Best Bad Credit Loans in August 2020

It's possible to get a loan even if you have bad credit. 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. Our recommendations for the best bad-credit personal loans have flexible eligibility requirements and lower rates than alternative sources like payday lenders.

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Bankrate's guide to choosing the best personal loan for bad credit

By: Hanneh Gundersen

As of Monday, August 03, 2020

Why trust Bankrate?

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

Best loans for bad credit in August 2020

Lender
Best for:
Min. Credit Score
Est. APR
Min. Loan Amount
Max. Loan Amount
Bad Credit Loans
Poor credit scores
Not specified
5.99%–35.99%
$500
$5,000
Upstart
Limited credit history
600
4.66%–35.99%
$1,000
$50,000
OneMain Financial
Secured loans
Not specified
18.00%–35.99%
$1,500
$20,000
TD Bank Personal Secured Loan
Credit building
Not specified
Starting at 5.67%
$5,000
$50,000
Avant
Unsecured loans
580*
9.95%–35.99%
$2,000
$35,000
LendingPoint
Flexible repayment options
585
9.99%–35.99%
$2,000
$25,000
Upgrade
Fast funding
620
7.99%–35.97%
$1,000
$35,000
LendingClub
Using a co-signer
600
10.68%–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 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
Estimated APR
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 credit score is considered bad?

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:

  • Fair credit: 580 to 669.
  • Poor credit: 300 to 579.

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.

6 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 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.

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 in nature, so make sure to thoroughly research any potential companies you're looking into 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, so make sure to do your research before reaching out.

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: The fees and interest rates of a cash advance are typically lower than those of a payday loan.

Cons: If you have an unsecured credit card, your cash advance interest rate will likely be higher than your card’s standard purchase APR.

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 these 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 upfront, 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 in 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 run the risk of losing your home.

Takeaway: Home equity loans can be ideal for things that require a large sum of money upfront, 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 out how much you need, when you need it. 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 upfront.

How does the coronavirus affect bad-credit loans?

Due to the impacts of COVID-19, many banks and online lenders are adjusting their personal loan offerings. But 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.

According to Mark Hamrick, Bankrate's senior economic analyst, you may have limited borrowing options if you have poor credit, since lenders are looking to minimize their risk.

"Broadly speaking, borrowers with less positive credit scores may find more limited borrowing options because of the COVID-19 downturn," Hamrick says. "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 already specialize in bad-credit loans.

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

  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, though you can currently access weekly reports through April 2021.
  2. Ensure that you can repay the loan. Evaluate your income and budget to make sure that you can support an additional monthly loan payment.
  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.
  4. Take advantage of prequalification. Before you apply for a loan, many online lenders allow you to check whether or not you will qualify 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.
  5. Look into secured loans. Some lenders offer secured personal loans, which are often easier to get for people with below-average credit. These loans must be backed by an asset like your home or car, but they typically have lower APRs.

In today's financial climate, 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.”

Details: bad-credit loans in 2020

Best loan for poor credit scores: Bad Credit Loans

Overview: As a loan aggregator, Bad Credit Loans refers applicants to reputable lenders that are willing to provide loans for those who have poor credit. 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 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: Bad Credit Loans does not charge you any fee for requesting a loan through its site. In addition, Bad Credit Loans 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: 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, fees and all other requirements offered by each lender, as details will vary.

Lender Bad Credit Loans
Bankrate Rating N/A
Min. Credit Score Not specified
Est. APR 5.99%–35.99%
Loan Amount $500–$5,000
Term Lengths 3 to 36 months
Min. Annual Income Not specified
Fees Varies

Best loan for limited credit history: Upstart

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 4.66 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.

Perks: Funds are provided quickly, as soon as the next 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.

Lender Upstart
Bankrate Rating 4.5/5
Min. Credit Score 600
Est. APR 4.66%–35.99%
Loan Amount $1,000–$50,000
Term Lengths 3 or 5 years
Min. Annual Income Not specified
Fees Origination fee of 0% to 8%, late fee of 5% or $15, returned check fee of $15

Best secured loan: OneMain Financial

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 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 per late payment.

Lender OneMain Financial
Bankrate Rating 3.9/5
Min. Credit Score Not specified
Est. APR 18%–35.99%
Loan Amount $1,500–$20,000
Term Lengths 24 to 60 months
Min. Annual Income Not specified
Fees Origination fee of $25 to $400 or 1% to 10%, late payment fee of $5 to $30 or 1.5% to 15%, nonsufficient funds fee of $10 to $50

Best loan for credit building: TD Bank Personal Secured Loan

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.

Lender TD Bank
Bankrate Rating 4.2/5
Min. Credit Score Not specified
Est. APR Starting at 5.67%
Loan Amount $5,000–$50,000
Term Lengths 12 to 60 months
Min. Annual Income Not specified
Fees Origination fee of $50

Best unsecured loan: Avant

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 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 late fee if monthly payments are not made in full within 10 days after the due date, as well as an insufficient funds fee.

Lender Avant
Bankrate Rating 4.5/5
Min. Credit Score 580 FICO, 550 Vantage
Est. APR 9.95%–35.99%
Loan Amount $2,000–$35,000
Term Lengths 24 to 60 months
Min. Annual Income Not specified
Fees Administration fee of up to 4.75%, late fee of $25, dishonored payment fee of $15

Best for flexible repayment options: LendingPoint

Overview: LendingPoint operates in 49 states and the District of Columbia and is known to offer 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.

Lender LendingPoint
Bankrate Rating 4.4/5
Min. Credit Score 585
Est. APR 9.99%–35.99%
Loan Amount $2,000–$25,000
Term Lengths 24 to 48 months
Min. Annual Income $35,000
Fees Origination fee of up to 6%

Best loan for no origination fee: Upgrade

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.

Lender Upgrade
Bankrate Rating 4.8/5
Min. Credit Score 620
Est. APR 7.99%–35.97%
Loan Amount $1,000–$35,000
Term Lengths 36 or 60 months
Min. Annual Income Not specified
Fees Origination fee of 2.9% to 8%, late fee of $10, returned check fee of $10

Best loan for using a co-signer: LendingClub

Overview: If your credit score makes it difficult to get approved for a loan, LendingClub allows you to increase your chances of approval through a co-signer. Not every lender offers this option, and it can be a helpful way to qualify for a loan that you wouldn't otherwise have gotten.

Perks: Along with the option of a co-signer, LendingClub offers a 15-day grace period if you're unable to pay the payment on the day it's due.

What to watch out for: There's an origination fee that ranges from 2 percent to 6 percent of the total loan cost.

Lender LendingClub
Bankrate Rating 4.5/5
Min. Credit Score 600
Est. APR 10.68%–35.89%
Loan Amount $1,000–$40,000
Term Lengths 36 or 60 months
Min. Annual Income Not specified
Fees Origination fee of 2% to 6%, late fee of 5% or $15

Frequently asked questions about bad-credit loans

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. Having a history of timely payments indicates to credit agencies that you're a reliable borrower. If possible, set up automatic payments with your bank for at least the minimum balance due each month.
  • Pay down your debt. By decreasing your overall debt balance, you improve your debt-to-income ratio. One good way to do this is the debt avalanche method, where you focus on paying off the highest-interest debt first. You can also start by paying off the smallest debts first and gradually working your way up.
  • Use credit score-boosting programs. Some credit cards are designed to help you boost credit, reporting your timely payments to all three of the major credit bureaus. Some companies, like Experian, also offer programs that allow you to add items like utility and phone bills to your credit history.
  • Leave unused credit cards open. Even if you have a credit card that you never use, it's best to leave the account open; credit bureaus favor accounts with long histories. Keeping unused credit cards also increases the amount of overall credit you have, which improves your credit utilization ratio.
  • Don’t open too many credit cards at the same time. Every time you open a credit card, the lender will do a hard pull of your credit report, which temporarily damages your credit score. If you're looking to consolidate debt using credit cards, it may be best to start with one balance transfer credit card and focus on paying off any remaining debt on your old cards.
  • Fix errors on your credit report. Make sure to periodically read through your credit reports and contact the credit bureaus with any errors that may be lowering your credit score. You are entitled to one free credit report from each of the bureaus each year, and some banks will even provide you with a monthly credit score update. If you notice any patterns you can't explain, follow up with the bureaus as soon as possible.

Do I need collateral to get a bad-credit loan?

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 need to provide a form of collateral.

Can you get a small loan with bad credit?

You can get a small loan with bad credit, but you'll have to ensure that you're not applying for a predatory loan. Many smaller loans under $1,000 come from payday lenders, which charge astronomically high interest rates. If you're looking for a relatively small loan, it's best to shop around with more reputable lenders first. Most lenders set their lowest loan amount around $1,000, but you may have more luck finding a loan for a few hundred dollars with your local bank.

Can you get a loan if you're unemployed?

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.

Is there risk in bad-credit loans?

As a borrower, you take on some risk whenever you accept 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 risk 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.

Can you get a loan with no credit check?

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.

Can you get a loan without a checking account?

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.

What's the easiest loan to get with poor credit?

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.

Can you get a personal loan with a credit score of 550?

It can be difficult to get approved for a personal loan with a credit score of 550, especially if the loan is unsecured. If you get approved for the loan, there is a good chance that the loan will have a high APR and lots of fees.

If you are unsure if you'll qualify due to your credit score, you may have a better chance with the help of a co-signer who has good credit. However, while the job of a co-signer isn't to make the monthly payments for you, co-signers do hold some responsibility if you fail to pay and could see their own credit score impacted.

How long does it take to get my loan?

From application to disbursement, it could take anywhere from a few days to a few weeks to get your loan, depending on the lender. Typically an online lender's process is the quickest. If you apply with a bank or credit union, the approval process may take longer.

To expedite the process, gather the information you'll need to apply for the loan. This might include your Social Security number, employment information, income information and financial history. Being prepared when you apply allows the process to advance more quickly.

How will applying impact my credit score?

When you apply for a personal loan, the lender will run a hard credit inquiry to assess your creditworthiness. Because of this, you'll likely see your credit score decrease a few points.

That said, the long-term credit benefits that come with a personal loan can outweigh the few points that may get temporarily knocked off your credit score. You can also prequalify for many loans before officially submitting an application; this allows you to see whether or not you qualify with a lender without activating a hard credit check.

How to spot 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. 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 upfront, 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: Reputable lenders should have a physical address listed on their websites.