Best Bad Credit Loans of 2020: Compare Lenders

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Personal loans can help you consolidate debt and fund major purchases without using credit cards. Plus, unsecured loans don’t require that you risk your home or car as collateral the way some other types of loans do. But it’s hard to get approved for a personal loan with bad credit, and you may have already faced challenges when applying for loans.

The good news is that you may be able to qualify, even with a limited credit history or problems in your credit reports. Unfortunately, you have fewer choices with bad credit, and borrowing will be more expensive.

Get quotes from a mixture of online and local lenders, compare offers from at least three of them, and pick the best deal. But only do that for lenders who say they do a “soft pull” or “soft inquiry” of your credit report or that checking offers won’t hurt your credit score.

What it Means to Have Bad Credit

When we say “bad credit,” here, we’re referring to your FICO score. The FICO 8 scoring model classifies scores of 579 and lower as bad credit. If you have slightly better credit, consider looking at personal loans for fair credit—you might have more options and qualify for more favorable terms.

Whenever possible, it’s best to minimize borrowing until your credit improves—but that’s not always an option. If you need to apply for a personal loan, start with the resources below. This list is designed to help you find lenders that:

Are most likely to approve you with bad credit
Typically offer competitive (although not necessarily low) interest rates on personal loans

Based on that criteria, here are our picks for the lenders that offer the best personal loans for people with bad credit.

Best Loans for Bad Credit

Lending Club
OneMain Financial
Avant
Local Banks & Credit Unions

Lending Club

Lending Club is a well-established online lender that makes a large volume of loans. It does not publicly share any minimum credit score requirement, but interest rates for the least creditworthy borrowers can be quite high—as much as 35.89% APR. Plus, you may need to pay an origination fee of 1% to 6% of your loan amount. With three- and five-year repayment options, you can keep monthly payments relatively low.

What We Like

Relatively long history of lending online
Two reasonable repayment periods keep it simple and should result in a payment that works
Fixed interest rate prevents surprises
Borrow as little as $1,000

What We Don't Like

Origination fees that reduce your loan proceeds can leave you with less than you need
Interest rates above 30% make borrowing expensive

Unlike credit cards, personal loans with fixed rates typically have the same payment every month, which helps you manage your budget.

OneMain Financial

OneMain Financial offers a variety of loans, including unsecured personal loans, to borrowers with bad credit. There is no minimum credit score required to apply. Interest rates here are also as high as 35.99%, and there's an origination fee ranging from $30-$150 or 1%-5%, depending on your state. Borrowing minimums and maximums also vary by state but generally range between $1,500 and $20,000.

What We Like

Several repayment terms to choose from
Fixed interest rate prevents payment shocks if rates rise
Same-day funding in some cases

What We Don't Like

In-person visit may be required for verification before funding your loan
Interest rates above 30% make borrowing expensive
Origination fee

Avant

Avant is an online lender that promises quick funding for personal loans. An Avant representative says that there is no minimum credit score requirement and everybody is welcome to apply. However, those with credit scores above 600 are more likely to get approved and may qualify for lower interest rates. Avant may charge an administration fee of 4.75%, and the highest APR is currently 35.99%.

What We Like

Fixed-rate loans for predictable repayment
Customer service available seven days a week by phone, email, and chat
Repayment terms of two to five years
Loans as small as $2,000

What We Don't Like

Not available in all states
At the highest rates, it may be best to avoid borrowing
Origination fee

Local Banks and Credit Unions

In a world of online banking and peer-to-peer (P2P) lending, brick-and-mortar institutions may seem irrelevant. But they’re still helpful, particularly if you have bad credit. The best offers you see advertised online are only available to borrowers with excellent credit. But your local bank or credit union might be eager to serve the community and work with borrowers who have less-than-perfect credit.

Credit unions, as not-for-profit institutions, might be an especially good bet—but don’t rule out small banks. Credit unions are unique, though, because they may offer Payday Alternative Loans (PALs) in addition to personal loans. Depending on your credit rating, those small, short-term loans might be better than anything else available.

Why Go Local?

If you have your checking account with a local institution and you receive regular pay into that account, you might have a better chance of getting approved because lenders can view your transaction history. Plus, while speaking with a loan officer, you might discover additional options you weren’t aware of.

What We Like

In-person discussions can provide tips on how to improve your application
Loan officer review might result in approval where an automated system would deny you
Can provide guidance on avoiding predatory lenders

What We Don't Like

Takes time to visit in person
Application process might be more cumbersome than you’d experience with online lenders
May require credit union membership

Key Takeaways

It’s certainly possible to get a personal loan with a low credit score, but expect to pay relatively high rates. As a result, you end up paying a lot more for whatever you buy with your loan proceeds, so take a moment to learn how those interest costs add up. Compare offers from at least three lenders (as long as those lenders don’t do a hard pull of your credit report), and consider both traditional and online options as you shop among lenders.

Article Sources

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