Personal loans are a popular way to get money: between 2017 and 2019 they were America’s fastest-growing form of credit, though borrowing slowed during the pandemic. Personal loans are not tied to any specific use, but they are often used for debt consolidation, medical bills, major purchases, and even vacations. If you’re looking for a personal loan with very poor credit, though, your options will be limited.
Let’s face it, a credit score between 300 and 449 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.
⚠️ Many people with very poor credit fall back on “courtesy loans“: payday loans, title loans, and other loans that don’t require a credit check. This can be a mistake. These loans carry exorbitant interest rates, often above 300% on an annual basis. They may also have hidden fees and other risks.
You may be able to find other options, especially if you are working and have an adequate income.
What to Expect
You probably knew this already, but looking for a personal loan with very poor credit is not going to be fun. Here’s a look at what’s ahead.
- Rejection. It is hard to find a lender willing to make a personal loan to a borrower with very poor credit. Expect to have applications turned down.
- Expense. If you are approved for a loan, you can expect to pay a premium price for it. The price shouldn’t reach the level of a payday loan but rates up to 35% are common. You may also face a substantial origination fee.
- Sketchy lenders. Many borrowers with very poor credit are desperate, and plenty of people are ready to take advantage. Getting an offer may be a huge relief, but don’t get carried away. Always look into the lender’s record before closing a deal.
That probably doesn’t sound appealing, but it’s still what you’re likely to face. Let’s look at some ways to get ready for it.
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How to Prepare
It’s one thing to know what to expect, but what will you actually do? Here’s where to start.
- Assess your goals. How badly do you need the money, and do you really need to borrow? High interest rates can change the cost/benefit picture of a loan. For example, high interest rates will usually make a loan for debt consolidation pointless.
- Know your credit score. Remember that if you’re using a free credit score provider you are probably getting a VantageScore. Lenders will usually use a FICO score, which may be different.
- Read your credit report. It may not be fun, but you need to know where you stand. Get your credit reports and read them. Start with our guide to understanding your credit report.
- Dispute any errors. Mistakes on your credit report can hammer your score. Find any entries in your credit report, learn about the dispute process, and challenge the errors.
- Consider credit repair. Credit repair has (and deserves) a dodgy reputation, but some companies are legit and can help you improve your credit. It will take some time and money, and you’ll need to understand the credit repair process before you start.
- Consider your assets. Your credit score is poor, but do you have anything working for you? Do you have a steady job? Own a home or other assets? Do you have a record of making rent and utility payments on time? Have you used the same bank or credit union for some time? Any of these factors could work in your favor.
- Make a list of prospective lenders. We’ll list some possibilities later in this article, but feel free to add others.
- Apply for loans. Keep all of your applications within a 15-day period. That way the credit bureaus will recognize that you are shopping for the best deal and will record only a single hard inquiry. You don’t want to push your score even lower.
That leaves us with the biggest question: where can you get a personal loan with very poor credit.
Where to Get a Personal Loan With Very Poor Credit
There’s no guaranteed source for personal loans for borrowers with very poor credit. You’ll have to look into multiple possibilities and see what they have to offer.
Your Bank or Credit Union
If you’ve been a customer for some time a bank or credit union may be willing to take a chance on you. After all, they know your finances and income better than anyone. Credit unions in particular often have products designed to help members stay away from payday loans.
Banks and credit unions may also be more likely to use alternative data, such as your income, your debt to income ratio, and your record of paying rent and utility bills, in lending decisions. That can help borrowers with poor or very poor credit.
Not many online lenders will offer personal loans to borrowers with very poor credit, but there are a few possibilities.
Get Prequalified for a Personal Loan
Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.
Possible Finance offers loans up to $500 that they advertise as payday loan alternatives. You’ll have multiple months to pay the loan and Possible reports to credit bureaus, allowing you to improve your credit with a relatively small loan. There’s no credit check.
OneMain Financial offers personal loans up to $20,000. There’s no minimum credit score. One Main bases lending decisions on an “ability to pay evaluation” which considers multiple factors.
You may be able to find other lenders, especially local and regional lenders serving your area.
Loan Matching Services
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 poor or very poor credit.
Note that these are not recommendations. 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.
AmOne offers loans up to $50,000 with interest rates from 3.49% to 34.99%*. They claim that loans are available for all credit scores.
LendingClub is a former peer-to-peer loan broker that now functions as a loan matching service. Interest rates range up to 35.89%* and origination fees may reach 6%. Loans are up to $40,000 and no minimum credit score is listed on the website.
CashUSA handles loans up to $10,000 at rates up to 35.99%*. There’s no minimum credit score but you will need to earn at least $1000/month after taxes and have a valid checking account.
BadCreditLoans.com lends up to $10,000 at rates up to 35.99%*. Loan decisions are available in minutes. There’s no minimum credit score but you will need a steady income.
Monevo offers loans up to $100,000 with rates up to 35.99%*. They claim to have options for all credit scores.
All of these services advertise willingness to lend to borrowers with bad credit, but there’s no guarantee that any of them can match you with a willing lender.
Peer-to-peer lending services match borrowers with individual investors who make loans. Most peer-to-peer services advertise minimum credit scores, often in the 580-600 range, but some may handle loans for borrowers with lower scores. There may be income requirements.
PersonalLoans.com is a loan matching company that also maintains a peer-to-peer platform. There’s no stated minimum credit score.
Peer-to-peer lending is not heavily regulated and you’ll have to do some research to know who you’re dealing with.
Your Next Steps
That’s not an extensive list, but it’s enough to give you a reasonable chance of getting a personal loan even with very poor credit.
Once you have a loan you’ll want to start the process of building better credit, so that next time you need to borrow you’ll have more and cheaper options. The first step toward that goal is to make your personal loan payments on time. That’s an important step toward better credit.
For more ideas on improving your credit, try these 8 strategies for rebuilding damaged credit.
Finding a personal loan with very poor credit isn’t easy. You’ll need to work at it, you’ll probably have to pay a very high interest rate and substantial fees, and you may have to deal with lenders that aren’t of the highest caliber. That’s just the reality of very poor credit. Once you’ve finished the immediate task of getting your loan, let that experience motivate you to improve your credit and build more options!