Best bad credit loans in May 2023

Written by
Hanneh Bareham
Edited by
Rhys Subitch
Reviewed by
Mark Hamrick

May 25, 2023

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PERSONAL LOANS

BEST LOAN FOR FAST FUNDING

4.7

Bankrate Score
Est. APR
8.49- 35.99%
with AutoPay
Loan amount
$1k- $50K
Min credit score
560
See offersArrow Right

Check rate with Bankrate

PERSONAL LOANS

BEST FOR SECURED LOANS

4.7

Bankrate Score
Est. APR
8.99- 35.99%
Loan amount
$2k- $50K
Min credit score
600
See offersArrow Right

Check rate with Bankrate

PERSONAL LOANS

BEST SECURED LOAN

4.1

Bankrate Score
Est. APR
18.00- 35.99%
Loan amount
$1.5k- $20K
Min credit score
Not disclosed
See offersArrow Right

Check rate with Bankrate

PERSONAL LOANS

BEST LOAN FOR A RANGE OF REPAYMENT OPTIONS

4.5

Bankrate Score
Est. APR
9.95- 35.99%
Loan amount
$2k- $35K
Min credit score
580
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PERSONAL LOANS

BEST LOAN FOR LIMITED CREDIT HISTORY

4.7

Bankrate Score
Est. APR
6.70- 35.99%
Loan amount
$1k- $50K
Min credit score
Not disclosed
See offersArrow Right

Check rate with Bankrate

PERSONAL LOANS

BEST FOR SMALL LOANS

4.4

Bankrate Score
Est. APR
7.99- 35.99%
Loan amount
$2k- $36.5K
Min credit score
600
Read our reviewArrow Right

Check rate with Bankrate

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How to compare the best bad credit loan lenders

There's no single best loan company for everyone. Choosing the best bad credit loan company for you depends on a few factors:

  1. Determine the best type of bad credit loan for you. Cash advance loans, secured loans, unsecured loans and payday loans are the four main types of bad credit loans available. Know what each offers before selecting one.
  2. Pick loan terms that suit your needs. A shorter repayment period means you'll be out of debt sooner and will pay less interest. A longer term, on the other hand, will reduce your monthly bill but you'll pay more interest.
  3. Prequalify with three or more lenders. Don't go with the first lender that you qualify with. To find the best deal available, apply with at least three different lenders.
  4. Calculate the loan costs. Look at more than just the rates and terms available from the lenders you prequalify with. Take into account any fees to decide which is the best deal.
  5. Look at customer experience and reviews. Some lenders offer online chat features and seven days a week customer phone support. Look into a lender’s customer service options before applying, especially if you prefer in-person service.
  6. Identify unique features and useful perks. Lenders sometimes offer perks like introductory APRs and online financial tools and apps, especially if you're already a member of the institution.
  7. Be careful of predatory lenders and scams. Guaranteed acceptance and not being licensed to do business in your state are two of the biggest warning signs a lender isn't aboveboard. Keep an eye out and do your research.

Compare bad credit loan rates in May 2023

LENDER BEST FOR MIN. CREDIT SCORE EST. APR MIN LOAN AMOUNT MAX. LOAN AMOUNT
Upstart Limited credit history Not disclosed 4.60%-35.99% $1,000 $50,000
OneMain Financial Secured loans Not disclosed 18.00%-35.99% $1,500 $20,000
Avant A range of repayment options 580 9.95%-35.99% $2,000 $35,000
LendingPoint Small loans 600 7.99%-35.99% $2,000 $36,500
Upgrade Fast funding 560 8.49%-35.99% $1,000 $50,000

A closer look at our top bad credit loans

Here's a deep-dive into each lender, why is the best in each category and specifically who would benefit most from borrowing from the lender. 

Upstart: Best for limited credit history

Overview: Headquartered in San Mateo, California and founded by ex-Google employees, Upstart has originated over $16 billion in personal loans to-date. The lender charges a low minimum APR of 6.70 percent and is ideal for those who need the money quickly. The company asserts that after approval, the funds can be available in as soon as one business day.

OneMain Financial: Best for secured loans

Overview: In exchange for providing collateral, OneMain Financial lends to those who wouldn't otherwise qualify for a personal loan due to having less-than-stellar credit.

Avant: Best for a range of repayment options

Overview: Avant's loan amounts range from $2,000 to $35,000, which can make it easier to fund multiple projects or purchases and is rare for those that cater to lower credit borrowers. Plus, its convenient mobile app makes it easy to stay on top of your payments and loan details.

LendingPoint: Best for small loans

Overview: LendingPoint offers personal loans to borrowers in 48 states across the U.S. — residents in Nevada and West Virginia are unable to apply — and is based in Atlanta, Georgia. The lender is unique in that it allows those who have a bankruptcy on their credit report to get approved for a loan (as long as it was discharged at least 12 months ago).

Upgrade: Best for fast funding

Overview: Upgrade has a low minimum score requirement of 560 and a smaller-than-average minimum amount of $1,000. Plus, the lender carries relatively low APRs, especially for a lender that caters specifically to those who have less-than-perfect credit.

LendingClub: Best for an online experience

Overview: This lender is different from other companies in that it's a peer-to-peer institution, so instead of acting as a financial instruction or bank, LendingClub provides investors to fund your loan like a traditional lender would.

What is a bad credit personal loan?

When you apply for a loan, lenders will look at your credit score and credit history to determine how risky it could be to lend you money. Bad — or low — credit is a score that falls between 300 and 579 and is caused by factors like thin credit history, multiple late payments and maxed-out credit cards. 

If you have bad credit, it can be difficult to get approved for a loan. You'll likely need to turn to lenders that offer loans specifically for individuals with bad credit. These loans are either secured (backed by collateral, like a home or car) or unsecured and often come with higher interest rates than other personal loans. 

Before signing on the dotted line, be completely sure you need a bad credit loan, as the higher rates and potentially unfavorable terms could put you in more debt down the road.

How to get a loan with bad credit 

Here are 9 key steps to keep in mind when getting a loan with bad credit. For a more in-depth explanation as to why these steps are crucial and how to find the loan for your credit situation, visit our guide on how to score a personal loan with bad credit. 

  1. Check your credit score and credit reports. Before beginning the process of applying for a personal loan, make sure you're familiar with your credit report and have a firm grasp as to why your credit score is the number it is. Most lenders use the FICO scoring model and base eligibility on your FICO score in tandem with your overall financial health. 
  2. Make sure your monthly payment fits into your budget. As you shop around and compare lenders, make sure you aren't applying for a loan you can't afford. Use a loan calculator or prequalify to ensure that the monthly payments can reasonably fit into both your long-and short-term budget. 
  3. Compare bad credit loans. Even though your loan options will be less than if you had a good-to-excellent credit score, make sure you look through every lender that caters to those with less-than-stellar credit to find the one that offers you the most competitive terms and rates. 
  4. Get prequalified. Prequalifying allows you to check your predicted eligibility odds and potential interest rates before officially applying to the lender. Unlike applying, prequalifying doesn't impact your credit score and it makes comparing lenders a much easier and smoother process. 
  5. Look into secured loans. Secured loans are generally easier to get approved for since they're backed by a form of collateral, meaning that the lender is undergoing less risk potential by lending to those with subprime credit. However, if you default on the loan, the lender may seize your collateral to satisfy the delinquent payments. 
  6. Add a cosigner if necessary. A cosigner is a trusted, creditworthy family member or friend who signs the loan agreement with you to help increase your approval odds or chances of scoring a lower rate. While this is helpful, it also means that the cosigner's credit will take a hit if you miss a payment and they'll be responsible for paying back the delinquent balance. 
  7. Gather financial documents. When you apply for a bad credit loan, the lender will ask you to provide multiple financial and personal documents, like your Social Security Number, a valid U.S. Drivers License or proof of legal residence and bank statements or asset information. Before diving into the application, make sure you have the necessary documentation on hand to ensure a smooth and easy process. 
  8. Be prepared for a hard credit check. A hard credit check — also called a hard pull — is initiated by the lender when you apply for a loan. This will result in a short-term knock to your credit score, so make sure you don't undergo multiple hard checks in a short period of time to protect your score. 
  9. Look for a lender without credit score requirements. Some lenders cater to all borrowers across the credit spectrum and therefore don't have a minimum credit requirement. If you have little to no history and a low score, applying for a no-check loan can increase your approval odds; however, it's likely that one of these loans will come with a much higher interest rate.  

How bad credit personal loan fees work

While personal loans that are geared toward those with bad credit will typically come with higher fees and rates than other loans, there are three primary fees to compare between lenders to ensure you're going with the least expensive loan for your credit health. 

  1. Origination fee: An origination fee can fall anywhere from 1 to 10 percent of the total loan balance. It is generally taken out of your total loan amount, but some lenders may let you pay off the fee in one lump sum. 
  2. Late payment fees: Late payment fees vary by lender and are likely higher for those with lower credit. However, most of the time you'll be charged a one-time fee between one to five percent of the late payment amount. 
  3. Prepayment penalty: Some lenders charge a fee for making monthly payments or paying off your loan in its entirety prior to the end of your set repayment timeline. Also known as prepayment fees, these are a rarity amongst most personal loan lenders, although loans for those with bad credit may still tack on this extra fee. 

Interest rates are also much higher when it comes to bad credit loans. For example, the average personal loan interest rate comes out to around 11 percent while most bad credit lenders charge maximum rates up to 36 percent. 

While this may not seem like a huge jump, here's what this difference could cost you if you were to take out a $5,000 loan with a five year repayment period.

Interest rate Monthly cost Interest accrued Total cost
11% $108.71 $1,522.73 $6,522.73
20% $132.47 $2,948.17 $7,948.17

While all rates are higher than average due to the current economic environment, if you're offered a higher rate from multiple lenders, it may be best to explore alternative borrowing options or improve your score before signing on the dotted line. 

Even if the monthly payment seems manageable, it's important to think about the long-term implications that interest accrual could have on your financial goals and well-being.

What to know about your credit score and securing a loan

Lender's often base rates off of creditworthiness — a borrower's overall credit health. Borrowers with excellent credit are eligible for the most competitive rates and terms, while those with a thin credit history or a less-than-ideal score are more likely to be offered higher interest rates. 

Here's a rundown of the estimated APR you could receive based on your credit score.

Estimated APR by FICO score range

CATEGORY CREDIT SCORE PERCENTAGE OF PEOPLE IN THIS CATEGORY ESTIMATED APR
Excellent 800-850 21% 10.30%-12.50%
Very good 740-799 25% 10.73%-12.50%
Good 670-739 21% 13.50%-15.50%
Fair 580-669 17% 17.80%-19.90%
Very poor 300-579 16% 28.50%-32.00%
Source: FICO

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:

A poor or fair credit score can impact your ability to get approved for larger loans, like a mortgage or auto loan. If you get approved for a loan with bad credit, you'll likely be charged the highest interest rates and fees. However, there are long-term habits that you can develop to improve your credit score.

If you're in need of a personal loan in the near future and don't have the ability to build your credit before applying, making the monthly payments in full and on time is a surefire way to build your score while paying off your balance.

What makes up a bad credit score?

FICO calculates your credit score using the following five factors. If your finances fall short in one or more of these areas, your score will drop. 

  • Payment history: 35 percent. Your payment history is the most important factor in determining your score. If you have a habit of making late payments, then your score is most likely to drop by a significant amount. 
  • Amounts owed: 30 percent. Also known as your credit utilization ratio, your amounts owed makes up the total amount of debt you carry. The more debt you carry in relation to your annual income could be interpreted by lenders as a higher risk of default.
  • Length of credit history: 15 percent. How long you've had active credit accounts plays an important role in your score. This includes how long your accounts have been established and how long it's been since you've utilized specific lines of credit or accounts.  
  • New credit: 10 percent. How many new credit accounts you have and how many you've opened in the recent past makes up 10 percent of your score. If possible, avoid taking out too many new accounts in a short amount of time to avoid multiple hits to your credit. 
  • Credit mix: 10 percent. Your credit mix is the amount of different credit types you have. This includes installment loans, revolving lines of credit or retail accounts. It's typically best to have a healthy, diverse credit mix. 

Where can I get a personal loan with bad credit?

When searching for a personal loan with low or bad credit, it is important to consider all of your options before committing to an online lender. While bad credit can lead to limitations in the borrowing process, there are lenders, banks and credit unions who gear their products specifically toward borrowers in this situation. 

Plus, it's not uncommon for financial institutions and online lenders to provide helpful financial resources and member benefits — like an autopay discount — for borrowers with less-than-stellar credit. 

Types of bad credit loans and their uses

There are two main options for getting a personal loan if you have bad credit: secured and unsecured. But there are many other varieties.
 

Pros and cons of bad credit loans 

While every loan comes with advantages and disadvantages, borrowers with low credit will need to carefully consider the potential drawbacks to avoid getting into high-interest debt down the road.

Pros

  • Checkmark

    Flexible lending guidelines: Loans for borrowers with credit that's average and below are more likely to base approval on factors other than just credit score. For example, Upstart also factors in education and job history when evaluating an application.

  • Checkmark

    Credit building: A positive repayment history is one of the fastest ways to grow a credit score.

  • Checkmark

    Lower rates than credit cards: While loans of this nature carry higher rates when compared to other personal loans, they generally have lower interest rates than most credit cards.

Cons

  • Fees: Before applying, read the fine print in the terms and conditions to look for any hidden fees. Due to the lower credit range of the applicants, many bad credit loans charge high fees that can detract from the overall value of the loan.

  • High interest rates: Interest rates are highly dependent on creditworthiness, with the best rates going to those with the highest credit scores. Taking out a loan while your score is low may mean unaffordable payments.

  • Collateral requirements: Some lenders only offer secured loans for borrowers who have low credit, which poses a risk to the borrower should they become unable to make the monthly payments.

  • Increased predatory potential: Many predatory lenders will advertise their products similarly to bad credit loans. However, these often come with rates that are near impossible to manage and leave the borrower in years of debt.

Alternatives to bad credit loans

Bad credit loans carry a reputation for high interest rates — which for some could lead to long-term financial damage. Before signing off on a loan you're not positive you can manage, consider the alternatives.
 

How to spot bad credit loan scams

While shopping for a personal loan, avoid potential scams by being aware of these 8 red flags:
  1. The lender guarantees approval. Reputable lenders generally want to see personal information, like your credit report and annual income, 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.
  2. The lender isn't registered 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.
  3. The lender demands payment upfront. 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 upfront, it's not legitimate.
  4. The lender calls, writes or knocks. 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.
  5. The lender has no physical address. A reputable lender should have a physical address listed on its website.
  6. The lender pressures you to act immediately. High-pressure tactics and immediate calls to action are a few hallmarks of personal loan scams. If a lender claims that it can press charges if you don't accept, or claims that the offer expires within the same day, you can guarantee it's a scam.
  7. The website is not secure.  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.
  8. It sounds too good to be true. If a lender is promising you will get an extraordinarily low rate without even applying, it is most likely a scam.

What to do if you get scammed

 
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Bankrate Insight

If you end up getting involved in a bad credit loan scam, dispute the charge with your bank or credit card issuer, change your passwords, keep an eye on your accounts and report the scam to the FTC.

 

Unfortunately it's not uncommon to get scammed nowadays. With scammers getting more and more crafty, it's important to know what to do should you find yourself in a bad situation. If you suspect you've been scammed by a lender, the first thing you should do is contact your credit card servicer or company and report the charge as fraudulent. 

If they approve the request, you'll get your money back and it will be deposited to your account on the servicer's timeline. If you gave the scammer any personal information, go to IdentityTheft.gov and follow the steps on how to monitor your finances and credit for further illegal activity. 

It's also wise to change your credit card and online banking passwords, just to be safe. Create a strong, new password that you'll remember and if you use the same password for anything else, make sure to change it there as well. 

As a last step, make sure to report the scam to the FTC. This will help the FTC build cases against scammers and can help prevent similar fraudulent activity from happening in the future. 

Frequently asked questions

Methodology

To select the best personal loans for bad credit, Bankrate’s team of experts evaluated over 30 lenders. Each lender was ranked using a meticulous 20-point system, focusing on four main categories:

  • Affordability: The interest rates, penalties and fees are measured in this section of the score. Lower rates and fees and fewer potential penalties result in a higher score. We also give bonus points to lenders offering rate discounts, grace periods and that allow borrowers to change their due date. 
  • Availability: Minimum loan amounts, number of repayment terms, eligibility requirements, ability to apply using a co-borrower or co-signer and loan turnaround time are considered in this category.
  • Customer experience: This category covers customer service hours, if online applications are available, online account access and mobile apps.
  • Transparency: For this factor, we consider how well information is presented to the borrower on the lender’s website. This includes listing credit requirements, rates and fees, in addition to offering prequalification.
Consider both the Bankrate ratings and the best-for category for each lender when evaluating which might best fit your needs.


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