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.
By: Mia Taylor
As of Wednesday, June 03, 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.
| Lender |
Best for:
|
Est. APR
|
Min. Loan Amount
|
Max. Loan Amount
|
|---|---|---|---|---|
| BadCreditLoans.com |
Best loan for very bad credit scores
|
5.99% - 35.99%
|
$500
|
$5,000
|
| Upstart |
Runner up: best loan for very bad credit scores
|
6.27% - 35.99%
|
$5,000
|
$30,000
|
| OneMain Financial |
Best secured loan
|
18.00% - 35.99%
|
$1,500
|
$20,000
|
| TD Bank Personal Secured Loan |
Runner-up: best secured loan
|
5.67% - 18.00%
|
$5,000
|
$50,000
|
| Avant |
Best unsecured loan
|
9.95% - 35.99%
|
$2,000
|
$35,000
|
| LendingPoint |
Best loan for flexible repayment options
|
9.99% - 35.99%
|
$2,000
|
$25,000
|
| Upgrade |
Runner-up: best loan for flexible repayment options
|
7.99% - 35.97%
|
$1,000
|
$35,000
|
Bad credit refers to a low credit score 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.
| 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%
|
There are two main options when it comes to getting a personal loan if you have bad credit: secured and unsecured. If you're having trouble qualifying for a traditional personal loan, you have other options.
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 back your loan 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.
Payday loans 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 — so it's important to weigh your other options first. Payday lenders can also be predatory in nature, so make sure to thoroughly research any potential companies you're looking into before signing up.
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.
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.
Like personal loans, home equity loans disburse a lump sum of money upfront, which you pay back in fixed monthly installments. Because home equity loans are secured by your home, they may be easier to acquire for people with bad 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.
Due to the impacts of COVID-19, many banks and online lenders are adjusting their personal loan offerings. Borrowers who already have personal loans may have the option to defer payments or waive fees, though specific loan relief programs vary by lender. But while some lenders are also lowering APRs for new loans, many are also tightening eligibility requirements — meaning if you have below-average credit, you may find it harder to qualify. If this is the case, try starting your loan search with the bank that holds your checking or savings account, or take advantage of prequalification options with lenders that already specialize in bad-credit loans.
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.
“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.”
Overview: As 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.
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 6.27 percent to 35.99 percent. Loan amounts range from $5,000 to $30,000, 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 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.
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 $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 per late payment.
Overview: The TD Bank Personal Secured Loan comes with a variable interest rate. The origination fee for this loan is $50, which is collected at 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.
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 can 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 late fee if monthly payments are not made in full within 10 days after the due date, as well as an insufficient funds fee.
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 $35,000 to qualify for a loan.
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 $35,000, 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.
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:
Every lender has its own specific requirements. Most personal loans are unsecured, meaning you don't have to put down collateral. However, borrowers with bad credit are less likely to qualify for these types of loans. If you fall in this group, you may want to search for a secured loan. If you’re considering a secured bad-credit loan, you’ll likely need to provide a form of collateral.
Employment is one of many factors that lenders consider when you apply for a personal loan. It's still possible to get a personal loan if you're unemployed, but you'll likely have to compensate with a high credit score and proof of a regular source of income. This can include Social Security benefits, child support, investments, disability income and more. If you have poor credit and you're unemployed, it will be harder to convince lenders to extend you a loan.
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.
With bad-credit loans, specifically, much of the risk comes from predatory lenders. Payday lenders and scammers are more likely to target people who have trouble qualifying for loans elsewhere; it's important to vet any company with bad-credit loans that may seem too good to be true.
There are no-credit-check loan companies, but if you're considering this route, proceed with caution. Companies that don't check credit often compensate by charging an exorbitant amount in interest, sometimes upward of 400 percent. Because of this, it's best to start your search with traditional banks or reputable online lenders, some of which extend loans to people with credit scores below 600. If you do choose to borrow from a no-credit-check lender, keep an eye out for any potential loan scams.
It is possible to get a loan without a checking account, but your options are likely limited. Generally, without a checking account you'll have to either put up collateral or turn to payday lenders, which can be predatory and charge extremely high interest.
If you have bad credit, it's likely easiest to get a loan from a payday lender or other no-credit-check lender. However, just because that's the easiest option doesn't mean it's the best. The convenience of these types of loans often comes at the cost of high APRs, short repayment periods or even loan scams.
To get a loan with bad credit, we recommend starting with the lenders we review above. Many of these have prequalification options, allowing you to see your eligibility and rates so you can easily compare lenders. While not every lender will accept borrowers with poor credit, many do.
While shopping for a personal loan, look out for red flags that may be a sign that you’re walking into a scam: