Best Personal Loans for 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.

There are a few different credit scoring agencies that offer you a credit score. FICO credit scores are popular and are often available for free via your credit card company or bank. FICO credit score ranges are as follows:

• Excellent Credit: 800-850
• Very Good Credit: 740-799
• Good Credit: 670-739
• Fair Credit: 580-669
• Poor Credit: 300-579

The process of applying for a loan is similar whether you have bad credit or excellent credit. Select at least three lenders, and compare the offers with the interest rate, origination fees, and other features in mind. If it makes sense to move forward, apply for a loan. It may take some extra work to find the right lender, but the list above should help you narrow things down. 

Depending on the lender, you might apply entirely online or complete your application on paper. Plan to provide details about yourself (your Social Security Number and address, for example) as well as information about your income.

Lenders review your application after you submit it, and they may ask for additional information to help with the approval decision. Provide any information needed promptly to keep things moving forward, and ask for clarification if you’re not sure what to give them. In some cases, the process moves fast, and you might get an answer on the same day. 

Once your loan is approved, your lender completes funding. In many cases, the lender transfers money directly to your bank account electronically.

Loans for people with poor credit scores have higher interest rates than people who apply for loans with a good credit score. Loans made to people with bad credit also sometimes have higher fees or come in lower amounts than what someone with a good credit score can qualify for.

Check your credit: Get your free credit reports and verify that there are no errors that can drag down your credit scores. Checking your credit should not affect your credit scores if you use AnnualCreditReport.com. 

Pay down debt: If you’re carrying credit card debt, pay down your balances to 30% or less of your available credit limit. Doing so could help your credit scores as well as your debt-to-income ratio.

Consider a co-borrower: If you can’t get approved on your own, applying with somebody else could help. Lenders may find that the co-borrower’s credit score and additional income are sufficient to help you qualify.

With bad credit, lenders might not be willing to take large risks. That doesn’t mean you can’t borrow, but your ability may be limited. Several popular online lenders listed here work with individuals who have bad credit, and loan amounts start at $1,000 to $2,000. That’s a significant amount, and it may be possible to borrow more.

Some of the best places to borrow include online lenders, as well as banks or credit unions. Those lenders are most likely to have competitive rates and reasonable fees. However, with bad credit, expect to pay high rates to borrow.

Be careful about borrowing from lenders who guarantee that everybody gets approved. Those outfits may be running scams, and you’ll end up in a worse place than you are today. Also, payday loan shops tend to lend money at extremely high rates, so it’s best to stick to the types of lenders highlighted above.

Bad credit does not need to be a permanent condition. Your credit can improve over time, especially if you borrow money and make your payments on time.

To improve your credit, borrow money only when you need it, and always pay your bills on time. If you’re having a hard time getting approved, start with small secured loans and credit cards, and build up from there. The longer you borrow (and keep up with payments), the more your credit scores should improve.

As you continue using credit, borrow wisely. You don’t need to keep a balance on your credit cards to improve your credit. In fact, it’s best to keep your balances below 30% of your credit card limit.

Several of the lenders on this page will approve a loan with a low credit score, but it’s critical to borrow wisely. Instead of focusing on how you can get approved right now, it’s best to prioritize affordable loans that don’t make things worse. That’s easier said than done when you need cash immediately. Still, a long-term strategy might help prevent this situation from repeating. Here’s a roadmap for getting the best possible results when your credit score is below 580:

1. Ask a local bank or credit union for guidance on loan options available to you.
2. Determine if you can get a co-signer to help you qualify for a better loan. If your co-signer has good credit, consider mainstream lenders with the best loan offerings.
3. Request quotes from at least two online lenders and one local bank or credit union. If you can't get quotes without actually applying for the loan, be aware that the hard inquiries on your credit report could temporarily hurt your score further.
4. Compare interest rates, origination fees, and other loan details carefully.
5. Select the best loan offer from your list.
6. Sleep on it. Evaluate whether or not it makes sense to borrow before you move forward.

Unfortunately, borrowing with bad credit might make things worse. It’s worth exploring alternatives, like selling things you own or taking on extra work, assuming those solutions are available to you. That’s easy for someone to suggest when they’re not in your situation, and you might already be doing everything you can. Still, it’s worth looking at ways to drum up cash without taking on debt at high interest rates.

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.