Nearly 13% of Americans have poor credit (a FICO score below 580), according to Experian data. While many lenders will deny your application if you have bad credit, others may not. Lenders that work with people with bad credit often charge higher costs and lend smaller amounts, but these loans give you a chance to rebuild despite making credit mistakes in the past.
Here’s what to look out for when choosing a bad-credit lender, and how to manage a bad-credit loan.
Once you improve your credit with a bad credit loan, refinance the loan to get a better rate.
Best loans for bad credit in July 2024
Methodology
We considered a wide range of features to evaluate the best loans for bad credit. These covered bad-credit specific criteria as well as general lender features, including:
- minimum credit score requirements
- whether secured loans are available
- whether the lender accepts cosigners
- the maximum APR the lender charges
- funding time
- minimum income requirements
- customer experience
- minimum APR
- minimum and maximum loan amounts available
- repayment terms
- fees
- discounts
Data was culled from each lender’s website, customer service, and internal lender and loan data from Credible.com. All data was rigorously fact-checked and is regularly updated.
What are bad-credit loans?
Bad-credit loans refer to loans that are accessible to borrowers with a FICO credit score under 580. (Note that “bad credit” and “poor credit” are synonymous.) Having bad credit indicates to lenders that you present a higher risk of defaulting on a loan. To compensate, bad-credit loans often come with lower loan amounts, higher interest rates, higher fees and shorter repayment periods.
Bad-credit loans include personal loans, payday loans, cash app advances, title loans, pawn shop loans and payday alternative loans.
The annual percentage rate (APR) accounts for both upfront costs and the interest rate. Comparing APRs is a good way to compare costs on loans that charge fees to those that charge interest.
Types of bad-credit loans
Bad-credit loans come in a few different forms. Here are six popular types.
Personal loans
Best for long repayment terms, low monthly payments and loan amounts above $1,000
Personal loans are fixed-rate installment loans that provide you with a lump sum upfront that you repay, plus interest and fees, over a set term. The loans may be for thousands of dollars, and repayment terms typically range from one to seven years. Approval is based on your income, employment and credit history. The best personal loans are transparent in the fees they charge and requirements. For example, many lenders publish their minimum credit score requirement, allowing you to see at a glance if you’re eligible.
Along with payday alternative loans (PALs), personal loans tend to be the best choice if you can qualify, since their APRs top out around 36%, and their interest rates are usually fixed (meaning they won’t increase, unlike credit card interest rates). Plus, loan funds can be available within days, in some cases as soon as the same day you apply.
Bad credit installment loans/emergency loans
Best no-credit-check loans
Similar to traditional personal loans, bad credit installment loans, aka emergency loans, typically have no credit score minimum requirements, but gauge eligibility based on your income and other factors.
These loans can have very high APRs-for instance, some no-credit-check installment loans have a maximum APR of 179%. But since repayment terms can extend to 18 months, and loan amounts are available up to $4,000, these are often a much better choice than payday loans and even cash advances, especially if you need to lower monthly payments or need more time to pay.
Make sure loan payments are reported to credit bureaus in order to improve your credit and be eligible for lower rates in the future.
Payday loans
Not advised
Payday loans are small no-credit-check loans, often up to $500, which are automatically repaid from your next paycheck. Payday lenders tend to charge excessive fees, which has made them illegal in some states. According to Pew research, payday loans in Colorado have the lowest costs at 114% APR, while payday loans in Idaho cost an average 652% APR. For context, even bad-credit installment loans tend to have APRs that top out just under 200%.
Try a payday alternative loan from a credit union before agreeing to a payday loan. Some credit unions let you apply immediately upon joining.
Payday alternative loans (PALs)
Best for credit union members
Due to the predatory nature of many payday loans, the National Credit Union Administration launched payday alternative loans (PALs) for federal credit union members. As the name suggests, PALs offer a more affordable alternative to payday loans. APRs are capped at 28%, and loans are available for up to $2,000 with repayment terms up to 12 months.
Cash advance apps
Best for small, short-term loans
Similar to payday loans, cash advance apps allow you to borrow a small amount without a credit check-typically less than $1,000-until your next paycheck. However, apps may not charge you for the advance unless you want to expedite the funds transfer. Further, many provide ongoing access to cash advances and the ability to gain access to larger amounts over time.
Eligibility is often based solely on your bank account activity, which can be helpful for people with bad credit. Examples of cash advance apps include Dave, Earnin and MoneyLion.
Fees for same-day or instant funding can send cash advance APRs into the triple digits. Cash apps are best if you can wait a few days for money.
Buy now, pay later
Best for short-term financing on retail purchases
Buy now, pay later (BNPL) loans are installment loans for specific retail purchases. Offered by BNPL companies like Klarna, Affirm and Afterpay, they typically allow you to split up purchases into four interest-free payments every two weeks. Many companies offer longer-term financing options that resemble traditional personal loans.
BNPL companies may run a “soft” or “hard” credit check (the latter can affect your credit score), depending on the company, but it may be easier to qualify for BNPL than for a similar-sized loan that provides cash upfront.
How to get a loan with bad credit
If you have bad credit and want to get a loan, start by checking your credit reports. Keep in mind that information such as missed payments and defaults falls off after seven years. If you have any negative marks that will be removed soon, you may want to wait to get a loan.
Improve your credit score fast
Look for opportunities for quick improvements, such as:
- Adding utility bills and rent payments to your credit reports through a service like Experian Boost or Self.
- Becoming an authorized user on the account(s) of friends or family members with good credit. This can increase your credit score by lowering your credit utilization (which contributes up to 30% to your score).
If possible, wait a month to see improvements reflected in your score and reports. Once all is set, start shopping around with bad-credit lenders. Prequalify to get a sense of whether you can get a traditional personal loan and how rates compare to other options.
Where to get a personal loan with bad credit
Each lender has a unique set of eligibility requirements. If you have bad credit, you’ll want to look for lenders that are on the more flexible side. Here are a few examples-all of which report to the credit bureaus:
- OneMain Financial: OneMain Financial prides itself on being a leader in offering credit to “nonprime” customers. It offers personal loans from $1,500 to $20,000, with APRs that top out at 35.99%.
- Upstart: Upstart is a tech-forward company using AI to improve access to credit for all-including those who don’t qualify with traditional lenders. Loans range from $1,000 to $50,000 for APRs up to 35.99%.
- RISE: RISE specializes in lending to borrowers with bad or no credit. It offers loans from $500 to $5,000, tools to help you develop good money habits and credit alerts. However, APRs can run as high as 299%, so compare other options first.
- OppLoans: OppLoans offers loans up to $4,000 with APRs up to 179% and reports payments to the three major credit bureaus.
Pros and cons of loans for bad credit
While bad-credit loans can bridge gaps during tough financial times, they often have a few notable drawbacks. Here’s a closer look at the pros and cons.
Pros
- Access to funds: You can borrow money despite having bad credit.
- Credit score boost: If you pay the loan as agreed and you choose a lender that reports to credit bureaus, it can help you build credit and qualify for better loans in the future.
- Lower monthly payments: Even if you can only qualify for a high APR, a long repayment term could lower your monthly payments and provide the breathing room you need to get back on track.
Cons
- High interest rates: Lenders often charge relatively high interest rates to compensate for the increased risk, especially on loans that don’t check your credit.
- High fees: Lenders may also charge fees to compensate for the risk, such as an origination fee, which is taken out upfront from the loan amount.
- Limited loan amounts: Loan amounts may top out around $5,000 for bad credit lenders, whereas traditional lenders often offer loans up to $50,000.
How to compare loans for bad credit
If you’re on the hunt for a bad-credit personal loan, shop around and compare options to find the best deal. Here are key factors to consider:
- Loan amounts: Check how much money a lender will let you borrow.
- APRs: All personal loan lenders communicate their loan costs as APRs. For fee-only loans, use an APR calculator to translate fees into an APR.
- Fees: Look for the fees a lender charges and how they’ll be charged. For example, origination fees are often deducted from the loan amount upfront, reducing the amount you receive.
- Loan terms: Check the amount of time you’ll have to repay the loan and if it results in a monthly payment you can afford.
- Monthly payment: Perhaps the most important element-make sure you can afford the monthly payment.
- Customer service: Consider the quality and availability of a lender’s customer service team. Check the channels, hours of operation and reviews from past customers.
Are bad-credit loans safe?
Many lenders of bad-credit personal loans are well-established and reputable. However, lenders offering short-term, no-credit-check loans may not be. Payday loans and lenders, along with title loans and pawn shop loans, are best avoided. If you have any doubts about a lender, check the following to ensure they’re legitimate:
- Licensing: Check with your state’s regulatory agency to ensure the lender is currently licensed.
- Better Business Bureau (BBB): Look the lender up with the BBB to see if it has a profile, is accredited and has a good rating.
- Website security: Ensure the site is encrypted. Look for signs like a website URL that starts with “HTTPS” and sometimes has a padlock symbol in the dropdown in the URL bar.
- Contact details: Check the lender’s contact page for a working phone number and legitimate physical address.
- Online reviews: Legitimate lenders tend to have online reviews across many third-party review sites. Check to see if reviews exist and, if so, skim them to look for any red flags.
- Phishing signs: Note any misspellings in a lender’s URL or email address. Emails typically only come from sender addresses that end with the lender’s properly spelled name (@lendername.com).
How to spot a bad-credit loan scam
While many legitimate bad-credit loans exist, there are people out there trying to run loan scams. How can you spot them? A lender asking you for money upfront is one of the biggest red flags. Generally, you should not have to pay anything out of pocket for a personal loan.
Even though many bad-credit personal loans come with origination fees, the amount should be deducted from your loan before you receive it. Beyond that, scammers may try to entice you with a great loan offer in order to steal your personal information. If you come across a loan company you’ve never heard of before, research its legitimacy before filling out any forms.
Alternatives to bad-credit personal loans
If you can’t qualify for a bad-credit personal loan, consider other types of bad-credit loans such as PALs, BNPL loans and app-based cash advances.
- PALs: You’ll need to join a federal credit union, but can then apply to borrow up to $2,000 for up to 12 months, depending on the type of PALs the credit union offers (PAL I or PAL II).
- BNPL: Best if you can pay off a retail purchase over four biweekly interest-free installments. You can download the app, apply in seconds and find out how much you’re prequalified for with different stores.
- Cash advance apps: Can be good for making ends meet between paychecks. You can download a cash advance app, link your bank account and find out how much you can advance. The amount is automatically repaid when you get paid via direct deposit.
FAQ
What is a bad credit score?
A bad credit score is a FICO score under 580 or a VantageScore under 601. It can result from behaviors like missing credit payments, defaulting on credit accounts and having accounts go to collections.
What personal loans are the easiest to get with bad credit?
The easiest personal loans to get with bad credit are emergency loans from lenders like OppLoans and RISE, but if you can qualify for a loan from Upstart or OneMain Financial, you’ll likely get a much better rate. Look for lenders like these that specialize in extending credit to subprime borrowers.
Are personal loans bad for your credit?
Whether a personal loan helps or hurts your credit depends on how you manage it. If you make all your payments on time, a personal loan can strengthen your credit report and improve your score. However, if you miss payments and default, it’ll have the opposite effect.
How much money can you borrow with a bad credit score?
The amount you can borrow depends on factors like the loan type you choose, the lender you choose and your creditworthiness. For example, OneMain Financial offers personal loans up to $20,000, while Dave offers cash advances up to $500.
Can I get a personal loan with no credit check?
Most personal loan lenders conduct a hard credit inquiry, but some will approve borrowers despite bad credit. If you’d rather forgo the credit check altogether, consider cash advance apps or a lender like 60 Month Loans that only runs a soft credit check (even when you apply).
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