Best Bad Credit Personal Loans in 2020

Getting a loan when you have bad credit isn’t impossible, but it does come at a higher cost. Bad credit can happen to the best of us after hard financial times or unexpected life events, but you can still borrow money from trustworthy lenders at reasonable rates. Before applying for an online personal loan for bad credit, you can also consider asking friends and family for help, using a credit card or asking for an advance on your paycheck. If you decide a personal loan is your best option, keep in mind that with very bad credit loans, lenders may require a cosigner, higher interest rates or a secured loan.

To determine the best bad credit personal loans, we used our proprietary SimpleScore methodology to evaluate each lender’s rates, terms, loan amounts, customer support and fees. We’ll also cover how to apply for a loan with bad credit, when to use a personal loan versus other options, and steps you can take to improve your credit score and secure a better interest rate.

Why trust The Simple Dollar? 

When we rate and review online bad credit loans, we use our SimpleScore methodology, which we’ve made available to review in the spirit of financial wellness, transparency and honesty. The SimpleScore rating system uses five identifiable and measurable factors to assign a score to each brand in the bad credit loans category. SimpleScore makes it easy to compare bad credit loans online in order to make informed and financially sound decisions regarding your next lending product. 

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    In this article

      How personal loans are being affected by COVID-19

      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 people with bad credit generally come with a higher interest rate, a shorter term and lower amounts. Only consider taking out a bad credit personal loan if you know you’ll be able to pay it off quickly.

      ProsCons
      Eligible for many usesMany lenders charge fees
      Better interest rate than credit cardsPoor credit means higher APRs
      Fixed monthly paymentsA lasting form of debt

      Bad credit loans and FICO credit ranges

      It’s important to understand what bad credit is and where you stand ahead of finding the right loan. Your credit score is a triple-digit number that reflects your history in lending and using credit cards. If you regularly miss payments or max out your credit cards, you will mostly likely have a bad credit score. 

      However, this number is not arbitrarily assigned. Certain parts of your credit history affect your credit score in different ways. Payment history, amounts owed, length of credit history, new credit and credit mix are all considered when your credit score is calculated. 

      Here’s what makes up your credit score:

      • Payment history – 35%
      • Amounts owed – 30%
      • Length of history – 15%
      • New credit – 10%
      • Credit mix – 10%
      Credit scoreRangeDetail
      Excellent Credit760 and aboveExcellent credit will unlock the best rates across all lenders.
      Good Credit701-759You’ll most likely qualify for a number of loans, though there is no guarantee you’re getting the best possible terms.
      Fair Credit651-700A credit score of 700 means you’re in about the 50th percentile
      Poor Credit300-650Having a poor credit score makes it harder to open new loans.

      Do you know your credit score?

      We found 51% of Americans don’t check their credit score

      Checking your credit score periodically could improve not only your chances at landing a great interest rate on a loan or mortgage, but can also improve your long term financial health. If your credit score falls under 650, you’re in the bad credit range. The first step in any loan process is determining where you stand.

      [ Keep Reading: Survey: Half of America Doesn’t Check Their Credit Score at All ]

      Ways you can improve your credit score

      If you have time and before looking into top lenders and how to get a personal loan, consider building your credit first. You could avoid those high interest rates and tight lender restrictions. Here are 4 steps you can take to getting to better credit. 

      1. Look at your credit report: Are there small balances you could pay off today that have been outstanding for a longer period of time? What’s the biggest factor affecting your low credit score?  
      2. Make regular payments on outstanding debt: You may not be able to pay the whole thing off quickly, but showing progress each month on putting money down helps your overall credit score. 
      3. Use a credit boosting service. Products like UltraFICO or Experian claim as high as a 65% success rate in improving your credit.  
      4. Self report your rent: There are services that report your rent to certain Credit Bureaus and thus can improve your credit score.

      Other lending sources for people with bad credit

      In most cases, it’s better to look for other alternatives to get money and avoid payday loans for bad credit. Instead, consider borrowing money from a friend or an advancement on your paycheck. 

      If you’re having difficulty making a payment it may be best to reach out to the provider for payment deferment, start a payment plan with a lower monthly payment or using available emergency savings. But, if these and other ways aren’t an option an emergency personal loan may be a good choice for you.  

      Credit cards for people with bad credit 

      Credit cards have often been known as a good way to establish and rebuild bad credit. It’s recommended to get secured credit cards with a security deposit to rebuild credit. Once you make a number of on-time credit card payments, you receive your security deposit back and your credit scores have improved.

      Mortgages for bad credit

      If you’re looking to buy a home with bad credit remember that credit is not the only factor that lenders consider. In addition to your credit score, your loan approval will be based on your down payment, debt to income ratio and other factors. Make sure you choose a bad credit mortgage lender that specializes in working with borrowers who have bad or fair credit. Oftentimes, people are able to get approved for mortgages with a minimum 500 credit score.

      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 and 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.

      If you’re applying for a payday loan for bad credit or an online personal loan for bad credit, expect to see shorter repayment terms, lower loan amounts and higher APRs — like, up to 400% high. Be wary, however, as easy bad credit loans come with a price — the terms attached to bad credit loans stack the odds of repayment very much against the borrower and are generally difficult to reasonably pay back. 

      To avoid cheap bad credit loans that may further harm your finances, find reputable online personal loans for bad credit providers that have APRs under 50%. It may seem difficult, but it is possible to get a bad credit loan without risking your credit more than necessary.

      Check Your Personal Loan Rates

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

      Get Started

      with our trusted partners at Bankrate.com

      Why should I get a bad credit loan? 

      Online personal loans for bad credit are a way to bridge the financial gap between a problem and a solution. For example, if your car needs new brakes or a trip to the ER has left you with a hefty bill, a loan will cover those expenses. Of course, you will have to pay back the money you borrow, plus interest, but it’s quicker than saving up money and could be less expensive than a payday loan for bad credit. 

      [ Read: When to Use a Personal Loan for Unexpected Expenses ]

      Depending on your situation, easy loans for bad credit can be a boon more than a curse. As long as you shop around for the best bad credit loans, you should be able to find a lender that has reasonable terms and rates. Coupled with responsible borrowing habits, like paying off your loan every month on time, you can even improve your credit with every on-time payment. 

      What are the uses for a bad credit personal loan?

      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, which means more money paid back in the long run. 

      Bad credit personal loans can be put to any use. Whether you’re interested in debt consolidation to improve your credit score or adding a quick infusion of cash to your bank account, a subprime loan can help. Some of the most common uses for personal loans for bad credit are:

      Common uses for a personal loan

      • 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

      Bad uses of personal loan

      • Vacation 
      • Expensive item

      The best rates and terms go to borrowers 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.”

      Jeff Zhou – FigLoans

      How to get a loan with bad credit

      • 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.
      • 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. Did you know that you can get a free credit report each year? Before applying for a loan, pull your credit report from AnnualCreditReport.com. This site is offering free weekly credit reports until April 2021 in light of COVID-19.
      • Consider a secured loan: With poor credit, getting a secured loan is easier than an unsecured loan. This will mean that you’ll need to put forth an asset before you can obtain the loan.
      • 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. 
      • Finalize: To finalize your loan, the lender will perform a hard credit inquiry. Remember: too many hard inquiries will negatively affect your credit score.
      • 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.

      [ Next: How to Get a Loan With Bad Credit ]

      Check Your Personal Loan Rates

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

      Get Started

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      Types of personal loans for bad credit

      When a financial emergency strikes, many people turn toward personal loans and other ways to get money fast in case of an emergency. Here are some examples:

      Secured loans vs. Unsecured loans

      Backed by collateral, secured loans generally come with 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 personal loans vs secured 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

      [ More: Secured Personal Loans vs. Unsecured Personal Loans ]

      Long-term loans

      Long-term loans typically allow between 60 and 84 months for repayment. They provide a lower monthly payment over an extended period of time. Long-term loans are a good option if you need a more affordable monthly payment but don’t mind paying more in the end. Long-term loans are not a good option for you if collateral is needed to secure your loan, as a long-term loan will be harder to get. Installment loans are common. 

      Peer-to-peer loans 

      Peer-to-peer loans are typically easier to apply for — even with bad credit. Typically, you can get an online bad credit loan from a P2P lender with a credit score of 600, but some other lenders are willing to accept credit lower than that. Because the loans are funded by a group of individual investors instead of an entity, approval comes with more ease. However, this is usually where the differences between P2P loans and traditional unsecured loans end. 

      Fast personal 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.

      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.

      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.

      Home loans 

      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. If you own a home, a home equity loan or a similar home equity line of credit (HELOC) may be your best option for paying for an expense.

      [ Read More: Buying a Home with Bad Credit ]

      The 6 best loans for bad credit in 2020

      Finding the right bad credit lender for you doesn’t have to be difficult, which is why we use our evidence-based, proprietary SimpleScore system to rate and review the best bad credit lenders so you can find the right one for you. 

      Compare the best bad credit personal loans

      LenderAPRLoan AmountTermsKey BenefitSimpleScore
      OneMain Financial18%–35.99%Up to $20,000Up to 60 monthsSame-day funding.4.5
      Peerform5.99%–29.99%$4,000–$25,0003 yearsEasy application process.4
      NetCredit34.00%–155%Up to $10,0006–60 monthsLow credit scores accepted.3.2
      Avant9.95%–35.99%$2,000–$35,00024–60 monthsMobile application process available.3.75
      PersonalLoans.com5.99%–35.99%Up to $35,00090 days–72 monthsShort-term loans available if needed.4.25
      BadCreditLoans.com5.99%–35.99%$500–$5,0003–36 monthsLarge affiliate network to fund your loan.3.6

      The best bad credit loans companies

      Best for emergency loans – OneMain Financial

      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%.

      APR Range
      18%–35.99%
      Loan Amount
      $1,500–$20K
      Term
      24–60 months
      SimpleScore
      4.4 / 5.0
      close
      SimpleScore OneMain Financial 4.4
      Rates 4
      Loan Size 5
      Terms 5
      Support 5
      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.

      In the News

      To help members during the COVID-19 crisis, OneMain Financial is offering borrower’s assistance and helping connect members with helpful resources. You can learn more about these options with OneMain Financial.

      OneMain Financial Disclosure

      Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on your ability to meet our credit standards (including a responsible credit history, sufficient income after monthly expenses, and availability of collateral). Larger loan amounts require a first lien on a motor vehicle no more than ten years old, that meets our value requirements, titled in your name with valid insurance. Maximum APR is 35.99%, subject to state restrictions. APRs are generally higher on loans not secured by a vehicle. The lowest APR shown represents the 10% of loans with the most favorable APR. Active duty military, their spouse or dependents covered under the Military Lending Act may not pledge any vehicle as collateral for a loan. OneMain loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB’s Regulation Z, such as college, university or vocational expenses; for any business or commercial purpose; to purchase securities; or for gambling or illegal purposes.

      Borrowers in these states are subject to these minimum loan sizes: Alabama: $2,100. California: $3,000. Georgia: Unless you are a present customer, $3,100 minimum loan amount. Ohio: $2,000. Virginia: $2,600.

      Borrowers (other than present customers) in these states are subject to these maximum unsecured loan sizes: Florida: $8,000. Iowa: $8,500. Maine: $7,000. Mississippi: $7,500. North Carolina: $7,500. New York: $20,000. Texas: $8,000. West Virginia: $7,500. An unsecured loan is a loan which does not require you to provide collateral (such as a motor vehicle) to the lender.

      Best peer-to-peer lending – Peerform

      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.

      APR Range
      5.99%–29.99%
      Loan Amount
      $4K–$25K
      Term
      12–36 months
      SimpleScore
      3.8 / 5.0
      close
      SimpleScore Peerform 3.8
      Rates 5
      Loan Size 5
      Terms 3
      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.

      Best for building credit – NetCredit

      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.

      APR Range
      34%–155%
      Loan Amount
      $1K–$10K
      Term
      6–60 months
      SimpleScore
      3.2 / 5.0
      close
      SimpleScore NetCredit 3.2
      Rates 2
      Loan Size 3
      Terms 5
      Support 3
      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.

      In the News

      NetCredit recently launched a COVID-19 Customer Support Center designed to provide borrowers with resources and tips during the pandemic.

      Best mobile app – Avant

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

      APR Range
      9.95%–35.99%
      Loan Amount
      $2K–$35K
      Term
      24–60 months
      SimpleScore
      4 / 5.0
      close
      SimpleScore Avant 4
      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.

      In the News

      Avant is working with its members who have been impacted by COVID-19 through its Readiness Plan and encourages borrowers to use its mobile app or customer service dashboard for account servicing needs.

      Avant Disclosure

      The actual loan amount, term, and APR amount of loan that a customer qualifies for may vary based on credit determination and state law. Minimum loan amounts vary by state. Avant branded credit products are issued by WebBank, member FDIC.

      Best bad credit lender marketplace – PersonalLoans.com

      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.

      APR Range
      5.99%–35.99%
      Loan Amount
      $500–$35K
      Term
      90 days–72 months
      SimpleScore
      4 / 5.0
      close
      SimpleScore PersonalLoans.com 4
      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.

      Best for really bad credit – BadCreditLoans.com

      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.

      APR Range
      5.99%–35.99%
      Loan Amount
      $500–$5K
      Term
      3–36 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.

      Tips for choosing the best bad credit loan company for you

      Before starting the process, evaluate your current situation. What’s the purpose for the loan? How much do you really need? By defining these things, you’ll be better positioned to decide which loan is best.

      If getting a personal loan is the right move, next you’ll need to decide on a lender. Shop around from traditional banks and credit unions to some of the best online lenders for bad credit. Whichever option you go with, your monthly payments are influenced by the APR of the loan. Try to find a loan you can qualify for with the lowest APR possible.

      Next, compare the terms and fees for the options you’ve selected. 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.

      Make sure the repayment terms are suitable for your budget. If you want to pay off your loan before the term ends, check to see if the lender charges repayment fees. If there are repayment fees, you may want to consider a different lender that better fits your needs

      Come up with a strategy for repaying your loan so you never fall behind on payments or damage your credit. While your credit might not be the best now, it doesn’t have to stay that way. The personal loan can be used to your advantage to rebuild your credit through on-time payments.

      How to detect personal loans scams

      You shouldn’t jump at the first loan offer that comes your way. Keep an eye out for red flags that could mean a bad credit loan scam. Here’s what to watch out for:

      • No credit check: Legitimate lenders will check your credit to determine if you can repay the loan, so beware of any lender who doesn’t.
      • Upfront fees: Many lenders require fees, but legitimate lenders will take them out of the loan once it is funded.
      • Unregistered in your state: The Federal Trade Commission requires lenders to be registered in every state they do business in. The lender should also have a verified address.
      • Email warning signs: Unsolicited emails with irresistible rate offers, emails with errors and an inconsistent email address are all ways to spot scams.

      Frequently Asked Questions for Bad Credit Loans

      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. If you still need to improve your credit, try using credit-boosting tools like UltraFICO or Experian Boost to incorporate your utility bills or rent payments into your credit score — as long as you pay those on time, you can fix your credit. You can also get a secured credit card, which requires a deposit, but will help improve your bad credit when used correctly.

      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.

      Getting a loan while unemployed really 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.

      Depending on the type of personal loan you choose, you could get your loan within minutes up to several weeks.

      When you apply for any loan, a soft or hard credit pull will have a negative impact on your score. That doesn’t mean that you can’t improve your score again over time — the key is to avoid multiple credit pulls within a short period.

      Applying for a poor credit loan is no different than other loans. You can negatively impact your credit score when you don’t make payments on time.

      Yes, you can apply for a loan without opening a checking account. For instance, some short term loans like title loans may not require you to open a checking account since you can put down collateral to back the loan.

      Yes, payday and title loans are examples of loans that you can get without having your credit pulled. However, these loans often come with high APRs and short repayment terms, making them a high-risk form of borrowing.

      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.

      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.

      As with any lending product, there will always be a risk. If your income situation changes and you can’t pay your monthly loan bill, the lender can report your late and non-payment to the credit bureaus, which will further damage your credit score.

      Yes. While the terms and rates on the personal loan won’t be ideal, you can most likely find a lender willing to work with you if your credit score is 500. However, if your lending needs aren’t emergent, try fixing your credit before borrowing with a 500 credit score.

      Ask the Experts

      Siva Mahesh

      Dreamshala.com

      Randell Yates

      The Lenders Network

      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.

      The impact of COVID-19 on your 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.

      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.

      Methodology

      SimpleScore

      The SimpleScore is a proprietary scoring metric we use to objectively compare products and services at The Simple Dollar.

      For every review, our editorial team:

      • Identifies five measurable aspects to compare across each brand
      • Determines the rating criteria for each aspect score
      • Averages the five aspect scores to produce a single SimpleScore

      Here’s a breakdown of the five aspect scores and their rating criteria for our review of the best personal loans of 2020.

      Why do some brands have different SimpleScores on different pages?

      To ensure the SimpleScore is as helpful and accurate as possible, we developed unique criteria for every category we compare at The Simple Dollar. Since most brands offer a variety of financial solutions, their products and services will score differently depending on what we’re scoring on a given page.

      However, it’s also possible for the same product from the same brand to have multiple SimpleScores. For instance, if we compare NetCredit’s personal loans according to our criteria for the best personal loans, it scores a 2.3 out of 5. But when we compare NetCredit according to the criteria for the best bad credit personal loans, it scores considerably higher, since the criteria for the latter review are more lenient (lenders who serve borrowers with bad credit will always offer higher rates, so we needed to adjust our category methodology to account for different industry standards).

      Questions about our methodology?

      Email Hayley Armstrong at hayley@thesimpledollar.com.

      Rates

      We looked at the maximum APR for each lender — the lower their maximum rate, the higher their score.

      Loan Size

      We awarded higher scores to lenders with more generous loan sizes.

      Customer Satisfaction

      We leveraged the J.D. Power 2019 Personal Loan Satisfaction Study℠ to see how customers rated their experience with each lender. (If a lender wasn’t included in J.D. Power’s study, we skipped this aspect and averaged the four remaining aspect scores.)

      Support

      We awarded higher scores to lenders with the most channels for customer support.

      Fees

      We looked at the three most common fees — origination, late payment, and pre-payment — and penalized lenders for each fee charged.

      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
        Courtney Mihocik
        Editor

        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.