Best Personal Loans for Bad Credit in 2020

It's possible to get a loan even if you have bad credit. While the loan might carry higher APRs, you have options for getting the funds you need.

Bankrate's guide to choosing the right bad credit loan

By: Mia Taylor

As of Monday, April 06, 2020

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If you have bad credit and are looking for a loan, shop around to make sure you’re comparing the best offers. While your credit score will keep you from getting a great APR, you can still find interest rates that are much lower than those you’d likely find on payday loans.

The loan lenders listed here are selected based on factors such as credit requirements, APR, loan amounts, fees and more.

Best bad credit loan rates of April 2020

Lender
Best for
Max. Loan Amount
Est. APR
BadCreditLoans.com
Best loan for very bad credit scores
$5,000
5.99% - 35.99%
Upstart
Best runner-up for very bad credit scores
$50,000
6.53% - 35.99%
OneMain Financial
Best secured loan
$20,000
18.0% - 35.99%
TD Personal Secured Loan
Best runner-up unsecured loan
$50,000
Variable
Avant
Best unsecured loan
$35,000
9.95% - 35.99%
LendingPoint
Best for flexible repayment
$25,000
9.99% - 35.99%
Upgrade
Runner-up for flexible repayment
$50,000
7.99% - 35.97%
Earnest
Best for ease of qualification
$75,000
5.99% - 17.24%

Best loan for very bad credit scores: BadCreditLoans.com, APR: 5.99% - 35.99%

Overview: A loan aggregator, BadCreditLoans.com refers applicants to reputable lenders that are willing to provide loans for those who have poor credit. The APR on personal loans from the BadCreditLoans network of lenders and financial service providers ranges from 5.99 percent to 35.99 percent, with loan amounts from $500 to $5,000. Repayment terms vary from three to 36 months. Applying for a loan is free, though applicants must be at least 18 years old.

Perks: BadCreditLoans.com does not charge you any fee for requesting a loan through its site. In addition, BadCreditLoans says that it designs its application process to allow nearly anyone to qualify, even those who would not necessarily be approved elsewhere.

What to watch out for: BadCreditLoans 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, fees and all other requirements offered by each lender, as details will vary.

Runner-up for very bad credit scores: Upstart, APR: 6.53% - 35.99%

Overview: Upstart has developed a reputation for offering fast and fair personal loans. 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. APRs for Upstart loans vary by state and range from 6.53 percent to 35.99 percent. However, the average three-year loan offered by lenders using the Upstart platform is 21 percent. Loan amounts range from $1,000 to $50,000, and you can choose a repayment term of either three or five years.

Perks: Funds are provided quickly, as soon as the next day after approval. There’s no down payment required or 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.

Best secured loan: OneMain Financial, APR: 18.0% - 35.99%

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 be run anywhere from 18 percent to 35.99 percent, and term lengths are 24, 36, 48 or 60 months.

Perks: The application and funding process with OneMain is very quick — typically about one day from the start of the application to receipt of funds. The company also has nearly 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 $300, 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 per late payment.

Runner-up for best secured loan: TD Personal Secured Loan, APR: Variable

Overview: The TD Personal Secured Loan comes with a variable interest rate. The origination fee for this loan is $50, which is collected at the closing and cannot be rolled into the loan. Borrowers can apply for loan amounts of $5,000 to $50,000 with terms ranging from 12 to 60 months.

Perks: This loan allows applicants to borrow against their savings, which TD Bank treats as collateral. There are no monthly fees, annual fees, prepayment fees, late fees or insufficient fund fees.

What to watch out for: Applicants must use a TD Bank savings account, money market savings account or CD as collateral for these loans, which can be limiting for potential applicants.

Best unsecured loan: Avant, APR: 9.95 - 35.99%

Overview: Avant offers unsecured loans of between $2,000 and $35,000. Avant’s loans offer repayment terms of 24 to 60 months, and APRs range from 9.95 percent to 35.99 percent.

Perks: For those who qualify, the loan funds will be made available as soon as the next day.

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 after the due date, as well as a $15 insufficient funds fee.

Best for flexible repayment options: LendingPoint, APR: 9.99% - 35.99%

Overview: LendingPoint operates in 49 states and the District of Columbia and offers loans for those with credit scores as low as 585. Loan amounts range from $2,000 to $25,000, 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 48 months.

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 day.

What to watch out for: Depending on your state, you may pay an origination fee with LendingPoint of as much as 6 percent, which is deducted from your loan proceeds. In addition, you must have a minimum annual income of $25,000 to qualify for a loan.

Runner-up flexible repayment options: Upgrade, APR: 7.99% - 35.97%

Overview: Upgrade offers personal loans that can be used for debt consolidation, credit card refinancing, home improvements or major purchases. APRs available from Upgrade start at 7.99 percent and go as high as 35.97 percent. Loan amounts range from $1,000 to $50,000, and terms are 36 or 60 months.

Perks: When applying for an Upgrade loan, you’ll get a decision within just a few seconds, and the funds can be available within just one day of going through the provider’s verification process.

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.

Best loan ease of qualification: Earnest, APR: 5.99% - 17.24%

Overview: Earnest is known for evaluating an applicant based on far more than just credit scores. Unlike many other lenders, Earnest considers factors like the applicant’s savings habits, education and even earning potential in order to build an overall applicant profile and determine the best interest rate to offer. APRs start at 5.99 percent.

Perks: Earnest offers low-cost, zero-fee loan options. This includes no origination fees, prepayment fees or extra payment fees.

What to watch out for: The Earnest decision-making process can take some time, anywhere from five to 10 days. That timeline can be impacted if additional information is required to evaluate an application.

Best bad credit loans of 2020 recap

  • Best loan for very bad credit scores: BadCreditLoans.com - APR range: 5.99% - 35.99%
  • Runner-up for very bad credit scores: Upstart – APR range: 6.53% - 35.99%
  • Best secured loan: OneMain Financial - APR range: 18% - 35.99%
  • Runner-up for best secured loan: TD Personal Secured Loan - APR range: Variable
  • Best unsecured loan: Avant - APR range: 9.95% - 35.99%
  • Best for flexible repayment: LendingPoint - APR range: 9.99% - 35.99%
  • Runner-up for flexible repayment: Upgrade - APR range: 7.99% - 35.97%
  • Best for ease of qualification: Earnest - APR range: 5.99% - 17.24%

What are bad credit loans?

Bad credit refers to low credit scores or a short credit history. Things like late payments or maxed-out credit cards are financial missteps that can lower your credit score.

Bad credit loans are an option for people whose credit reflects some financial missteps or people who haven’t had time to build a 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 weak 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.

Personal loans for bad credit FICO score range

Category
Credit Score
Percentage of people in this category
Excellent
800-850
21%
Very good
740-799
25%
Good
670-739
21%
Fair
580-669
17%
Very poor
300-579
16%

How to get a personal loan with bad credit

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 find a personal loan if you don’t have strong credit.

  • Step 1: Check your credit score. Learn how your credit stands by requesting a free credit report from AnnualCreditReport.com. You are entitled to one free credit report every year from each of the credit reporting agencies.
  • Step 2: Ensure that you can repay the loan. Ensure that you have a steady income and calculate whether your budget can support an additional monthly loan payment.
  • Step 3: Compare bad credit personal loans. If you have an existing relationship with a bank or credit union and your accounts are in good standing, it may have a personal loan option for you. You can also research personal loans for bad credit online, but make sure to read the fine print and independent reviews about the lender.
  • Step 4: Take advantage of prequalification. Many online lenders allow you to check whether or not you will qualify for a loan without pulling a hard credit check. This is a good way to shop around for a bad credit loan without impacting your credit score further.

“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.”

What are the types of personal loans for bad credit?

There are two main options when it comes to getting a personal loan if you have bad credit: secured and unsecured.

Secured vs. unsecured bad credit loans

Secured loans require collateral, like a home or car. Generally, they offer more favorable rates and terms and higher loan limits. If you default on the loan, however, you risk losing your home, car or other collateral.

Unsecured loans don’t require any collateral, and the rate you receive is based on your creditworthiness. Since it’s not secured by an asset, this type of loan typically comes with a higher interest rate and lower loan limits.

Additional types of loans for people with bad credit

If you're having trouble qualifying for a traditional personal loan, you have other options.

  • Installment loans: These loans are for a specific sum of money upfront that you repay with interest in equal monthly installment over the life of the loan.
  • Payday loans: These are short-term loans, typically for $500 or less. Payday loan lenders don’t run credit checks, but the overall cost of borrowing is high — sometimes up to 400 percent in interest.
  • Cash advances: Cash advance lenders generally don’t check your credit, but you’ll need to show proof of income. If you have an unsecured credit card, your cash advance interest rate will likely be higher than your card’s standard purchase APR.
  • 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.

Frequently asked questions about bad credit loans

How do online bad credit loans work?

Applying for an online bad credit loan online is similar to the application for a regular loan. Legitimate lenders will typically check your credit history, financial situation, ability to repay and other information before extending a loan offer.

If you have bad credit, you can expect to see higher interest rates, termination fees and other fees. Calculating the total cost of the personal loan beforehand is crucial to finding the most competitive rate for your credit.

Is there risk in bad credit loans?

As a borrower, you take on some risk whenever you take on a personal loan. If you default on a secured personal loan, for instance, the lender could take your collateral, and your credit score could take an even bigger hit. With any type of loan, you also chance racking up even more debt if you don’t pay bills on time.

How to look out for bad credit loan scams?

While shopping for a personal loan, look out for red flags that may be a sign that 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.

How can I fix my credit in order to get a better loan?

If you want more loan options with better terms, work on improving your credit. Although the process can take time, there are several things you can do to raise your credit score:

  • Pay your bills on time.
  • Pay down your debt.
  • Use credit score-boosting programs.
  • Leave unused credit cards open.
  • Don’t open too many credit cards at the same time.
  • Fix errors on your credit report.

Do I need collateral to get a bad credit loan?

Every lender has its own specific requirements. If you’re considering a secured bad credit loan, you’ll likely need to provide a form of collateral.

Can I take out an unsecured loan with bad credit?

There are unsecured personal loans for individuals with bad credit. Lenders will evaluate whether to approve your application based on a few factors, like your credit score, payment history, income and other criteria. Unsecured loans, however, generally have higher interest rates and fees.

Can you get a loan if you're unemployed?

You may still be able to get a personal loan if you’re unemployed, but your options will be limited. Lenders may assess your credit history and score, plus alternative income like Social Security, disability income or investments.

Can I get a bad credit loan without a checking account?

Legitimate personal loan lenders generally require borrowers to provide their checking account information in order to receive an unsecured loan. You might find alternative loan lenders that offer cash advance loans without the need for a bank account. However, these types of loans are typically more expensive than a typical credit card cash advance, and they generally come with short repayment periods.

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