The 7 Best Loans for Bad Credit in 2019
These are some lenders to consider if you have a poor score
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There are many reasons one may need to borrow money, but if you have bad credit, it can be a serious challenge. Because fixing your credit score can take years, you may be interested in finding a lender that accepts borrowers with not-so-great credit. Fortunately, there are plenty of options to consider.
Follow along to learn about how your credit works and to find the best auto loan for bad credit, the best installment loan for bad credit, and other important loan categories that may fit your financial needs.
What it means to have bad credit
Whenever you use any type of credit account, the activity on that account is reported to at least one of the three major credit bureaus: Equifax, Experian, and TransUnion. These businesses track and store about ten years' worth of your credit account details in their massive consumer credit information databases.
If you always keep your credit card balances low, pay your credit card and loan bills on time every month, and make at least the minimum payment, you are helping to build your credit. If you carry large revolving debt balances, miss payment due dates, and ignore your accounts, your credit score will drop quickly.
All of this credit activity goes onto your credit report and is used to calculate your credit score, a number between 300 and 850 that tells lenders how likely you are to pay back your loans. A credit score below 580 is considered “poor” according to Experian. The most popular credit score model is the FICO score, though VantageScore offers an increasingly popular alternative.
Read on for a list of lenders to consider if you need a loan and have a poor credit score.
Sometimes you are in a tight spot and need a little cash to get you through. Whether it is a car repair, broken-down furnace, or something else, an installment loan might be the best choice. Unlike a credit card, installment loans don’t allow you to increase the balance in the future, and instead set you on a clear payoff schedule.
With Avant, you can borrow amounts ranging from $2,000 to $35,000. (Minimum loan amounts vary by state.) Apply online and get your funds as soon as the next business day in some cases. Loans are available with 24-month to 60-month terms, and APRs range from 9.95% to 35.99%. On top of the APR, there are administrative fees up to 4.75% per loan.*
While the top interest rates here are far from the prime rate, they are quite good for unsecured loans with bad credit. Some payday lenders charge well over 400% APR, so compared to that, even 35.99% APR is a bargain. WebBank originates the loans and Avant services them, so any customer service or servicing questions will go through Avant.
*Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.
Traditional payday loans charge high interest rates. For example, Ohio has some of the most expensive rates in the nation, typically charging 591% APR. But no matter where you live, your interest rate with Earnin is zero.
Earnin is an app-based payday lender with no fees or interest rates. You can borrow up to $100 per day or $500 per pay period. It is that simple. There’s no catch and no fine print to worry about. If Earnin works with your employer (and it works with most large employers) then you can get yourself up and running quickly with little to no cost.
If you do decide Earnin is worth it, you can pay what you think is fair for the service. It is refreshing to see a new take on payday loans, an industry that is best known for high prices and predatory practices.
The personal loan from Marcus by Goldman Sachs is the best debt consolidation loan for bad credit available today. Marcus is a consumer banking and lending arm operated by Goldman with excellent rates, no fees, and loans available for people with credit scores as low as 660 on the FICO 9 and 580 on the VantageScore 3.0 scales.
The online application takes just a few minutes to complete, and you can get your interest rate instantly. Rates currently range from 5.99% to 28.99% APR (5.99% to 24.99% for NY residents) depending on your credit and market interest rates. But that interest rate is all you will ever pay. Marcus makes it clear: No fees ever. No signup fees, no prepayment fees, and no late fees.
If you want to borrow and can get approved for a personal loan from Goldman Sachs, you will likely get the lowest-cost loan available for your borrowing needs.
Want to learn more? Check out our full review of Marcus by Goldman Sachs.
New American Funding is a large mortgage lender that offers FHA loans, VA loans, and conventional, ARM, and jumbo mortgage loans. For FHA loans, New American Funding offers loans to borrowers with credit scores as low as 580. For other loans, you need at least a 620 to qualify.
This mortgage lender started as a regional lender in Southern California and has since grown to serve 48 states and Washington D.C. While the application is not quite as quick and easy as some online-focused lenders, it is highly rated by customers and offers a large array of loan options.
Keep in mind that with mortgages, as with other kinds of borrowing, those with lower credit scores tend to pay higher interest rates. For a home loan, that can easily cost you tens of thousands of dollars over 30 years, so if you can increase your credit score you may be able to save down the road with a refinance.
Capital One is a great bank for checking and savings accounts, and their auto loans aren't too shabby either. In fact, Capital One may be your best bet for an auto loan with bad credit. This bank takes applicants with credit scores as low as 500, so even if you were rejected elsewhere, Capital One may still be an option.
Capital One auto loans are available from $4,000 to $40,000 with 36- to 72-month terms. You can qualify for a loan in the lower 48 states and with the Capital One Auto Navigator, you can pre-qualify for financing with no impact on your credit before you head to the dealership.
Their application process is simple and can be completed online or on your phone in just a few minutes. If credit is holding you back from getting the car you need, consider Capital One for your auto loan.
Prosper is a peer-to-peer marketplace. This means your loan is not funded directly by Prosper, but by investors who choose your loan on the Prosper platform. When you pay each month, the investors get paid back little by little and Prosper takes a small fee from the payment each month for putting it all together. Loans can be funded in as little as three to five days.
Prosper borrowers can borrow $2,000 to $40,000 for 3-year or 5-year terms. Longer terms charge higher interest but offer lower monthly payments. This is an installment loan with a fixed interest rate and monthly payment for the entire 36-month or 60-month term, and there are no prepayment penalties. Interest rates range from 6.95% to 35.99% APR.
Loans are available to borrowers with credit scores of 640 and above, though the average borrower has a score above 700. Depending on your credit, you will pay an origination fee from 2.41% to 5%, so keep an eye out for that. You’ll also pay 5% or $15 (whichever is greater) for late payments.
Lending Club is the largest and oldest of the big online lending marketplaces. While it's had a bit of bad publicity in the last few years, it remains one of the most trusted peer-to-peer lending marketplaces out there.
To borrow with Lending Club, you’ll need a credit score of 660 or above. Interest rates range from 6.95% to 35.89% APR depending on your credit, and loans are available from $1,000 to $40,000 and come in 3-year or 5-year terms. It takes 14 days to get funded on Lending Club, which is a bit longer than Prosper. Origination fees are also higher at 1% to 6% of the loan amount.
Remember, when you get a loan from a peer-to-peer marketplace and don’t pay it back, you are not missing a payment to a large bank or financial institution. Investors include regular individuals who put their investments and retirement accounts on the Lending Club platform. It is a modern and unique take on banking that flips the model and takes big banks out of the equation.