Best Personal Loans for Bad Credit

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Personal loans can provide a quick fix for people who need cash in a pinch and a good alternative to high-interest credit cards — but your credit will determine your approval odds and interest rate. 

However, some lenders work with bad-credit borrowers or even design loans specifically for people with low scores. Below, we walk through some of the best current personal loans for borrowers with poor credit, explain how to secure one, outline the risks and costs involved, and show the importance of choosing the right lender. 

Best Personal Loans for Bad Credit

Note: The information provided above is based on available data. Actual terms and availability may vary based on individual qualifications and lender policies.

Online Lenders That Offer Bad Credit Loans

Some online lenders specialize in lending money to borrowers with poor credit. While their terms are likely to be stricter and their rates are sure to be higher, many offer features like low or no minimum credit requirements, hassle-free approval and quick cash deposits into your bank account. 

Consider the following lenders who work with bad-credit borrowers.

• Wise Loan
• Rise Credit
• Integra Credit
• King of Kash

Credit Union Loans for People With Bad Credit

Unlike banks, credit unions are member-owned nonprofit organizations. Since they don’t have profit- and dividend-hungry shareholders to satisfy, they can return their profits to their members in the form of lower rates and higher yields. Most importantly, they’re more likely to work with low-credit applicants, often offering better terms than online lenders that specialize in bad credit loans. 

Some have loans designed specifically for people with poor credit. For example, FreeStar Financial offers the Fresh Start Loan. Insight Credit Union has the Credit Rebuilder Loan, which has a 4% APR that would be excellent even for those with top-shelf credit.

Government and Nonprofit Loan Options

Depending on the reason for borrowing, you might qualify for a federally backed loan with looser credit standards and better rates than a traditional loan. Visit USA.gov if you:

• Are buying a first home
• Need help paying for home renovations
• Are a student trying to finance higher education
• Are a small business owner or someone seeking funds to launch a business
• Are a farmer or a rancher
• Need financial assistance after a disaster

The federal government does not typically issue grants to individuals, but it does fund state-based programs that help borrowers with bad credit. Nonprofits like the National Federation for Credit Counseling can also help.

What Is a Bad Credit Personal Loan?

A bad credit personal loan is a loan for general financial needs designed for high-risk borrowers with low credit scores and derogatory marks on their reports. Unlike traditional personal loans, which are generally available only to people with at least fair credit scores of 580 or above, bad credit personal loans are open to borrowers with the lowest scores down to 300 or even those with no credit at all.

Low-credit borrowers take out personal loans for many of the same reasons as everyone else, from debt consolidation or medical bills to car repairs or funeral expenses.

Note: In most cases, bad-credit loans have much higher APRs, which can quickly compound and trap an already strapped borrower in a cycle of debt. 

How to Get a Loan With Bad Credit

If your credit is in bad shape but you need to borrow money, follow these steps to secure a loan designed for borrowers like you. 

Check Your Credit Score First

The first step is to see what lenders will see when you apply for loans. AnnualCreditReport.com is the only federally authorized reporting site. Despite its name, it offers weekly credit reports from all three bureaus, but you can also get accurate representations of your credit history and score through your bank’s or brokerage’s app, although there’s no guarantee it’s identical to the one your lender will see.

Compare Lenders That Accept Bad Credit

Most lenders consider bad credit anything below a 580 FICO score, but many require scores of 600 or above. Credit unions and online lenders tend to have looser standards than big banks, and several specialize in bad-credit borrowing. When shopping around for lenders that work with borrowers in your score range, consider: 

• APRs
• Fees, including loan origination, late payment and early payment fees
• Repayment terms
• Collateral requirements
• Application process
• Processing time

Consider Secured Loans or Co-Signers

You can dramatically increase your approval odds and lower your interest rate by pledging collateral like a vehicle, property or savings account as part of a secured loan. Another way to entice leery lenders is to add a high-credit co-signer to the application who guarantees the loan on your behalf.

Note: If you default on a secured loan, the lender can seize your car, home, savings account or other collateralized assets. If you default on a co-signed loan, your co-signer is liable for the debt.

What Are the Costs of a Bad Credit Loan?

While bad credit loans might be available, they are generally not affordable. 

Interest Rates & Fees

Rates change from loan to loan, lender to lender and borrower to borrower, and they fluctuate frequently — but bad credit borrowers should expect to pay handsomely for the risk they require lenders to take by approving them. 

According to LendingTree, the average APR for credit scores in the 560-579 range is 160.3% The average for those with less than 560% is 191.19%.

GOBankingRates referenced a variety of current loan offers to identify the following average APRs on different kinds of loans for borrowers with good credit in the 660-740 range compared to those with poor credit scores below 580.

How Much More Will You Pay With Bad Credit?

Using the above data, this example shows what an unsecured personal loan will cost a good-credit vs. poor-credit borrower. With the power of compound interest working against them, low-credit borrowers end up repaying 3.5 times what they borrowed.

How to Improve Your Chances of Approval

Here’s how to position yourself for success when applying for a loan with bad credit.

Ways to Boost Your Credit Score Before Applying

When your credit is bad, every point on your score counts. Paying down debt is the surest and fastest way to boost your score no matter your credit history. Also, check your report for errors, offer to settle delinquent accounts you can’t pay in full and petition previous lenders for goodwill removal of settled accounts from your report.

Alternative Ways to Borrow Money

With bad credit, there’s no guarantee you’ll qualify, even for a loan designed for borrowers in your score range, and with crushing APRs being par for the course, you might not be able to afford the payments even if you’re approved. 

Don’t be enticed by payday loans, which epitomize toxic lending. They’ll generally loan money to anyone collecting a paycheck, but it’s a form of predatory lending designed to trap borrowers in an endless debt cycle. Instead, consider payday alternative loans (PALs), which are small loans that regulated credit unions issue with lower APRs and better terms than traditional payday loans.

The other alternative is the oldest kind of loan in history — borrowing from friends and family, who are likely to offer more forgiving terms than the bank. 

Pros and Cons of Bad Credit Personal Loans

Here’s a roundup of the main benefits and drawbacks of bad credit personal loans.

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