How to Get a Loan With Bad Credit

Bad credit personal loans have been around for some time, but they tend to gain popularity in times of financial tumult. It wasn’t too long ago that a bad credit score was a major obstacle that could not be overcome, and lenders wouldn’t consider a score that dipped below 670.

But a few things happened in the last decade or so to change that. We experienced the chaos of the mortgage crash and the subsequent recession, and of course, COVID-19. Mass job losses and furloughing have also played their part in bad credit. There’s also a group of consumers that don’t have a credit score and need to start somewhere.

So what happens when a person with bad credit needs a loan? And how do they navigate that process?

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In this article

    What is a bad credit personal loan?

    A bad credit loan is a personal loan for those who have lower scores than what lenders would consider as fair. On the FICO Score scale of 300 to 850, a bad credit score is one below 670. More specifically, a score between 580 and 669 is considered fair, and one between 300 and 579 is poor.

    Applicants with scores above 670 have access to a wider range of loans at lower costs. One of the ways lenders make up for the risk of lending to someone with bad credit is by increasing the interest rate. It’s unlikely for anyone to have a score below 300. However, those who have no credit may have a score of 0.

    How to get a personal loan with bad credit 

    The process of how to get a bad credit loan becomes easier when you know where to start.

    Check your credit online.

    Having as much information as possible about your credit history will put you in a better position to negotiate your financing terms. Go through each line on your report and make sure the information presented is accurate and fair. If there are any mistakes, notify the credit bureaus. Even little jumps of 10 or 15 points can make a difference to your rates.

    [ Read: Are You Checking Your Credit Reports Often Enough? ]

    Compare all the offers available to you.

    There are a number of reputable lenders that provide some of the best bad credit loans online, and it may seem daunting to work your way through all the offers. Things to consider and compare include:

    • The annual percentage rating (APR)
    • Monthly services fees
    • Repayment terms
    • Minimum and maximum loan amounts

    Press that submit button.  

    Once you’re happy with the terms of the loan you’d like to apply for, it’s as simple as completing the information and pressing the submit key. Once you’ve submitted the application, this will show up as a hard inquiry on your credit report. If you’re still doing research, request a pre-qualification quote instead.

    Types of bad credit loans

    Payday loans 

    These loans come in handy when you’re in pinch a few days before payday. There are a few advantages to the loan, such as the high likelihood of approval and the fast turnaround. Some things to consider include the high APR and that the maximum loan amount might not be enough. These loans also need to be paid back pretty quickly, usually within a month or less.

    [ Read: Need Help With Payday Loans? How to Escape the Cycle ]

    Credit union loans

    Credit unions require you to join as a member. The advantage is that credit unions are usually small enough to have a better understanding of the unique circumstances their members face. This makes it easier to apply for a loan, even if you have bad credit.

    Secured personal loans

    A personal loan can be secured or unsecured. You may have to use an asset as security, such as money in a fixed term account, a car or a property that has equity (also see HELOCs for bad credit). Banks prefer this to unsecured loans for bad credit, as their risk is somewhat mitigated. For consumers, this option might result in them losing their assets if they’re unable to repay their loan.

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

    The best bad credit personal loans

    Best for highest maximum loan amount – Avant

    Avant may be the generous Uncle Scrooge we wish we had, but you’d have to have a good credit score to enjoy a low APR.

    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

    This lender is the best option if you’re looking for a fat stack of cash without having to sell your granny’s vintage tea set to afford the APR. Avant is known for its fast service delivery and almost faster loan disbursements once loans are approved. It typically pays out within 24 hours. For applicants with low credit scores, however, the main perk to this lender is the high maximum loan amount and the comparatively low APR. Loan amounts range from $2,000 to $35,000, and APR starts from 9.95% and can go up to 35.99%. There is also an admin fee of up to 4.75%.

    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 for co-applicants – OneMain Financial

    OneMain is that favorite granddad who forces you to come to his house to borrow a few dollars.

    APR Range
    18%–35.99%
    Term
    24–60 months
    Loan Amount
    $1,500–$20K
    SimpleScore
    4.4 / 5.0
    close
    SimpleScore OneMain Financial 4.4
    Rates 4
    Loan Size 5
    Terms 5
    Support 5
    Fees 3

    You’re in it together for the long haul and like Johnny and June. You’ll walk the line straight into your nearest OneMain branch, because you have to.

    While OneMain throws a lifeline to those with bad credit scores by not capping its minimum score requirement, you will need to apply at your nearest branch. The application process is fast once processed and applicants can expect a disbursement within 24 hours of approval.

    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 credit builder – RISE Credit

    Start small and stay small or else you’ll have to dig deep in those pockets to cover the interest. 

    APR Range
    50%–299%
    Term
    4–26 months
    Loan Amount
    N/A
    SimpleScore
    3 / 5.0
    close
    SimpleScore RISE Credit 3
    Rates 1
    Loan Size 4
    Terms 2
    Support 3
    Fees 5

    RISE is like the boot camp for low credit scores. Whether you’re new to the game or simply need to rebuild, boot camp is always open, but you’ll feel the burn the next day.

    If you’re still stuck on the APR and wondering whether you misread that number, it’s okay. Read it again. While that rate might seem farfetched, it’s worth remembering that RISE doesn’t require applications to have a credit score, let alone a good one. That places them at a high risk of defaults which need to be mitigated somehow. The entire process is automated, and borrowers never have to set foot in one of its offices. This is the ideal product to start with when trying to build a credit score. 

    Best speedy loans – OppLoans

    If you’re planning on using your personal loan for more than a small amount, expect to pay it bak in spades.

    APR Range
    99%–199%
    Term
    Up to 3 years
    Loan Amount
    $500–$4k
    SimpleScore
    2.8 / 5.0
    close
    SimpleScore OppLoans 2.8
    Rates 2
    Loan Size 1
    Terms 3
    Support 5
    Fees 3

    These loans are applied for, approved and disbursed faster than Avengers: Endgame grossed its first $100 million (a day!).

    There are few loans that are as fast to process as this one. OppLoans has a streamlined, no-fuss approach to lending that doesn’t require a great credit record. That said, the minute you get your score where you need it to be, it’s time to move on to a lender that does pay some attention to the score. That’s because the APR starts at 99% and can go up to as much as 199%. That’s also part of the reason why the terms are relatively short and loan amounts are super low.

    Best conventional lender alternative – Peerform

    This could just be your startup capital for that fledgling cupcake emporium, just like Max and Caroline in “Two Broke Girls.”

    APR Range
    5.99%–29.99%
    Term
    12–36 months
    Loan Amount
    $4K–$25K
    SimpleScore
    3.8 / 5.0
    close
    SimpleScore Peerform 3.8
    Rates 5
    Loan Size 5
    Terms 3
    Support 5
    Fees 1

    Peer-to-peer lending was perfected by Peter and Paul, and to this day, we still borrow from Peter to pay Paul.

    The APRs on these loans are quite reasonable, and that’s because you need a minimum FICO score of 600, plus a debt-to-income ratio of less than 40%, to qualify. There are other requirements too, but they seem to be a little less stringent than the other bad credit lenders. Peer-to-peer lending is great for those who want to apply online for a loan through an institution that is not a bank. The funding is done by investors who “fund” these loans. The repayments are similar to dividends earned through other investment products.

    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

    Benefits of bad credit loans

    • You can build or improve your credit score: By diligently keeping to the repayment agreement, your credit score should improve over time. Be sure to make payments on time, for the right amount and in the right frequency. For those building up their credit score for the first time, a small loan with a manageable installment is a good place to start.
    • You may improve your cash flow: The right bad credit loan might be a perfect substitute for smaller, higher-installment loans. By replacing the smaller ones with higher installments with a single installment, you can free up your cash flow. It’s important to check whether the new interest rate and repayment terms are worth it, as you may end up paying more in the long run.
    • Fast access to cash: While it may take up to a week or two for approval with some lenders, for the most part, these loans are approved and disbursed within a few days.

    Things to consider about bad credit personal loans 

    • They’re expensive: It’s important to run the numbers and decide whether the APR charged is within your budget, as it can push up the installment.
    • They are still loans: While it’s tempting to finally put a downpayment on that jet ski, it’s important to use debt wisely.
    • You might not be eligible: Lenders have a number of criteria that you need to satisfy before they approve a loan. These include:
      • Can you afford the loan?
      • How much credit are you already exposed to?
      • Is your income stable and sufficient?

    How to use a bad credit loan to improve your credit score

    Whether you’re building up your credit score for the first time or rebuilding your score after a tumultuous financial period, you can get a bad credit loan as a starting block to get that score up. For this to work, however, it needs to be managed right.

    Start off by applying for an amount that’s low enough to manage, even in times where your income takes a knock. This ensures that even in tough months you will be able to honor your commitments.

    Opt for a term that’s not too long. Some offer loan terms as short as three months or as long as 72 months. It takes at least six months to see decent movement on a credit score, which means that the term should be long enough to build a decent repayment history.

    Bad credit personal loans FAQ

    Personal loans can be a good option if you have a large expense coming up and there won’t be enough time to save up the full amount, such as an emergency medical procedure or unplanned trip. A loan can also help you rebuild your credit score or consolidate your payments. It may even offer you a better interest rate or repayment term than your current debt, such as high-interest credit cards.

    A personal loan should be used to finance events and items that may be too expensive to finance through a credit card. These are usually once-off expenses, such as weddings or home renovations. While there are different ways to finance these expenses, a personal loan can have a more attractive term, interest rate or installment.

    Most lenders prefer a FICO score of 600 or higher. Some instances where the score might not play a factor at all is when borrowers are building their score up for the first time and have other payment references to strengthen their application.

    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.

    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.