Best Personal Loans for Bad Credit

What It Means to Have Bad Credit

When we say “bad credit” here, we’re referring to your FICO score, which 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.

Your credit score (and bad credit scores) result primarily from information that lenders provide to credit reporting agencies. If you miss payments or default on loans, your credit scores typically fall. Public records like bankruptcy and judgments may also affect your scores.

How Do You Know What Credit Score Range You Are In?

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: 800 and up
• Very good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 579 and lower

Can You Get a Loan With Bad Credit?

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.

What Are Bad Credit Loans?

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.

How Can You Get a Loan With Bad Credit?

Check your credit: Get your free credit reports and verify that there are no errors that can drag down your credit scores.

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 (DTI) ratio.

Consider a co-borrower: If you can’t get approved on your own, applying with somebody else could help.

How Much Can You Borrow If You Have Bad Credit?

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.

Where Can You Get a Loan When You Have Bad Credit?

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, expect to pay high rates because of your bad credit.

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.

How Do You Fix Bad Credit so You Can Get a Better Loan?

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.

Best Approach for a Bad Credit Score

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. Take some time to evaluate whether it makes sense to borrow before you move forward.

How We Chose the Best Personal Loans for Bad Credit

Our writers spent hours researching loan options from more than 50 different lenders. Recommendations are based on personal loan companies offering a combination of good interest rates, loan terms, low fees, loan amounts, speed of funding, and more.

These loan recommendations take into account that all borrowers have different needs and financial situations that may require loans that meet various priorities. Not every recommendation is right for every borrower, so consider all of your options before applying.

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