans have a fixed term and defined interest rate, which makes budgeting for repayment easy since you know what your payment will be each month. The term of your loan will vary from lender to lender, though repayment periods are usually between 24 to 84 months. A longer term means lower monthly payments, but more interest over time. Since bad credit loans often have higher APRs, you should expect to pay more in interest and fees.

Here’s the process of getting and repaying a personal loan:

  1. Evaluate how much you need: Try not to take out more money than you need. Don’t forget loans have interest and fees, so getting out more than you need can impact your ability to repay the loan.
  2. Check your credit score and gather financial documents: To start, you’ll want to go through your credit report to ensure there are no errors that need to be corrected. Gather things like pay stubs and asset information that will help lenders evaluate your financial history.
  3. Prequalify for a loan: Often done online, prequalifying for a loan lets you know exactly how much you can borrow and what the terms of the loan will be. Lenders will perform a soft credit pull, which will not impact your score.
  4. Finalize: To finalize your loan, the lender will perform a hard credit inquiry. Remember: too many hard inquiries will negatively affect your credit score.
  5. Work towards paying off your loan: Once you have your loan, make a realistic budget for repayment. Without a clear plan for repayment, it’s easy to fall behind on payments and damage your credit even further.

Check Your Personal Loan Rates

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

When is the best time to obtain personal loans for bad credit?

The best rates and terms go to those with good credit. If you have the luxury of time, try to build up your credit score before applying for a loan, especially if you are only a few points away from the next tier. A higher credit score will unlock better terms and rates, so do what you can within your time frame.

“The biggest problem with bad credit is what we call the catch-22: you have to get a loan to build credit, but you need good credit to get a loan. It’s hard to find a loan with bad credit, but that does not mean payday loans are the solution for your emergency cash needs,” says Jeff Zhou with FigLoans. “Payday loans advertise themselves as a quick fix but are often designed to trap borrowers in debt. Hidden costs in the fine print make payday loans exceptionally dangerous.”

When to avoid personal loans

Before you take out a loan, consider your entire financial situation. If you have poor credit, you’ll end up with a higher interest rate, so if you can, it’s best to avoid a personal loan until your credit is repaired.

You can get a personal loan for almost any reason, but they aren’t recommended for every situation. Things that aren’t an investment or emergency — vacations or big-ticket items — shouldn’t be paid for with a personal loan.

Tips to choosing the best bad credit loan company for you

Decide why you need a loan

Before you even start the process, you have to be realistic about your situation. Why do you need a loan and how much do you need? Defining these things will help you decide which loan to consider. Take an honest look at your financial standing so you know what you can afford to take on.

Shop around

Once you’ve decided a personal loan is the right move, you have to decide which lender to go with. Whether you go with one of the best online lenders for bad credit or go down the traditional route of banks or credit unions, you should see what options you have. Your monthly payments are based on the APR of the loan. Compare options and choose the lowest APR you qualify for.

Andrew Roderick, CEO of Credit Repair Companies, offers this advice for the best way to obtain a personal loan for bad or poor credit.

“When looking for a bad credit loan in 2020, it’s very important to find one that best suits you. There are straightforward payday loans, which usually have a higher percentage rate for pay back, but can easily get you through a couple of months,” he explains. “But they should only be used if you are sure your income is secure for the next couple of months, especially at these trying times, or you could face extremely high charges only making your situation worse.”

Compare terms and fees

Once you have all of your options laid out in front of you, take time to understand the advantages and disadvantages of each loan. The long-term implications of a loan with less favorable terms cannot be ignored. Personal loan comparison will help you evaluate the terms and fees, making sure whatever you choose fits your finances and doesn’t just solve the need for money. Remember, you always want the most favorable terms which will allow you to save money over time.

Consider what type of flexibility you need

Make a list of everything you need from your personal loan for bad credit. If you plan on paying your loan off before your term ends, look for a lender who doesn’t charge repayment fees. Fees and repayment flexibility will vary from lender to lender, so take the time to find a lender that checks off your list of needs.

Plan your repayment budget


Choose a personal loan that you can reasonably afford and pay back on time. Come up with a repayment plan so you never fall behind on payments or damage your credit. Even though your credit may be poor right now, it doesn’t have to stay that way. You can use your personal loan as a chance to rebuild your credit by reducing your debt and making payments on time.

What is an APR?

APR or Annual Percentage Rate is a way to evaluate the affordability of the loan. It includes both the interest rate of the loan and any additional fees you pay. For the second quarter of 2019, the average interest rate on a personal loan was 9.41%, according to Experian.

Personal loan rates range from about 6% up to 36% on average, with lower percentages being the most ideal. The APR you receive is determined by your credit score, financial history and loan details. Bad credit personal loans will have higher interest rates, but that doesn’t mean you have to settle for anything that comes your way. You’ll still be able to strategically compare options and find the lowest possible APR for your credit.

Fixed APR vs. variable APR

There are two types of APR: fixed and variable. With a fixed APR, the interest rate on your personal loan is the same for the duration of your loan. If you have a fixed rate of 5.99% on your loan, it will remain 5.99% until you make your last payment. Conversely, if you have a variable APR, the interest rate will fluctuate based on the prime lending rate, which is the lowest rate your bank can charge its customers to borrow money.

How to detect personal loans scams

Having a bad credit score can make it harder to qualify for loans. But you still shouldn’t jump at the first offer that comes your way. Keep an eye out for red flags that could mean a bad credit loan scam. The most common types of personal loan scams are:

    • No credit check loans: Your credit history is how lenders determine if you’ll repay the loan. Legitimate lenders will check your credit, beware of any lender who doesn’t. More than likely they are offering you a payday loan, which comes with steep fees and extremely high interest rates.
      • Requiring fees upfront: Many lenders do require fees, though legitimate lenders will take them out of the loan once it is funded.
      • Unregistered in your state: Lenders are required by the Federal Trade Commission to be registered in every state they do business in. If they aren’t registered in your state, avoid doing business with them.
      • No physical address: Even online lenders have physical offices. Watch out for lenders who don’t have an address or only a PO box address.
      • Email warning signs: Unsolicited emails with irresistible rate offers, emails with errors and the inconsistent email address are all ways to spot scams.

Check Your Personal Loan Rates

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

Bad credit personal loans FAQ

What are personal loans?

A sum of money you get from a lender, a personal loan is paid back over a fixed period of time at a fixed APR. Some of the most common uses are debt consolidation and covering emergency expenses.

How do you apply for a personal loan?

Today, it’s easy and quick to apply for a personal loan online. Even many banks and credit unions offer the ability to apply online in minutes.

How can I fix my credit?

One of the best ways to improve your poor credit score is to make debt payments on time. In addition to paying off high-interest balances, try not to take on any extra debt if you’re attempting to improve your score. For more Credit/Debt Management resources click here.

Do I need collateral?

Most personal loans are unsecured. But, if you have bad credit, you may only qualify for a secured loan, which is secured by an asset or collateral.

Can I get a loan if I’m unemployed?

It depends on the lender. Most often lenders will look at employment history when approving you for a loan. However, the biggest consideration is your credit score. If you have a long employment history and good credit, you may qualify for a personal loan. But, it may have to be secured by collateral so your lender knows it will be paid back. Visit Emergency Loans for the Unemployed to learn more.

Ask the Experts

Tiffany Aliche, Owner, The Budgetnista and the Live Richer Academy

What are things to watch out for with bad credit personal loans?

If you’re in a situation where you really need to take out a loan and your credit is less than stellar, here are some things to consider before signing on the dotted line.

First, is the loan absolutely necessary right now or can it wait until you’ve gotten your credit profile in better shape? This is an essential question because it is inevitable that people with damaged credit will pay more and, in many cases, feel cornered to agree to loan terms that aren’t great

Here’s what to look out for:

Interest rates – The lower your credit score, the more you will pay in interest fees.

Repayment length – Some lenders will entice borrowers to take out a loan with longer than standard repayment lengths. However, it’s important to keep in mind that the longer you pay on a loan, the more you pay the lender back in interest. And, for long auto loans, you will likely end up underwater on the car (owing more than the vehicle is worth).

Prepayment penalties – This is another way lenders can sneak in unexpected charges. Suppose you take out a standard 5-year loan but have the good fortune of being in a position to pay it off by year three? If the loan term includes prepayment penalties, the borrower will have to pay a fee (usually a percentage of the remaining balance) to get out of the loan early.

The bottom line is: please read all the fine print and determine the true, entire cost of a loan before making the financial commitment!

How has COVID-19 affected the behaviors of banks and lenders?

Pre-COVID-19, banks and lenders were a little less restrictive with the criteria they were using to determine consumer loan eligibility. Loan applicants with average or below-average credit profiles — although penalized with higher interest rates — were still likely to secure the loan that they applied for.

Today, over 40 million Americans have suddenly found themselves without jobs since the start of the pandemic in mid-March. This crisis has shot the rate of unemployment so high that we are surpassing what Americans who lived through the Great Depression experienced. In response, lenders are reflexively tightening the belt on who they lend money to in fear of an avalanche of missed or defaulted loan repayment scenarios by consumers who can’t afford to keep up with what they own. They’re now most likely to agree to do business with customers perceived as being a less risky repayment bet — those with higher credit scores and more assets.

If I get denied for a bad credit personal loan, will it make my credit worse?

Not getting approved for a loan isn’t what impacts your credit. Your credit report will have no definitive information on whether a submitted loan application was approved or denied.

However, most lenders will check your credit report with one (or all) of the major credit bureaus when you apply for a loan, resulting in a hard inquiry. Hard inquiries stay on your credit report for up to two years and can cause a minor drop to your score. The good news is that the impact on your score decreases as each month passes.

Although more hard inquiries on a credit report do lead to larger credit score drops, it’s still smart to shop for loans from different lenders to get the best interest rate and terms. Credit scoring models recognize this and will typically only count multiple hard inquiries as one inquiry as long as they are done within a specific loan shopping time window and are for the same loan type.

Siva Mahesh, Dreamshala.com

What is your advice for finding the best loan for someone with bad credit?

First comes finding the potential lender, just know an important fact here. Having a bad credit score doesn’t mean you can’t take out a loan. There will always be a hand for you to clap further. I recommend you to find a potential lender with patience.
Taking a second opinion with a partner bank is what you must consider as a follow-up, show them you’re serious by improving your credit score in less time, and finally never repeat your past mistakes.

What steps can one take begin improving their credit score if denied for a bad credit loan?

First, you should never bog down after you got denied for the loan. Then you can shift your key focus on how to improve your credit score. Analyze your past financial steps, make a report on them, and start working on it to improve. Right after, start clearing the clutter by paying bills on time and start creating additional sources of income. If you lack financial discipline, never hesitate to spend a penny on a financial adviser to keep you balanced. Finally, keep an eye on the durability of credit and opt for new to fix the old one.

What are the most common considerations for banks and lenders when considering the approval of loan applicants?

There are a few common considerations:

      1. Your past credit score
      2. Genuinity of your cause
      3. Your inward and outward flow of money
      4. Legal documentation
      5. Value of your collateral
      6. Mode of repayment and time period

Randell Yates, CEO, The Lenders Network

Can a bad credit personal loan help improve your credit score? If so, how?

Any loan or line of credit is reported to the Credit Bureaus. Each time you make your payments on time, it helps your overall payment history, which is the largest factor in determining your credit score.

If I get denied for a bad credit personal loan, will it make my credit worse?

Credit inquiries have little impact on your credit rating unless you have a significant amount. Check out the credit requirements and see if the lender can run a soft credit inquiry to see if you’re pre-qualified. Soft inquiries do not affect your credit negatively.

What steps can one take to begin improving their credit score if denied for a bad credit loan?

First, pay off credit debt. Most people are not aware that carrying high credit card debt severely lowers your score. Before applying for a loan, you can improve your chances of being approved by paying down your card balances to 30% of their credit limits or less.
Second, dispute old accounts. If you have negative accounts on your report that are bringing your credit score down, you can dispute them directly with the credit bureaus. The creditors have 30 days to verify the account, or it must be deleted by law.

What are the most common considerations for banks and lenders when considering the approval of loan applicants?

Income is the most important factor lenders look at when issuing loans. Credit is second. Someone with a 600 credit score and a 60k salary is more likely to get approved for a personal loan than someone with a 650 score making less than 30k a year.

Logan Allec, CPA, Founder, Moneydoneright.com

What is your advice for finding the best loan for someone with bad credit?

First, cast your net as wide as you possibly can. It’s not easy to get a loan with bad credit, so plan to speak with a large number of lenders as you look for one that will be willing to give you a loan. Do an online search for lenders in your area and make a plan to call and discuss your options. You can even set online chat meetings with at least 50. This way, you are mentally setting yourself up for an arduous process.
Secondly, try to visit credit unions first instead of regular banks. Credit unions are owned by their customers, not-for-profit shareholders. As a result, you often will find an easier path to a loan from these smaller institutions.

How has COVID-19 affected the behavior of banks and lenders, particularly with respect to making personal loans to those with bad credit?

One thing is clear: banks and lenders are extremely hesitant to issue credit right now. With the economy showing clear warning signs, and the United States officially in a recession, lenders will want significant reassurance that they will get their money back. As a result, the few loans banks will give out will likely go to people with fantastic credit. Also, many banks are working overtime right now to issue PPP loans for the government. In practice, that means loan officers might not have the time to get to your loan application. If you want to submit a personal loan, it could make sense to apply through a bank that isn’t issuing PPP loans.

Erin Ellis, Financial Counselor at Philadelphia Federal Credit Union (PFCU)

What are things to watch out for with bad credit personal loans?

Usually, loans for people with bad credit are expensive! Interest rates on personal loans are often very high. The terms may be extended to make the payments more manageable, which also increases the amount you must payback.

High-interest rates and long terms result in very expensive loans. You should not only check the interest rate but also look at how much you are paying back in interest. For example, if you borrow $5,000 for five years at a high rate of 35.99%, you pay more in interest than you borrow!

Can a bad credit personal loan help improve your credit score? If so, how?

First, check with the lender to see if they report to the three major credit bureaus. Any loan that reports to the three major credit bureaus has the potential to help improve your credit score. As long as you make your loan payments on time every month, your score should increase over time. A good idea with any loan or credit card is to set up automatic payments from your checking account so that you will not accidentally miss a payment and potentially damage your credit score.

What steps can one take to begin improving their credit score if denied for a bad credit loan?

I commonly see two reasons people have low credit scores. First, they have no new credit card or loan history and need to build credit. The second reason is they have used too much of the available credit on their credit cards.

If you have no loan history and need to build credit, I recommend using a Credit Builder or Secured Loan. Secured credit cards are also a good tool to build credit, but beware that they come with the same pitfalls and dangers of any credit card. Secure credit cards require education and consistency. If you maxed out your credit, paying down the balance and keeping it low is the best way to help improve your score.

Too long, didn’t read?

The best personal loans for bad credit may take time to get, but if you need money for consolidating other high-interest debt, paying for a wedding, hospital bills or many other things, they can be a good solution. Low credit loans by default will have tighter restrictions, more fees and a higher APR. This is why finding terms you can reasonably repay is essential for building your credit and paying off your debt.

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Methodology

The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For bad credit personal loans, we compared interest rates, loan terms, loan amounts, customer support and fees for every major lender. Our ratings are meant to be a directional tool to help you in the process of choosing a personal loan provider. Be sure to continue your research and shop around for the best personal loan that fits your specific needs.

We welcome your feedback on this article and would love to hear about your experience with the bad credit personal loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

COVID mask

The impact of COVID-19 on personal loans.

The coronavirus pandemic has already changed the financial industry, and personal loans are no exception. For example, U.S. Bank is offering personal loans of $1,000 to $4,999 at 2.99% APR for all eligible borrowers. Likewise, HSBC Bank is deferring personal loan payments and waiving late fees for 120 days from the time you enroll in HSBC’s hardship program.

Many online lenders are also offering help to people affected by COVID-19. LendingClub is allowing customers to defer two months of payments when they apply for a payment plan. The company is also not charging late fees or reporting late payments to credit bureaus.

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