Americans like personal loans: personal loan originations grew faster than any other form of credit from 2017 to 2019. These loans are popular for debt consolidation, medical costs, large purchases, vacations, and other uses. If you want to get a personal loan with bad credit, though, your options will be limited.
Let’s face it, a credit score between 300 and 579 is bad. It is difficult to find a lender who will give you a personal loan if your credit score is at this level. If you do find a loan, you may find yourself paying very high interest rates and substantial fees. You may find yourself dealing with lenders that are not entirely reputable.
You may be tempted to try payday loans, title loans, or other forms of “courtesy loans“. These loans don’t require a credit check, but they are almost never a good option. They carry devastating interest rates, often higher than 300% annually. Fees are often high.
Don’t give up, though. It is possible to get a personal loan with bad credit. Some lenders do not have a minimum credit score, though you may have to prove that you’re employed and you have enough income to pay the loan. You won’t get the best terms, but they will be better than what you’d get from payday lenders.
What to Expect
Looking for a personal loan with bad credit is not going to be a picnic, but you probably knew that already. Here’s what’s in store.
- Expect to be turned down. It is not easy to find a lender that makes personal loans to borrowers with bad credit. Some of your applications are likely to be rejected.
- Expect to pay. Personal loans are expensive for borrowers with bad credit. Interest rates range up to 35%, and you may also pay a substantial origination fee.
- You may deal with sketchy lenders. The bad credit loan marketplace attracts vultures who prey on desperate borrowers. Always look for independent reviews of a lender’s business record.
None of that is something you want to face, but that’s the reality of bad credit. Preparation can make things easier.
How to Prepare
Getting a personal loan with bad credit will be easier if you consider these factors.
- Why do you need the money? You’ll be paying a very high interest rate. Unless it’s essential, you might be better off not borrowing. Using a personal loan for debt consolidation is not worth it if the interest on your loan is higher than the interest on the debts you’re consolidating.
- What’s your credit score? Always check. Remember that your lender will use a FICO score and your free credit score provider will probably use VantageScore. They can be different.
- What’s in your credit report? Knowing where you stand is a good start. Get your credit reports and review them carefully. Check our guide to understanding your credit report.
- Are there errors on your credit report? Errors can harm credit scores. If entries on your credit report seem suspicious, use the dispute process to challenge the errors.
- Would credit repair help? The credit repair industry has earned a shaky reputation. There are still companies that are legit and may be able to help you boost your score. Start by understanding the credit repair process and look into legitimate credit repair companies.
- What do you have going for you? Do you have a steady job with a decent income? Any assets? Have you made your rent and utility payments on time? Some lenders will consider these items.
- What are your options? Make a list of lenders that might consider your application. The possibilities we list below will give you a start.
- Plan your applications. File all your applications within a 15-day period. Credit bureaus will see that you are shopping for a deal and will record only one hard inquiry. That will help you avoid hurting your score.
Now that we’ve reviewed the process, let’s look at some of the best lenders you can consider.
Best Personal Loans for Bad Credit
It’s not easy to get a personal loan with bad credit. You’ll have to try several lenders, and there’s no guarantee that any will approve your application.
Your Credit Union or Bank
Many borrowers overlook this possibility. If you’re a regular customer at a local credit union or bank you may be able to get a loan even with bad credit. They have your financial information and they are in a position to assess your cash flow. You can often have a face-to-face conversation with someone who can make a decision.
Some local banks and credit unions have loan products specifically designed to help customers avoid using payday loans. It’s always worth asking.
Your credit score will close you out of most online lending options, but there are still a few possibilities.
Prequalify for a Personal Loan
Check your personal loan rates by answering a few questions. It only takes two minutes and has no impact on your credit score.
OneMain Financial makes personal loans of $20,000 and below. Instead of a credit check, they use an “ability to pay evaluation” which considers income, employment history, and other factors.
It’s also worth checking your area for local and regional lenders who are willing to work with borrowers who have bad credit.
Loan Matching Services for Bad Credit
Loan matching services do not lend money. They are brokers that pass your details on to multiple lenders to see what offers you can get. There are a number of loan matching services that serve borrowers with bad credit.
Most of these companies have online complaints, ranging from reports of numerous calls and emails from lenders to customer service issues to claims that personal information was not properly secured. Check the service carefully and be alert for signs of trouble.
Some loan matching services to consider:
Bankrate can help you match with lenders whose rates are no greater than 35.99% APR* with terms from 6 to 84 months.
PersonalLoans.com is both a loan matching company and a peer-to-peer lending platform. There’s no stated minimum credit score.
AmOne will lend as much as $50,000. Interest rates range from 3.49% to 34.99%*. AmOne says they will lend to borrowers with any credit score.
LendingClub used to be a peer-to-peer loan service. It is now a loan matching service. Interest rates may reach 35.89%*, with origination fees up to 6%. The maximum loan is $40,000. Their website does not list a minimum credit score.
CashUSA does not have a minimum credit score. Borrowers must earn a minimum of $1000/month post-tax and have an active checking account. Loans are up to $10,000, rates are up to 35.99*%.
BadCreditLoans.com handles loans up to to $10,000. Rates are up to 35.99%*. They do not list a minimum credit score but they require evidence of a steady income.
Monevo claims to have loans available for borrowers with any credit score. They will handle loans up to $100,000. Rates can reach 35.99%*.
These services specialize in bad credit loans. They will still have other criteria, and you cannot be certain that they will approve your application. They are still a good place to start!
What to Do Next
Hopefully, that list will help you solve your immediate problem and find a personal loan for bad credit. Once you’re past that hurdle you’ll probably want to consider another challenge: improving your credit so you have more options next time you need to borrow.
That may sound like an insurmountable problem, but part of the solution is right in front of you. Start by making the payments on your new personal loan on time, every time. That will move your score in the right direction.
That’s step one. For other practical ways to improve your credit, check out our guide on how to rebuild credit.
Personal loans for bad credit are not easy to get. It will take effort, it will be expensive, and you may deal with lenders you’d rather avoid. Those are the penalties we pay for having bad credit, and there’s no way to get around them. You may still be able to get the loan you need, and the experience can motivate you to change your credit for the better!