It’s not uncommon for those with less-than-stellar credit to have a hard time getting approved for a loan. Fortunately, loans specifically geared toward borrowers with bad credit are available through online lenders, select banks and credit unions.

Not every loan is made equal, and some may be a better fit for your finances than others, so it’s vital to understand how they work before applying.

Online lenders

Several online lenders offer bad credit personal loans. The application process is generally streamlined, and you could get a lending decision in minutes. If approved, some lenders also offer same- or next-day funding.

You can also use an online lending network to view and compare offers from several lenders with a single application. Generally, you can see quotes without affecting your credit. Some online lenders also offer prequalification tools on their websites that won’t hurt your credit score.

But be careful: Interest rates are high if you have bad credit since you pose an elevated risk to the lender. You should also consider common fees — like loan origination fees — which can add to the cost of your loan.

Who this is best for: People who prefer to get a loan without having to visit a local branch.


  • Streamlined application process and fast lending decision.
  • Same or next-day funding available.


  • Steep borrowing costs.
  • Potentially high fees.

Bank or credit union

Some banks will consider people with bad credit, but because most lending decisions are based solely on your creditworthiness and income, it can be difficult to get approved. If you are approved, a lower score means you will face high interest rates.

Credit unions tend to be a bit more lenient than banks because they are member-focused. Federal credit unions also offer payday alternative loans, which cap out at 18 percent and are designed for borrowers with bad credit.

Who this is best for: Banks or credit unions are ideal for borrowers who already have an account.


  • Longer wait times for approvals.
  • Established members could get approved with lower credit scores.


  • Stringent qualification criteria.
  • Higher APRs than online lenders.

Pay advance apps

Pay advance apps are designed to help you access the money you’ve already earned through work. Because of this, you will need to have a steady source of income with regular hours. The more predictable your paycheck is, the more likely you will be to qualify for an advance.

Because these are not loans, there is no interest. However, some apps may require a fee or an optional tip. But while the fees may not seem high, a fee of $15 for a $500 advance is equivalent to an APR of nearly 36 percent. If you borrow for only a week, it means an equivalent APR in the hundreds.

Another factor to keep in mind: you will be drawing from your future income. This means a lower amount on your actual payday, which could make future bills harder to pay.

Who this is best for: People who have steady paychecks and only need a quick boost to their bank account.


  • Quick access to your own income.
  • Some apps offer optional tips and no fees.


  • May have a monthly membership fee.
  • Funds taken from your future paycheck.

Payday lenders

Payday lenders offer small short-term loans of up to $500. Even if you have bad credit, these loan products are easy to get approved for, but there is a significant drawback. You’ll pay a hefty interest rate, often up to 400 percent, and only have a short window to repay what you owe.

Many borrowers cannot pay back the loan by the due date, which is typically your next payday. Unfortunately, this leads to even more fees and a perpetual high-interest debt cycle that’s practically impossible to escape. Despite their convenience, these loans should only be used as a last resort.

Who this is best for: Borrowers who have exhausted all other options.


  • No credit check required.
  • Same-day funding available.


  • Excessive APRs and steep fees.
  • Short repayment period.

Title lenders

Title lenders also cater to borrowers with bad credit scores. Car title loans are installment loans that are relatively easy to qualify for. You’ll make equal monthly payments over a set period — up to six months in most cases. You could also get a slightly lower interest rate than with a payday loan.

Still, these loans are risky since they use your vehicle as collateral. If you fall behind on your payments, your car could be repossessed by your lender.

Who this is best for: People who have the means to make timely loan payments.


  • More favorable interest rate than payday loans.
  • Easy to qualify for with bad credit.


  • Requires collateral to get approved.
  • Collateral is at risk for seizure.

Bottom line

Bad credit loans can help you get out of a financial bind if you can’t secure funding from a traditional bank. They are often more costly than other personal loans, so borrow with caution.

Familiarize yourself with each option along with the benefits and drawbacks it offers, and get quotes from at least three lenders to find the most competitive loan offer. Depending on the loan terms, you could be better off cutting expenses to free up funds, applying for a credit card or finding other alternatives.