The Bankrate guide to choosing the best personal loan for bad credit
Reviewed by
Mark Hamrick, Bankrate senior economic analystAs of Monday, June 21, 2021
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At Bankrate, our mission is to empower you to make smarter financial decisions. We’ve been comparing and surveying financial institutions for more than 40 years to help you find the right products for your situation. Our award-winning editorial team follows strict guidelines to ensure the content is not influenced by advertisers. Additionally, our content is thoroughly reported and vigorously edited to ensure accuracy.
The lenders listed here are selected based on factors such as credit requirements, APRs, loan amounts and fees. To learn more, read our methodology section.
Best bad-credit loan rates in June 2021
| Bad Credit Loans |
Poor credit scores
|
Not specified
|
5.99%–35.99%
|
$500
|
$10,000
|
| Upstart |
Limited credit history
|
600
|
6.95%–35.99%
|
$1,000
|
$50,000
|
| OneMain Financial |
Secured loans
|
Not specified
|
18.00%–35.99%
|
$1,500
|
$20,000
|
| TD Bank |
Low rate caps
|
Not specified
|
6.99%–21.99%
|
$2,000
|
$50,000
|
| Avant |
A range of repayment options
|
580*
|
9.95%–35.99%
|
$2,000
|
$35,000
|
| LendingPoint |
Small loans
|
590
|
9.99%–35.99%
|
$2,000
|
$36,500
|
| Upgrade |
Fast funding
|
Not specified
|
5.94%–35.97% (with autopay)
|
$1,000
|
$50,000
|
| LendingClub |
Online experience
|
600
|
8.05%–35.89%
|
$1,000
|
$40,000
|
*Avant's minimum credit score is 580 FICO and 550 Vantage.
What you need to know about bad-credit loans
What are bad-credit loans?
Bad credit refers to a low credit score or a short credit history. Things like late payments or maxed-out credit cards can lower your credit score.
Loans for bad credit are an option for people whose credit reflects some financial missteps or people who haven’t had time to build credit history. These loans are either secured (backed by collateral like a home or car) or unsecured. Interest rates, fees and terms for these types of loans vary by lender.
Various banks, credit unions and online lenders offer loans to those with poor credit, but the threshold for what’s considered a “creditworthy borrower” varies by institution. Some lenders have stricter requirements than others, which makes it important to shop around thoroughly when looking for a loan.
Estimated APR by FICO score range
| Excellent |
800–850
|
21%
|
10.3%–12.5%
|
| Very good |
740–799
|
25%
|
10.3%–12.5%
|
| Good |
670–739
|
21%
|
13.5%–15.5%
|
| Fair |
580–669
|
17%
|
17.8%–19.9%
|
| Very poor |
300–579
|
16%
|
28.5%–32%
|
What is considered a bad credit score?
There are a few credit-scoring models that you can use to check your credit score, but the FICO credit scoring system is one of the most popular. FICO scores range from 300 to 850, with the scores on the lower end considered poor or fair.
According to FICO, a bad credit score is within the following ranges:
Having a poor or fair credit score can impact your ability to get approved for a loan and can even affect your ability to rent an apartment or purchase a home. If you do get approved for a loan with bad credit, you'll likely be charged the highest interest rates and higher fees. However, there are long-term habits that you can develop to improve your credit score, like paying your bills in full every month and regularly checking your credit report to catch errors.
What makes up a bad credit score?
FICO calculates your credit score using five pieces of information:
If your finances fall short in one or more of these areas, your score will drop. For instance, having a history of late payments will have a huge impact on your score, since payment history contributes the most to your score. Things like bankruptcies, foreclosures and high amounts of debt relative to your income could also result in a bad credit score.
How to get a bad-credit loan
Getting a personal loan with bad credit isn’t impossible, but it requires diligent research to find the most affordable loan possible. Here are a few steps to get a personal loan if you don’t have strong credit.
- Check your credit score. You are entitled to one free credit report every year from each of the credit reporting agencies, though you can currently access weekly reports through April 2022 from AnnualCreditReport.com. Your credit report doesn’t include your credit score, though. You can purchase that from a credit bureau or get it for free from some financial institutions.
- Ensure that you can repay the loan. Evaluate your home budget to make sure that you can support an additional monthly loan payment.
- Compare bad-credit personal loans. If your accounts with your existing bank or credit union are in good standing, it may have a personal loan option for you. You can also research personal loans for people with bad credit online, but read the fine print and independent reviews about the lender.
- Take advantage of prequalification. Before you apply for a loan, many online lenders allow you to prequalify, or check whether you’ll qualify without doing a hard credit check.
- Look into secured loans. Some lenders offer secured personal loans, which are often easier to get if you have below-average credit. These loans must be backed by an asset like your home or car, but they typically have lower APRs.
- Add a co-signer if necessary. Co-signers take on partial responsibility for the loan and may be required to repay it if you fall behind on payments. Adding a co-signer who has good credit could help you qualify and may net you lower interest rates.
- Gather financial documents. When applying for a loan, you'll likely have to provide financial documents that include pay stubs, tax documents and employment information.
- Be prepared for a hard credit check. While you can get prequalified with many lenders without a hard credit check, the actual application will result in a credit inquiry, which can temporarily damage your credit.
One of the most important things you can do to protect your financial health is to do your research before you apply for a personal loan, especially if you have bad credit.
“I can’t stress enough the importance of educating yourself as a consumer and shopping around for the right financial product to assist you with your goals,” says Leslie Tayne, a debt resolution attorney. “A low credit score does mean you have limited options, but it doesn’t mean you don’t have many options. There are products that assist borrowers with low or bad credit.”
How does the coronavirus affect bad-credit loans?
The addition of economic stimulus payments has been especially helpful for Americans who are in need of a break, but they may not be enough to reduce the burden those with poor credit face. Due to the impacts of the COVID-19 pandemic, many banks and online lenders have adjusted their personal loan offerings. While borrowers who already have personal loans may have the option to defer payments or waive fees, prospective borrowers may face bigger hurdles than usual as banks look to minimize risk. Some lenders are changing interest rates, while others are offering coronavirus hardship loans.
"Broadly speaking, borrowers with less positive credit scores may find more limited borrowing options because of the COVID-19 downturn," says Mark Hamrick, Bankrate's senior economic analyst. "Those who might otherwise be qualified for loans during the best of times are among those who will find it more difficult to qualify during these more challenging times, economically speaking."
However, there is some good news. "Fortunately, low interest rates are helping to restrain borrowing costs for those who do qualify. One of our mantras is that it always pays to shop around for the best rates. Even if one lender isn’t willing to qualify a borrower for a certain product, there may well be another lender out there who will."
If you have less-than-stellar credit and are unsure if you'll get approved, try starting your loan search with the bank that holds your checking or savings account. You could also take advantage of prequalification options with lenders that specialize in bad-credit loans.
How to choose the best bad-credit loan company
There's no single best loan company for everyone. The best bad-credit loan company for you depends on a few factors.
- Eligibility requirements. Many lenders will list eligibility requirements on their websites, including minimum credit scores, minimum income levels and maximum debt-to-income ratios.
- Interest rates and fees. Lenders use different criteria to calculate your interest rate, which is why it's important to shop around before applying for a loan. Get quotes from a few lenders and compare interest rates, origination fees and prepayment penalties to determine which will have the cheapest loan interest for you.
- Repayment terms. Personal loan lenders may offer repayment terms of anywhere from one year to 12. A shorter repayment period means that you'll be out of debt sooner and will pay less overall in interest. A longer repayment period, on the other hand, will reduce your monthly bill.
- Type of lender. You can find personal loans from banks, credit unions and online lenders. Online lenders often have the lowest rates, but you won't have the in-person service of a bank. Additionally, a local credit union that you already do business with may be more willing to extend you a bad-credit loan based on your existing relationship.
7 types of bad-credit loans
There are two main options when it comes to getting a personal loan if you have bad credit: secured and unsecured. But if you're having trouble qualifying for a traditional personal loan, you have other options.
1. Secured and unsecured personal loans
Standard personal loans can be secured or unsecured. Secured loans require collateral, like a home or car. Generally, they offer more favorable rates and terms and higher loan limits since you have greater incentive to pay your loan back in a timely manner. And if you have bad credit, it may be easier to get a secured loan than an unsecured one.
If you default on the loan, however, you risk losing your home, car or other collateral. The most common types of secured loans are mortgages, home equity loans and auto loans, although some lenders offer secured personal loans.
Unsecured loans don’t require any collateral, and the rate you receive is based on your creditworthiness — meaning they may be harder to qualify for if you have below-average credit. Since it’s not secured by an asset, this type of loan typically comes with a higher interest rate and lower loan limits, but you don't risk losing your assets if you fall behind on payments.
Pros: Personal loans tend to come with high loan limits, and you don't necessarily need any collateral to qualify.
Cons: If you opt for an unsecured personal loan, APRs may be far above what you're able to pay, and you may not qualify at all.
Takeaway: Secured loans and unsecured loans can both be useful tools to get the funds you need, but weigh the pros and cons of the different types to make sure you're not putting your assets at risk.
2. Payday loans
Payday loans are short-term loans, typically for $500 or less. They charge incredibly high fees in exchange for fast cash, and repayment is typically due by your next paycheck.
Pros: Payday loan lenders don’t run credit checks, so it's easier to get approved with them than with other lenders.
Cons: The overall cost of borrowing is high — sometimes up to 400 percent in interest — so it's important to weigh your other options first. Payday lenders can also be predatory, so thoroughly research companies before signing up.
Takeaway: Payday loans have the potential to put you in more debt due to extremely high interest rates. They can also be predatory, and it's best to start your search for a personal loan with more reputable lenders.
3. Cash advances
A cash advance is similar to a short-term loan and is offered by your credit card issuer. The sum you receive is disbursed in cash and is borrowed from the available balance on your credit card.
Pros: Cash advances are one of the fastest ways to get money, so they may be worth looking into if you have urgent needs.
Cons: If you have an unsecured credit card, your cash advance interest rate will likely be higher than your card’s standard purchase APR and higher than interest rates on personal loans.
Takeaway: A cash advance can be a useful way to pay off any unexpected expenses but is not recommended for frequent use. Because there is no grace period, interest accrues immediately, which can put you in an unfavorable financial position.
4. Bank agreements
Depending on your bank’s policy, it may approve you for a short-term loan or minimal overdraft agreement. This is, of course, dependent on your banking history and ability to keep your account open. For more information, contact your bank and ask about your options.
Pros: If you have a good relationship with your bank and need access to a small sum of cash, a bank agreement could be a good short-term solution.
Cons: Because bank agreements are not official policies, they are not reliable ways to borrow money.
Takeaway: If you'd like to set up a bank agreement, the best way to find out your options is to contact your bank directly and ask about its policies.
5. Home equity loans for poor credit
Like personal loans, home equity loans disburse a lump sum of money up front, which you pay back in fixed monthly installments. These loans use your home as collateral, meaning the lender has the right to seize your home in the event that you don't make payments. However, because this is a type of secured loan, interest rates may be lower than what you'd find with standard personal loans.
Pros: Because home equity loans are secured by your home, they may be easier to acquire for people with bad credit.
Cons: Since your home is collateral for the loan, if you fail to make the monthly payments on time, you risk losing your home.
Takeaway: Home equity loans can be ideal for reasons that require a large sum of money up front, like larger home improvement projects or debt consolidation.
6. HELOCs for poor credit
HELOCs are similar to home equity loans in that they are based on your home equity and secured by your home itself. HELOCs, however, are functionally similar to credit cards in that they allow you to borrow only as much as you need, when you need it, then repay funds with a variable interest rate.
Pros: HELOCs allow you to take money out at your own pace. So if you're planning smaller home improvement projects spread out over a period of time, a HELOC could be what you need to fund those projects.
Cons: As with a home equity loan, you use your home as collateral, which puts you at risk if you don't make the payments on time.
Takeaway: A HELOC is a valid loan option for people with bad credit, since you'll secure the loan with your home. It's also a good option if you don't need all of your funds up front.
7. Student loans for bad credit
While not a type of personal loan, a student loan may meet your needs if you're trying to pay for education costs like tuition, textbooks and room and board. Many personal loan lenders do not allow you to use funds for education, so you'll have to start your search with dedicated student loan lenders for bad credit.
Pros: Student loans are sometimes the only way to get funding if you need to pay for your college tuition or related expenses.
Cons: Student loans are not offered by many personal loan lenders, and if you have bad credit, you'll almost certainly need a co-signer to qualify.
Takeaway: Unlike the other options on this list, student loans can only be used for one purpose, but almost all student loan lenders accept co-signers if you have poor credit.
How to spot bad-credit loan scams
While shopping for a personal loan, look out for red flags that may be a sign you’re walking into a scam:
- Guarantees without approval: Reputable lenders generally want to see your credit report, income and other information before extending an offer. If you come across a lender that isn’t interested in your payment history, you might be getting lured into a bad situation.
- No registration in your state: The Federal Trade Commission requires that lenders be registered in the state where they do business. Research whether the business is licensed in your state.
- Poor advertising methods: Phone calls and door-to-door solicitation are not considered legitimate advertising practices for trustworthy lenders. Similarly, loan offers that pressure you into taking action immediately are designed to get you to accept without due consideration.
- Prepayment: While application, origination or appraisal fees are common loan charges, these charges are often deducted from the total amount of your loan. If a lender requires you to provide cash or a prepaid debit card up front, it's not legitimate.
- Unsecured website: A lender's site should be secure, meaning the website address should begin with "https" and feature a padlock symbol on any page where you're asked for personal information.
- No physical address: A reputable lender should have a physical address listed on its websites.
Details: best bad-credit personal loan companies in 2021
Best loan for poor credit scores: Bad Credit Loans
Overview: The APR on personal loans from the Bad Credit Loans network of lenders and financial service providers ranges from 5.99 percent to 35.99 percent, with loan amounts of up to $10,000. Applying for a loan is free, and applicants must be at least 18 years old.
Why Bad Credit Loans is the best for poor credit scores: As a loan aggregator, Bad Credit Loans refers applicants to reputable lenders that are willing to provide unsecured loans to those who have poor credit. The company says that it designs its application process to allow nearly anyone to qualify, even those who would not necessarily be approved elsewhere.
Perks: Bad Credit Loans does not charge you any fee for requesting a loan through its site.
What to watch out for: Bad Credit Loans is not a lender itself. It connects consumers to lenders and other financial service providers, meaning you will need to carefully read through the terms, the fees and all other requirements offered by each lender, as details will vary.
| Bad Credit Loans |
| N/A |
| Not specified |
| 5.99%–35.99% |
| Up to $10,000 |
| 90 days to 6 years |
| Not specified |
| Varies |
Best loan for limited credit history: Upstart
Overview: Upstart has developed a reputation for offering fast and fair unsecured personal loans. APRs for Upstart loans vary by state and range from 6.95 percent to 35.99 percent. Loan amounts range from $1,000 to $50,000, and you can choose a repayment term of either three or five years.
Why Upstart is the best for limited credit history: While many loan applications are based primarily on a borrower’s credit score and years of credit, Upstart applications also factor in an individual’s education, job history and area of study.
Perks: Funds are provided quickly, as soon as the next business day after approval, and there are no prepayment penalties.
What to watch out for: Upstart charges a one-time origination fee, which can be as high as 8 percent of the approved loan amount. Upstart also charges late payment fees and returned check fees, as well as a fee for receiving paper copies of documents.
| Upstart |
| 4.5/5 |
| 600 |
| 6.95%–35.99% |
| $1,000–$50,000 |
| 3 or 5 years |
| Not specified |
| Origination fee: 0% to 8%; Late fee: greater of 5% of the amount due or $15; Returned check fee: $15; One-time paper copies fee: $10 |
Overview: OneMain Financial offers both unsecured loans and secured loans, which require providing collateral, such as a motor vehicle. Loan amounts range from $1,500 to $20,000. APRs can run anywhere from 18 percent to 35.99 percent, and term lengths are 24, 36, 48 or 60 months.
Why OneMain Financial is the best for a secured loan: Many lenders only offer unsecured loans. Borrowers who can’t get approved elsewhere may have a better chance of getting a secured loan with OneMain Financial.
Perks: The application and funding process with OneMain is very quick — typically two to three days from the start of the application to receipt of funds. The company also has over 1,500 branch offices for those who like to deal with a brick-and-mortar business.
What to watch out for: OneMain Financial charges origination fees that vary based on the state you live in. In some cases, it’s a flat amount, ranging from $25 to $400, while in others it may be a percentage of the loan. Percentage-based fees range from 1 percent to as much as 10 percent. OneMain also charges late payment fees that vary based on the state where you opened the loan. Typically, the fees range from $5 to $30 or 1.5 percent to 15 percent of the monthly payment or delinquent portion.
| OneMain Financial |
| 3.8/5 |
| Not specified |
| 18%–35.99% |
| $1,500–$20,000 |
| 24 to 60 months |
| Not specified |
| Origination fee:$25 to $400 or 1% to 10%; Late payment fee: $5 to $30 or 1.5% to 15% of the monthly payment or delinquent portion; Insufficient funds fee: $10 to $50 |
Best loan for low rate caps: TD Bank
Overview: TD Bank's TD Fit unsecured personal loan offers borrowers anywhere from $2,000 to $50,000 and comes with few fees. Its loans are also funded in as little as one business day.
Why TD Bank is the best for low rate caps: While TD Bank doesn't offer the absolute lowest rates, the cap on its personal loan rates is relatively low at 21.99 percent APR. This could make it particularly appealing for borrowers with poor credit who might otherwise be subject to rates above 30 percent.
Perks: TD Bank's only fee is a late fee of 5 percent of the minimum payment due or $10, whichever is less. There are no monthly fees, annual fees, prepayment fees, late fees or insufficient funds fees.
What to watch out for: TD Bank's loans are available to a very limited customer base. In order to qualify, you must reside in Connecticut, Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia or Washington, D.C.
| TD Bank |
| 4.9/5 |
| Not specified |
| 6.99%–21.99% |
| $2,000–$50,000 |
| 36 to 60 months |
| Not specified |
| Late fee: 5% of minimum payment due or $10, whichever is less |
Best for a range of repayment options: Avant
Overview: Avant offers unsecured loans of between $2,000 and $35,000 with APRs from 9.95 percent to 35.99 percent.
Why Avant is the best for a range of repayment options: Avant’s loans offer repayment terms of 24 to 60 months, and with no prepayment penalty, borrowers can save money on interest by paying their loans off early.
Perks: For those who qualify, the loan funds can be made available as soon as the next business day after approval.
What to watch out for: Avant loans come with an administration fee of as much as 4.75 percent. There’s also a $25 late fee if monthly payments are not made in full within 10 days of the due date, as well as a $15 insufficient funds fee.
| Avant |
| 4.5/5 |
| 580 FICO, 550 Vantage |
| 9.95%–35.99% |
| $2,000–$35,000 |
| 24 to 60 months |
| Not specified |
| Administration fee: up to 4.75%; Late fee: $25; Dishonored payment fee: $15 |
Overview: LendingPoint operates in 49 states and Washington, D.C., and is known to offer unsecured loans for those with credit scores as low as 590. Loan amounts range from $2,000 to $36,500, and APRs start at 9.99 percent and go as high as 35.99 percent. The repayment terms offered by LendingPoint vary from 24 to 60 months.
Why LendingPoint is the best for small loans: Some lenders with tighter credit requirements have a $5,000 minimum for personal loans, but LendingPoint lets bad-credit borrowers take out as little as $2,000.
Perks: LendingPoint provides application decisions in just a few seconds, and once the loan is approved, funds can be available as soon as the next business day.
What to watch out for: Depending on your state, you may pay an origination fee of as much as 6 percent with LendingPoint, which can be deducted from your loan proceeds. In addition, you must have a minimum annual income of $35,000 to qualify for a loan.
| LendingPoint |
| 4.4/5 |
| 590 |
| 9.99%–35.99% |
| $2,000–$36,500 |
| 24 to 60 months |
| $35,000 |
| Origination fee: up to 6% |
Best loan for fast funding: Upgrade
Overview: Upgrade offers unsecured personal loans that can be used for debt consolidation, credit card refinancing, home improvements or major purchases. APRs available from Upgrade start at 5.94 percent and go as high as 35.97 percent. Loan amounts range from $1,000 to $50,000, and terms are 24 to 84 months.
Why Upgrade is the best for fast funding: Loan funds can be available within just one business day of going through the provider’s verification process.
Perks: When applying for an Upgrade loan, you’ll get a decision within just a few seconds.
What to watch out for: All personal loans include a 2.9 percent to 8 percent origination fee, which is deducted from the loan proceeds.
| Upgrade |
| 4.8/5 |
| Not specified |
| 5.94%–35.97% (with autopay) |
| $1,000–$50,000 |
| 24 to 84 months |
| Not specified |
| Origination fee: 2.9% to 8%; Late fee: up to $10; Returned check fee: $10 |
Best loan for online experience: LendingClub
Overview: If your credit score makes it difficult to get approved for a loan, LendingClub allows you to increase your chances of approval by having a co-borrower. Not every lender offers this option, and it can be a helpful way to qualify for a loan that you wouldn't have gotten otherwise.
Why LendingClub is the best for an online experience: LendingClub has a robust website that features an easy application process and an extensive loans resource center.
Perks: Along with the option of a co-borrower, LendingClub offers a 15-day grace period if you're unable to make your payment on the day it's due.
What to watch out for: There's an origination fee that ranges from 3 percent to 6 percent of the total loan cost.
| LendingClub |
| 4.3/5 |
| 600 |
| 8.05%–35.89% |
| $1,000–$40,000 |
| 36 or 60 months |
| Not specified |
| Origination fee: 3% to 6%; Late fee: greater of 5% or $15 |
Methodology
To select the top personal loan lenders, Bankrate considered factors that help consumers decide whether a lender is a good fit for them, such as credit requirements and minimum APRs. We sought lenders with low fees and a range of loan amounts for borrowers with varying budgets and credit profiles. We also looked for conveniences like online applications and fast funding.
In addition, the lenders featured here were evaluated for notable features like customer discounts and flexible repayment options.
