If you want to consolidate high-interest credit card debt or secure financing for a large purchase, a personal loan could help. As a lower-interest alternative to credit cards, personal loans come with fixed interest rates, set repayment terms and stable monthly payments. Even if your credit score is on the low end, you can get approved for a personal loan with a “bad” credit score or limited credit history.
We’ve evaluated major loan providers and highlighted the best personal loans for low credit below. We’ll update this list regularly as terms change and new loan products are released. Note that all of the starting annual percentage rates, or APRs, listed here are based on a high credit score of 800 or above.
Best lenders for bad credit, compared
|Lender||Best for||APR||Loan amount||Term lengths|
|Upgrade||Best overall||7.96% to 35.97%||$1,000 to $50,000||24 to 84 months|
|Upstart||Borrowers with limited credit history||6.5% to 35.99%||$1,000 to $50,000||36 to 60 months|
|Happy Money||Borrowers with credit card debt||8.99% to 29.99%||$5,000 to $40,000||24 to 60 months|
|LendingClub||Joint applicants||8.05% to 36.00%||$1,000 to $40,000||36 to 60 months|
|Lending Point||Next-day funding||7.99% to 35.99%||$2,000 to $36,500||24 to 72 months|
How personal loans work for bad credit
Bad-credit personal loans work much like personal loans for borrowers with fair, good or excellent credit. You’ll complete an application and, if approved, receive your funds and start repayment.
Personal loans for those with lower credit scores tend to charge higher interest rates and fees than those geared toward borrowers with good credit, as they’re riskier for the lender. Many of the lenders on this list have a maximum interest rate of around 36%. That’s considerably higher than the 5% to 6% personal loan rates that can be locked in by borrowers with excellent credit.
While getting a bad-credit personal loan can get you the money you need, it’s important to consider the additional costs you’ll face, like higher fees.
How to choose the best lender
When choosing a bad-credit personal loan lender, be sure to consider the following factors:
- Interest rate: Most lenders will give you a personalized rate quote if you submit some personal information. Look at that number, not a lender’s full APR range, when comparing lenders. Expect a higher interest rate if you have a lower credit score, but watch out for unreasonable rates. Rates that exceed 36% APR could fall into predatory lending territory, and may be more difficult to repay.
- Fees: In addition to the interest rate, look out for fees -- including origination fees, application fees, late fees and prepayment fees -- which can increase the cost of borrowing.
- Loan term: The longer your repayment term, the lower your monthly payment -- but the more you’ll pay in interest in the long run. It’s generally a good idea to take the shortest loan term you can afford.
- Minimum and maximum loan amount: Most lenders will limit the maximum amount you can borrow, but some may also have a minimum threshold. Before choosing a lender, make sure it offers your desired loan amount. Keep in mind that the loan amount you qualify for based on your creditworthiness may be lower than a lender’s maximum loan amount.
Types of bad credit loans
Some lenders offer secured loans that require you to put up an asset -- such as a car or house -- as collateral, which the lender can seize if you default. Most personal loans are not secured, which means they are based on your income and credit history and do not require collateral.
Since the lender has an asset it can use to recoup all or some of its money, secured loans are considered less risky for the lender than unsecured loans. For this reason, they may be easier to qualify for than unsecured loans or you may qualify for a lower rate -- even if you have lower credit. But, you risk losing your collateral if you can’t make payments.
You can get a cash advance from your credit card issuer to withdraw money directly from your credit line rather than charging purchases to your card. These advances usually come with a high interest rate, fees and limitations on how much you can borrow. A personal loan is typically more affordable than a cash advance.
Payday loans are predatory loans that do not require a credit check. They’re usually small loans -- about $500 or less -- that require you to repay the loan within a couple of weeks or roll it over to a new loan for a fee. While payday loans may seem enticing if you have a low credit score, their high APRs -- typically upward of 400% -- and fees can lock you into a cycle of debt.
Credit union payday alternative loans
Payday alternative loans, or PALs, are small personal loans offered by some federal credit unions for those with limited or lower credit. Amounts range from $200 to $1,000 and terms span up to six months. These loans typically charge much lower interest rates and fees than payday loans but are generally only available to existing members of a credit union. If you need a small loan quickly, it may be worth checking if your local credit union offers this type of loan.
Alternatives to a personal loan
If you don’t qualify for a personal loan because of your credit, you have a few options:
- Getting a cosigner. A cosigner is someone who contractually agrees to repay your loan if you don’t. If you can’t qualify for a personal loan on your own, having a cosigner with good credit might shift the odds in your favor. However, cosigning a loan has its own risks and drawbacks both parties should be aware of.
- Using a credit card. It’s a good idea to pay off your credit card balance in full each month, but if you have a credit card, need money fast and can’t get a loan, you can use your credit card to access a line of credit. If you can, try to charge purchases directly to your card rather than taking a cash advance, as you’ll pay less in interest and fees that way. Because credit cards have high APRs, try to pay off your balance as soon as possible.
- Asking family and friends. If relatives or friends can lend you money to cover the costs you need, you could avoid a loan altogether. Borrowing from friends and family isn’t always the best course of action and can cause relationship issues -- but if you have loved ones who are willing to help, it may be your most affordable option.
Should you take out a loan if you have bad credit?
Having bad credit doesn’t necessarily mean you can’t or shouldn’t get a loan, but you’ll likely face greater approval challenges and higher interest rates. Because of this, you should only take out a loan if:
- You can pay it back. Before taking out a loan, make sure you can afford the monthly payments. Missing payments or defaulting on a loan can seriously hurt your credit and may result in legal consequences.
- You qualify for a reasonable APR. Borrowers with bad credit should expect to pay more in interest and fees, but some loans have APRs that are so high they can trap you in a cycle of debt. A good benchmark for the maximum reasonable APR is 36%, according to the National Consumer Law Center. If you’re offered a higher APR, consider if the loan is affordable and worth the cost.
- You truly need the money. Before taking out a loan, make sure you have a plan for using the funds. We don’t recommend taking on debt for nonessential expenses like a wedding or vacation.
How to qualify and apply for a personal loan with bad credit
Qualifying for a personal loan
When you apply for a loan, these are some of the factors a lender will look at to determine if you qualify:
- Credit score and credit history. Even lenders that cater specifically to lower-credit borrowers will still look at your credit score. Every lender has a different threshold for what credit scores it’ll accept, but expect higher rates and fewer options if you have a below-average credit score. Lenders might also look at your credit history for red flags, such as recent bankruptcies or defaulted loans.
- Income. Lenders want to make sure you make enough money to pay the loan back. Be prepared to provide proof of income like pay stubs, bank statements and tax returns.
- Debt-to-income ratio. Your debt-to-income ratio, or DTI, represents how much of your monthly gross income is going toward debt payments. If your DTI is too high, a lender might see you as a risky borrower because your debt load is already large and you may not be able to handle another debt.
- Cosigner. If you add a cosigner to your application, your lender will also look at your cosigner’s credit score, income and overall financial profile.
Applying for a personal loan
Here are the steps to apply for a personal loan:
- Check your credit score and credit report. If you know your credit score, you can save time by only looking at lenders whose minimum credit score requirements match your profile. Checking your credit report can help you spot and remove errors that may be dragging down your credit score.
- Compare lenders. While you might not have as many options as borrowers with good credit, you can still shop around to find the best rate. Many lenders will give you a personalized rate quote without requiring a full application. Compare fees, loan terms and rates across multiple lenders.
- Complete an application. Once you’ve found the right lender, complete a loan application. You’ll need some important documents handy, like tax returns, pay stubs and bank account information. You’ll also need to consent to a hard credit check from the lender. Once approved, you’ll typically receive your money anywhere from within 24 hours to a few days, depending on your lender.
- Best Egg
- Happy Money (formerly Payoff)
- Lending Point
- One Main Financial