6 best bad credit loans of September 2022

A bad credit loan is a fixed-rate personal loan that you repay in equal monthly payments. Learn how these loans work and where to find them. (iStock)

Bad credit can make it harder to get a personal loan. And you’ll almost certainly pay more for it than someone with an excellent credit score would. 

Still, if you need cash urgently, a personal loan can be a good idea for someone with bad credit because it’s likely to cost less than other options you might consider, like a payday loan or title loan. And repaying your personal loan could actually help improve your credit, since payment history directly affects credit scores.

Here’s what you need to know about personal loans for bad credit, where to find them, and how they work.

Visit Credible to see your prequalified personal loan rates from various lenders, all in one place.

• What is a bad credit personal loan?
• Where to get bad credit loans
• Personal loan lenders for bad credit borrowers
• How much will a personal loan for bad credit cost?
• Pros and cons of unsecured personal loans for bad credit
• How to compare bad credit personal loans and lenders
• How can you get a bad credit personal loan?
• Working on your credit to get a better personal loan deal

What is a bad credit personal loan?

A bad credit personal loan is a type of loan offered to people with poor credit scores that is paid back in equal monthly payments. Like all personal loans, bad credit loans are fixed-rate loans available from a wide variety of lenders that you can use for things like unexpected expenses, home repairs, or to consolidate credit card debt. It might have higher rates than other loans on the market, but it can still be a valuable financial tool.

Personal loans are usually unsecured, meaning you don’t risk losing your home or car when you take out a personal loan. Secured personal loans are also available, and they use collateral to secure the loan, such as a savings account or a vehicle. Because they’re secured, these loans may have lower annual percentage rates or allow larger loan amounts. But if you aren’t able to repay the loan, you risk losing your collateral.

What’s a bad credit score?

Your credit score can range from 300 to 850, with higher scores being better. Good credit generally refers to a score of 670 or higher, with scores above 750 being excellent. A bad credit score is one of around 579 or below.

When determining your credit score, credit-ratings agencies look at:

• How reliable you are in paying bills on time
• Your total debt
• How many financial accounts you have and what type
• How long your accounts have been open
• Applications for new loans
• Any bankruptcies, foreclosures, or debt sent to collections

Why is a credit score important?

The interest rate and loan terms you’re offered generally depend on your credit score — the better your score, the better the interest rate you’ll be able to get. Some lenders set a limit on the minimum credit score a person can have and be approved for a loan. That’s because lenders use credit scores to judge how likely it is that someone will pay back their loan.

But you’re not out of luck with a bad credit score. Plenty of bad credit personal loans on the market are geared toward people with poor credit scores.

Where to get bad credit loans

If you have bad credit, you’ll have fewer options when it comes to personal loans. But you can find them with a little work. Some personal loan lenders have minimum credit score requirements, but others are more flexible and work with people who have bad credit. Some lenders may even consider nontraditional evidence that you’ll be able to pay back your loan, such as a history of on-time rent or utility bill payments.

Keep in mind, though, that when you find a company that will offer you a loan, you won’t receive the best interest rates. Lenders set rates based heavily on your credit score, and borrowers with poor credit will likely be offered significantly higher rates. This will increase your monthly payments and the amount you’ll spend on interest over the life of your loan. 

You can search for a bad credit loan at one of the following institutions.

Online lenders

A number of companies offer personal loans completely online, with no brick-and-mortar branch network. You can apply for the loan over the internet and receive your loan funds directly into your bank account in a few days. In many cases, you’ll never need to speak with anyone directly. But most online lenders offer support by phone if needed. 

Online lenders can be a convenient and quick way to borrow money, especially if you’re tech-savvy. You may be able to apply and receive a quote within a few minutes, day or night. 

Online lenders may also offer lower rates, since they don’t have to cover the costs of physical locations. Some online lenders also specialize in bad credit loans. However, getting customer service over the phone or by email may be more challenging than working with a local lender.

Credible makes it easy to compare personal loan rates from various lenders, and it won’t affect your credit score.

Banks and credit unions

Banks and credit unions are financial institutions that collect deposits and offer a wide range of financial products, often using a network of physical branches. Some may offer personal loans, as well. 

Banks and credit unions have the advantage of in-person locations, where you can meet with a loan officer to talk over your options. But these institutions may only offer personal loans to existing customers with checking or savings accounts with them. It may also be harder to find a bank or credit union that offers bad credit loans.

Personal loan lenders for bad credit borrowers

It’s safe to say that most lenders prefer borrowers with higher credit scores because these borrowers are more likely to repay their loans as agreed. To ensure they attract these borrowers, some personal loan lenders set their minimum credit score requirements fairly high. Or, they may have minimum loan amounts that far exceed what you need.

Whether you’re looking for a personal loan for debt consolidation, to cover an unexpected expense, or to make a big-ticket purchase, the following six Credible partner lenders offer loans to people with credit scores that fall in the poor credit range — a FICO Score below 580.

Avant

With a very low minimum score requirement, Avant may be a good choice for many borrowers with poor credit.

• Minimum credit score: 550
• Loan term: 2 to 5 years
• Loan amount: $2,000 to $35,000
• Good for: Borrowers with significant credit issues

LendingPoint

Once you submit your application, LendingPoint will give you a loan decision in seconds.

• Minimum credit score: 580
• Loan term: 2 to 4 years
• Loan amount: $2,000 to $36,500
• Good for: Borrowers who need a quick loan decision

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OneMain Financial

With no set minimum credit score required, OneMain could be a good option if you’re looking to establish a credit history.

• Minimum credit score: None
• Loan term: 2 to 5 years
• Loan amount: $1,500 to $20,000
• Good for: Borrowers with poor or no credit

Universal Credit

Universal Credit offers personal loans for a variety of uses, and the lender can typically fund your loan within one day of approval.

• Minimum credit score: 560
• Loan term: 3 to 5 years
• Loan amount: $1,000 to $50,000
• Good for: Borrowers who don’t need a long repayment term

Upgrade

With a minimum borrowing amount of $1,000, people who need a relatively small loan may choose Upgrade.

• Minimum credit score: 560
• Loan term: 2 to 6 years
• Loan amount: $1,000 to $50,000
• Good for: Borrowers who need a small loan amount

Upstart

When making loan decisions, Upstart looks at your education and job history in addition to your credit score.

• Minimum credit score: 580
• Loan term: 3 to 5 years
• Loan amount: $1,000 to $50,000
• Good for: Borrowers with a nontraditional credit history

The following lender isn’t a Credible partner, so you won’t be able to easily compare your rates with them on the Credible platform. But this lender may also be worth considering if you’re looking for a personal loan with bad credit.

Peerform

Peerform is a marketplace lending platform, and it could be a good option if you meet debt-to-income ratio requirements and have at least one open bank account.

• Minimum credit score: 600
• Loan term: 3 or 5 years
• Loan amount: $4,000 to $25,000
• Good for: People with a solid income

Methodology

Credible evaluated the best personal loan lenders for bad credit based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, and fees. Credible’s team of experts gathered information from each lender’s website, customer service department, and via email support. Each data point was verified to make sure it was up to date.

How much will a personal loan for bad credit cost?

Lenders make money on personal loans through the interest rates and fees they charge. The best personal loans for people with good or excellent credit will have low interest rates and no fees. Personal loans for bad credit will typically have much higher interest rates and can have significant fees. 

Bad credit personal loan rates

Most personal loan lenders will quote a range of APRs for their loans, with high-credit-score borrowers qualifying for the lowest rates and those on the lower end of the credit spectrum getting the higher rates. These different rates can translate into wildly different costs over the life of the loan. 

Here’s an example of how much your interest rate can affect your total loan costs. Let’s say you took out a $15,000 loan with a repayment term of five years: 

Good credit personal loan

• APR: 14%
• Monthly payment: $349
• Total interest charges: $5,941
• Total repayment amount: $20,941

Bad credit personal loan

• APR: 27%
• Monthly payment: $458
• Total interest charges: $12,482
• Total repayment amount: $27,481

Even though they’re borrowing the same amount and have the same amount of time to repay the loan, the person with poor credit will pay more than twice the total interest than the one with good credit will pay.

Bad credit personal loan fees

Many personal loans come with fees, though some lenders advertise that they don’t charge them. Some lenders will waive some fees for borrowers with good credit.

The most common personal loan fees you’ll see include:

• Application fee — This is a fee a lender charges to apply for a loan, regardless of whether or not you’re approved.
• Late payment fee — Lenders assess this fee if you make a monthly payment past the deadline and any grace period.
• Origination fee — Lenders generally charge an origination fee as a percentage of the loan amount, as much as 8% or more. It’s often deducted from the total loan funds you receive.
• Prepayment penalty — This is a fee that lenders sometimes charge for paying off your loan early or paying more than the standard payment.

Pros and cons of unsecured personal loans for bad credit

Just like any financial product, personal loans come with advantages and disadvantages. This is especially true for personal loans for bad credit. As you’re shopping around for a personal loan, it's important to weigh the costs and benefits before committing to a loan.

Pros of personal loans for bad credit

• Single, fixed monthly payment — Personal loans typically have fixed interest rates, meaning your monthly payment will remain the same for as long as you have the loan. You can also use a personal loan to pay off credit cards and other high-interest debt, leaving you with a single payment.
• Lower interest rates — When compared with credit cards, payday loans, or some other loans you might consider, a personal loan often has a lower interest rate.
• Lower risk — Unsecured personal loans don’t put your home or other collateral at risk if you have trouble making payments. Other loans, like home equity loans or a home equity line of credit, do come with the risk of foreclosure if you fall behind on your payments.

Cons of personal loans for bad credit

• Hard to qualify for — It can be harder to find a lender who will offer a personal loan to someone with bad credit. Fewer options can mean higher costs.
• Higher interest costs — Personal loans tend to have higher interest rates than secured loans, like home equity loans or HELOCs. Plus, you’ll pay even higher rates if you have bad credit.
• High fees — Personal loans for bad credit tend to come with higher fees than loans for people with good credit. This can eat into the amount of money you actually receive on your loan.

How to compare bad credit personal loans and lenders

Different lenders can offer very different loan terms, and you might even get different offers from the same lender. When comparing personal loan offers, be sure to keep these points in mind:

• APR — Also known as the annual percentage rate, this number includes the interest rate and any fees charged on the loan. The APR gives you a better idea of just how much a loan costs. Using it, rather than the interest rate, makes it easier to do an apples-to-apples comparison of two different loans.
• Fees — Pay close attention to see if the lender charges an origination fee, which is often deducted from the total loan amount you receive. Also ask about other fees, like late charges.
• Repayment terms — These can be as short as one year and as long as 12. Longer terms mean smaller monthly payments, but you’ll pay more interest long term.

How can you get a bad credit personal loan?

If you’ve weighed the options and think a personal loan is right for you, here’s how to get one:

1. Check your credit score. Knowing your score ahead of time can help you understand the costs you’re likely to face and give you time to correct any errors on your credit report before applying for a new loan. Under the law, you’re owed a free copy of your credit report every year from each of the major credit bureaus. You can use AnnualCreditReport.com to get a copy of your reports.
2. Shop around. Many lenders have basic information on their websites about the rates and terms they offer and who may qualify.
3. Prequalify. When you’ve found a few lenders that might be a good fit, go ahead and request a rate quote. You’ll give the lender a little bit of information about yourself, including your Social Security number. Most lenders will allow you to prequalify and check the rates you’d be offered using only a soft pull on your credit, meaning your credit score won’t be affected.
4. Apply. Once you’ve found the quote that works best for you, it’s time to formally apply for the loan. You’ll need to submit more information to the lender, which they’ll use to make a final decision on your loan.
5. Accept your loan. If you’re approved for the loan, you may be able to access the money within a day or two. The money can often be deposited directly into your bank account.

If you’re ready to apply for a personal loan, visit Credible to quickly and easily compare personal loan rates.

Working on your credit to get a better personal loan deal

A good credit score can make it easier to get a personal loan with a good rate and terms. Improving your score before applying for a personal loan could save you money in the long run.

Start by requesting your credit report, and then scour it to make sure all the information is accurate. Sometimes, incorrect account information can be listed on your report, drawing down your score. You can contest incorrect information, and the credit bureau will need to investigate the matter. 

Other strategies for improving your credit score include:

• Paying down credit card debt
• Paying all your bills on time, every time
• Avoiding taking on new debt

Prequalifying for a personal loan can help you get a feel for what interest rate you qualify for and how big a loan you’re likely to get. If you’re denied a loan, the lender may be able to give you areas of your finances you can improve before applying again.