How to get a personal loan with bad credit

If you want a low rate on a personal loan, you’ll need good credit. However, that’s not the reality for most borrowers. In fact, TransUnion data shows that people in the subprime and near prime categories — credit scores between 580 and 659 — made up the majority of loans (67%) at the end of 2025.

To get a personal loan with bad credit, you need a steady income and employment history, and the process will involve a few extra steps. The basic application is the same, but you’ll need to pay extra attention to the terms you’re offered to be sure they make sense.

In addition to higher rates and fees, you may be limited to shorter terms and lower loan amounts. You may need to do a little more shopping to find legit bad credit lenders and weed out the predatory ones.

Knowing the common approval requirements and how to use a personal loan calculator will also help you to compare offers from different bad credit lenders when you’re ready to finalize your loan.

What to consider before getting a loan with bad credit

When it comes to borrowing a personal loan when your credit is in bad shape, you’re really getting the short end of the stick. Not only will the financing itself cost more, but you’ll have less access to funds and have less time to repay the loan. 

Weigh the drawbacks of adding a fixed monthly payment to your budget before you make a final decision. This is why it’s best to hold off getting a personal loan until your credit improves.

Loan costs are more expensive

It’s expensive to borrow money with a low credit score. With personal loans, you’ll face steep interest and fees — which leads to a high annual percentage rate (APR). Many bad credit personal lenders set APRs as high as 35.99%, and the lower your score, the more likely you’ll pay the highest rate the lender can legally charge.

To illustrate, let’s say you got a $2,000 loan with a three-year term. Here’s how the math would look like if you got an APR of 12.43%, which is the average for personal loans as of Aug. 12, according to Bankrate’s data, versus an APR of 35.99%.

As you can see, not only do your monthly payments skyrockets, but you’ll pay more than triple in total interest charges.

Note that APR also includes fees, and with most bad credit loans, you’ll pay 1% to 12% of your loan amount in origination fees. Further, these fees typically come out of your loan funds before you receive them, meaning you have less cash for debt consolidation, home improvement or emergency costs.

Never pay out-of-pocket fees for approval. All fees should be deducted from your loan proceeds. Run away from a company that pressures you to pay advance fees for any bad credit loan.

Your loan amount may be lower

Lenders that offer personal loans usually cap amounts at $50,000 — but the amount you’ll actually qualify for with bad credit may be significantly lower. In fact, TransUnion data shows that subprime borrowers had an average new account balance of just $2,200 at the end of 2025, while near prime borrowers had a balance of $4,600.

You might not qualify if you have a very low credit score — anything below 580 — since lenders see borrowers with bad credit as more risky. Even with decent credit, if you have a high debt-to-income (DTI) ratio, you may also struggle to qualify for a larger loan amount. A lender won’t approve you for more than you can reasonably afford to pay each month, which will lead to a lower loan amount.

Terms are generally shorter

A low credit score tells lenders that you may have had difficulty managing your credit in the past. As a result, you may only be offered a shorter repayment term — three to five years, versus the six or seven year terms offered to good- or excellent-credit borrowers.

A shorter term limits a lender’s risk. You’ll pay down the balance faster because more of your money will go toward it from the get-go as opposed to toward interest. That means the lender can recover more of the money you’ve borrowed even if you default or have an unexpected change in your finances.

The good news is that if your credit score improves over time, you can refinance your personal loan to a longer term and use the savings to pay your loan balance off faster.

Tips for improving your chances of getting a loan with bad credit

Getting approved for a personal loan with bad credit can be difficult, but there are ways to increase your odds. Some take longer than others, but all are worth considering.

• Apply with a cosigner or co-borrower
• Opt for a smaller loan amount
• Consider secured options that require collateral
• Pay down your debt before applying
• Take steps to improve your credit score
• Shop around until you find the right lender
• Consider enrolling in Experian Boost to build credit from on-time utility payments

How to get a loan with bad credit in 7 steps

Most personal loan lenders consider a bad credit score to be anything below 580, while others only lend to borrowers with scores above 670. Whether consolidating high-interest debt or funding an emergency cost, you’ll want to know the extra steps involved in getting a personal loan with bad credit before you start applying.

1. Check your credit score, income and other debts

Your credit score is one of the most important factors that a lender considers when reviewing your application. Although average personal loan rates typically range from 6% to 36%, a bad credit score makes it more likely you’ll be offered a rate above 30%.

If you haven’t checked your credit scores lately, see if your credit card company or bank offers it as a free service. If they’re lower than expected, visit AnnualCreditReport.com to request your free credit reports and dispute any errors.

Bad credit lenders also pay extra attention to how much you earn, how long you’ve been employed and how much debt you already have. Because a lender will want to confirm you have the cash flow to make loan payments, it may ask for additional financial documents for approval, including pay stubs, W-2s, and tax returns to verify your income.

2. Compare bad credit lenders

The terms for bad credit loans vary widely among lenders. Apply with at least three lenders and compare their rates and fees to get the best idea of what’s available.

If you have a relationship with a community bank or credit union, see if it offers rate discounts or fee reductions for existing customers — you may have an easier time qualifying with a lender you already have a financial relationship with.

When you’re comparing options, check each lender’s website or ask for information about:

• Minimum credit scores
• Loan amount
• Repayment terms
• Fees
• Collateral

3. Apply for prequalification

Prequalifying for a personal loan allows you to gauge your eligibility odds and estimated rates with no commitment. This process should only involve a soft credit pull, which doesn’t affect your credit score.

It’s a free tool offered by most lenders and can give you an idea of the rates you can expect based on your credit history. A prequalified offer is not a firm guarantee — your rate may change after the lender reviews your full application.

If you can’t get prequalified for the amount you need, check to see if the lender allows you to add a cosigner or co-borrower to improve your eligibility.

When you make your final lender choice, you’ll officially apply for a personal loan. This is when the lender performs a hard credit check. A hard pull will temporarily knock your credit score down a few points, but the impact is usually offset by making timely loan payments.

4. Conduct a financial wellness check

During repayment, review your budget and financial goals to avoid future bad credit loans. If you make your loan payments on time and in full each month, your credit score should slowly creep up. Once you’re out of bad-credit territory, you may qualify for a lower APR through a personal loan refinance — the difference between bad credit and fair credit could shave 7 to 10 percentage points off your rate.

Watch your budget, avoid running up large credit card balances or pick up a side hustle to add money to your emergency savings so you can avoid debt in the future.

While a bad credit loan may help you consolidate debts and improve your credit score, you may also want to seek credit counseling to help you build better money habits and avoid future financial trouble.

Alternatives to bad credit personal loans

When you have bad credit, a personal loan can be quite costly and inflexible. And if you’re already struggling financially, it’s likely to strain your budget further. That’s why it’s best to explore other solutions first.

There are a number of alternatives to choose to avoid needing a bad-credit personal loan. These are three common options, but taking out a HELOC or borrowing money from friends and family could also meet your needs.

• Credit cards: Although they have high (and variable) interest rates, credit cards can be a useful tool if you manage payments responsibly. Not only will on-time payments improve your credit score, but you’ll have flexible access to funds as you need them. However, if you can’t pay the balance off each month, they can tank your credit scores quickly.
• BNPL loans: A buy-now, pay-later (BNPL) loan lets you split a large purchase into a few smaller chunks. They are typically offered by online retailers for bigger purchases, and many don’t require a credit check.
• Payday Alternative Loan (PAL): Check to see if your local credit union offers Payday Alternative Loans — while you will have to undergo a credit check, eligibility requirements are less stringent than on personal loans. PALs offer repayment terms of up to 12 months and amounts up to $2,000, and rates are capped at 28%.

Bottom line

Getting a personal loan with bad credit should be part of a financial plan focused on improving your credit in the future. However, if you’re in an urgent cash crunch, they may provide much-needed money to pay for an unexpected expense.

Compare lenders to find the one that offers you the best deal. While you may not qualify for the most competitive rates, you can still explore options that fit your budget.

Frequently asked questions

• Can you get a $2,000 loan with bad credit?

  Yes, some of the best lenders for bad credit loans include Upgrade, Avant, Upstart, Best Egg, OneMain Financial and LendingPoint, all of which offer loans of $2,000 or below. A small personal loan will be easier to qualify for with bad credit than a large loan amount.

• Can you apply for a loan with a 500 credit score?

  You can apply for a loan with a 500 credit score, but your borrowing options are limited. Most lenders (even those that work with bad credit borrowers) require a minimum score closer to 580.

• What is the lowest credit score for getting a personal loan?

  The minimum credit score requirement varies by lender. Some require a score of at least 600, while others will lend to someone with a 300 credit score. However, most require a score of 580 or better. You can find personal loan options with bad credit, but be prepared to do more research and receive higher rates.

• What’s the easiest loan to get with bad credit?

  Payday loans are among the easiest loans to get approved for with bad credit — but should only be considered as a last resort. This form of financing can be predatory, with rates over 400 percent and full repayment due in just two weeks. Although personal loans for borrowers with bad credit have a few more hoops to jump through, they are a safer option when compared to payday loans.

• Is it a credit card or a personal loan better with bad credit?

  If you’re looking for a short-term cash influx for a particular need — for example, to cover an urgent large expense — a personal loan can offer you just that. But if you only need $500 or less, or if you’re looking to finance ongoing purchases, a credit card for bad credit is probably a better choice as it offers more flexibility with repayment. Plus, you can avoid fees and interest charges altogether with the right card if you pay off your balance in full each month.