When lenders receive applications for personal loans, they typically take your credit score and overall creditworthiness into heavy consideration. Often, they require minimum credit scores to qualify — which can make it difficult for borrowers with poor credit to access these loans. Some lenders, however, offer personal loans for bad credit, meaning you can still qualify for a loan even if you have poor credit.
Unfortunately, those with unpolished credit scores often get saddled with higher interest rates and other less-than-ideal terms when applying for a loan. If you have bad credit, it’s typically difficult to qualify for a loan.
Bad credit loans generally come with fixed rates and are offered by lenders willing to loan you funds despite your limiting credit rating. You can use these types of loans for building credit so you can eventually become eligible for better loan terms and other financial opportunities.
It’s possible to get a personal loan with bad or no credit. However, if you take the time to work on your credit, you could save a lot of money by benefiting from a lower interest rate. If you need a personal loan now, however, consider these tips to finding the best personal loan for bad credit for you:
Personal loans for bad credit can be found at a variety of types of institutions. At LendingTree, you can browse through our personal loan marketplace to compare eligibility requirements, interest rates, terms and loan amounts.
Here are a few different types of lenders that we offer where you can start your search:
Bad credit loans aren’t just limited to traditional, unsecured loans. Here are the types of loans you can get with bad credit.
With a secured loan, you’ll have to offer your lender an asset as collateral, like a car, a home or even a savings account. Because secured loans require valuable collateral, they’re often easier to obtain than unsecured loans and generally offer better rates, since the lender is at less risk.
Best for: Consumers with bad credit who own valuable collateral they can afford to lose should they default on the loan.
What to like: Borrowers with poor credit may qualify for lower interest rates since they’re putting up collateral.
What to watch out for: If you default on a secured loan, your lender may legally confiscate your collateral to recover the money. And if your lender doesn’t recoup the cost of the loan by redeeming your assets, you may be responsible for the difference.
Since unsecured loans don’t require borrowers to offer up collateral, lenders of these types of loans mostly rely on factors such as credit history, income and debt obligations to determine your eligibility. Unlike secured loans, if you default on an unsecured loan, your lender cannot seize your assets.
Best for: Most borrowers could qualify.
What to like: If you’re unable to repay your unsecured loan, your lender cannot seize your assets.
What to watch out for: Because these types of loans don’t require collateral, lenders that offer unsecured loans rely heavily on your creditworthiness when it comes to approval and offers. This means that if you don’t have good or excellent credit, you may have a hard time qualifying or receiving low interest rates. If you default, your credit score is likely to take a major hit.
If your credit score isn’t quite high enough to get you approved by a lender, consider getting the support of a loved one and file for a joint personal loan. This enables you to apply for a personal loan with a second person.
Best for: Borrowers with poor credit who have a supportive family member or friend willing to back their loan request.
What to like: This approach can make it easier for consumers with bad credit to be eligible for a loan, as it lowers the primary borrower’s risk.
What to watch out for: If you’re unable to make payments on this type of loan, not only can your lender attempt to collect from you, they can also try to collect on the loan from your co-borrower. This can also impact both of your and your co-borrower’s credit scores.
Payday loans are considered a more dubious type of loan, with astoundingly high fees and interest rates. These loans are typically less than $500 and are expected to be paid back within two to four weeks. Many people who take out payday loans often have to take out additional loans to pay off the original payday loan, trapping them in a cycle of debt.
Best for: Those who can afford the sky-high fees and can pay the loan back right away — though it’s wise to avoid this type of loan if you can.
What to like: Payday loans don’t require credit checks, and you can often get your money right away.
What to watch out for: These types of loans are often predatory and may charge as much as 400% APR.
Cash advances are small, short-term loans that you can get from your credit card company. In these instances, you can withdraw cash from your credit card from your total balance.
Best for: Those who are in financial emergencies and need money quickly.
What to like: You won’t have to go through a credit check and can receive money fast if you need it.
What to watch out for: You may have to pay a fee, and you’ll pay much higher APRs than you would on typical credit card purchases.
If you have a strong relationship with your bank, you may be able to get what’s known as a bank agreement. This can take the form of a small, short-term loan or even the ability to overdraft on your account (up to a certain amount).
Best for: Consumers who have good histories with their bank.
What to like: If you’re in need of a short-term fix, you can use an already favorable relationship for financial assistance.
What to watch out for: This option may not be offered at all banks.
If you have bad credit, you may be able to cash in on the equity you’ve built into your home using a home equity loan. These loans have fixed rates and are typically paid off between five and 30 years. Like personal loans, with a home equity loan, you’ll be given the money in a lump sum.
Best for: Those who need large sums of money and have equity in their home
What to like: Allows borrowers to take out up to 80% of their home’s value.
What to watch out for: Because you’re using your home as collateral, defaulting on your home equity loan may result in losing your home.
A home equity line of credit (HELOC) works similarly to a credit card; consumers can borrow as much as they need (up to a limit) against their home’s equity and only have to pay back the amount they took out. Unlike home equity loans, HELOCs typically have variable interest rates.
Best for: Borrowers who aren’t sure how much money they need and want to be able to borrow from their home’s equity over a period of time
What to like: Consumers can borrow and pay back as needed, and reuse the line of credit.
What to watch out for: Since interest rates are variable, borrowers may experience highly monthly payments.
If you’re in school or preparing to attend college and have poor credit, you may be able to get student loans for bad credit to help cover expenses. While many lenders don’t allow borrowers to use a personal loan toward education financing, lenders like Upstart do allow for it.
Best for: Those who are pursuing financing for educational purposes
What to like: Some student loan lenders will cover up to the entire cost of your tuition.
What to watch out for: Some lenders have strict or vague forbearance and deferment programs — or none at all — in case you’re unable to repay the loan down the road.
If you have bad credit, your score in most scoring models likely falls somewhere between 300 and 579. Poor credit may be a result of the lack of time or opportunity to build up your credit, financial missteps — such as missing payments or having a high debt-to-income ratio — or perhaps being a victim of a scam or identity theft.
Whatever the reason, lenders often consider your credit score as a signal of your creditworthiness, or how likely you are to pay them back. As a result, poor-credit borrowers often have to pay higher APR rates than those with good or excellent credit.
If you’re looking for a personal loan, here are some of our most recent statistics on what kind of APR you may expect based on your credit score.
The annual percentage rate (APR) is what your financial institution charges you for taking out a loan, but there is a difference between interest rate and APR.
While the APR does include the interest rate you’ll be paying to borrow the funds, it gives you a more comprehensive picture of how much your loan will cost, as it also includes any additional fees. The lower the APR is, the less the loan will cost you over time. Therefore, you may want to choose a lender that can offer you a lower APR.
Your financial institution could charge you several fees for your personal loan in addition to the annual interest rate. Some of these fees could include administrative costs deducted upfront from the amount you’re borrowing, while others could be charged for making a late payment or paying off your loan before the end of its term.
Do your due diligence when deciding on the best lender for your needs. As part of your research, make sure to read online personal loan lender reviews.
Your repayment terms can make a difference in how large or small your monthly loan payments will be. Generally, lenders offer unsecured personal loan repayment terms between 12 to 60 months, but you can also find long-term loans with repayment terms as long as 144 months.
The longer your payment term, the higher your APR rate may be, but you’ll pay in smaller monthly payments. You’ll also pay more in total interest over the life of a long-term loan. If your repayment plan is shorter, however, your APR rates may be lower but your monthly payments will be larger.
While some lending companies only offer two or three different repayment terms, other companies may have more flexible terms to choose from.
Unfortunately, some poor-credit loans really are too good to be true. To avoid being scammed by a shady lender, be on the lookout for the following signs:
If you find out you’ve been scammed, the first step is to contact law enforcement and file a police report. Unfortunately, there may not be much they can do, but you’ll want to document the crime as much as possible.
Once you’ve filed a police report, you should also report the scam to the FTC Internet Crime Complaint Center. By reporting it, you could potentially prevent others from being scammed in the future.
We looked at eight lenders that offered personal loan services with credit scores ranging from 585 to 640 to determine the best lenders for bad credit. By offering a detailed and objective account of each lender’s rates and terms, LendingTree’s goal is to provide you with all the information you need to make a financially sound decision specific to your situation.
Here’s the criteria we assessed to choose the best poor credit lenders: