Borrowing money costs more when you have bad credit — and your choices for a loan will be limited.
Ideally, you should avoid borrowing for a couple years. Use this time to fix your credit before applying for loans.
But real life seldom meets this ideal. In reality, people lose jobs, have medical emergencies, get divorced, need major car repairs. The list is endless.
Whatever your reason, if you need a loan and your credit is making it difficult, here’s where I would start.
6 Best Personal Loans for Bad Credit
Here are the top 6 lenders for the best personal loans with bad credit:
- Lending Point
- OneMain Financial
First things first: Do not visit a payday or title lender. About two dozen states have outlawed these kinds of loans.
Yes, bad credit loans will be expensive. Some will charge 36 percent interest. But even this is a bargain compared to the 400 percent that payday and title loans ultimately charge — assuming you ever get the debt paid off.
Check out these better alternatives:
PersonalLoans.com is not a lender. It’s a marketplace where you can compare lenders. Your below-580 FICO will not disqualify you, but it will limit you to the highest APR options.
Expect to pay up to 36 percent interest, which is higher than even the most expensive credit cards. The good news: You get an installment loan with fixed payments and a set schedule for repayment.
Along with providing the cash you need, your consistent, on-time loan payments could help improve your credit.
Speaking of which: It’s likely PersonalLoans.com will pull a hard credit check when you apply. This could hurt your score for future applications. So only apply if you’re serious about getting a loan.
When you get matched with an actual lender, be sure to read reviews about that specific lender before submitting your final application.
- Access to multiple lenders with one application
- Installment terms up to 72 months
- Open to sub-580 borrowers
- Super easy to use
- Have money within 4 business days
- Hard credit check likely
- APR as high as 35.99 percent
- Fees can vary depending on matched lender
Learn More: Read our full PersonalLoans.com Review.
BadCreditLoans.com has created a lending marketplace specifically for sub-580 borrowers. You can connect with lenders who offer auto, personal, student, and even home loans.
Even on a site created for poor credit, you’ll have limited options if your FICO is in the low 500s. Expect lower funding options ($5,000 or below) and high interest (as high as 35.99 percent).
Still, when you’re credit challenged and need a few thousand dollars to fix the transmission or replace the broken fridge, you can find an installment loan with up to 60 months to repay. In the process, you could help revive your struggling FICO.
BadCreditLoans.com won’t ask you for money, but when you’re matched up with a lender, be sure to research that lender’s fees. Loans for people with lower credit often have high administrative fees.
- Compare multiple loans with one application
- Installment loans up to 60 months
- Simple user interface
- No fees and no pressure
- Funds disbursed within 1 to 2 business days
- Hard credit check likely
- High APR likely
- Matched lender will have its own fees
Learn More: Read our full BadCreditLoans.com Review.
LendingPoint Personal Loans
Borrowers with fair credit, above 585, can find pretty good deals through LendingPoint. Again, interest will be higher, from 10 to 36 percent, depending on your qualifications.
It’s also possible for sub-580 applicants to borrow because LendingPoint actually considers your income and your debt-to-income ratio along with your credit score. Stability in your current financial position could overshadow the past mistakes pulling down your FICO score.
LendingPoint stands out because its features resemble a prime lender’s features. You could choose your loan’s due date and even change it (once during the life of the loan). You could also apply for temporary relief and avoid late fees for up to 14 days.
Also, LendingPoint allows you to refinance your loan on better terms after making six consecutive on-time payments. If you have a higher credit score in six months, you could get a lower interest rate by refinancing then.
As with any refinance, check the fees and new interest charges to make sure they don’t erode your savings.
- Soft credit check shouldn’t harm score
- Considers more than just your credit score
- Fast funding — 1 to 2 business days
- Flexible repayment options
- Refinancing available later
- Origination fee could be as high as 6 percent
- $30 late fee after 15 days
- Must have at least $20,000 annual income
Unlike most lenders on this list, OneMain Financial has a physical presence with more than 1,500 branches in 44 states.
If the branch near you isn’t too busy, you could get the money you need within 15 minutes of applying. Check OneMain’s site for office locations and be sure to bring along the documentation you’ll need to finalize your loan — proof of income, an ID, and your Social Security number.
OneMain accepts applications from people with any credit score. Underwriters consider your income and debt-to-income ratio.
OneMain doesn’t share its guidelines for approval, but you can be sure: the lower your credentials, the more you’ll pay — both in interest and origination fees.
Interest rates range from 18 to 36 percent, and origination fees could reach 6 percent of your loan amount. The fee typically comes out of the money you borrow.
OneMain lets you lower your borrowing costs by putting up collateral, such as a car title. Remember: you could lose your car if you fail to pay.
- No minimum credit score required to apply.
- Terms of 2 to 5 years.
- Super-fast loan disbursement.
- Face-to-face discussions are available.
- Income and other debt considered along with credit score.
- Higher-than-average costs.
- Lack of transparency on site.
Avant requires a FICO score of 580, and its interest rates resemble the rates of other lenders on this list. You could pay as much as 35.99 percent.
If you can qualify, you’ll benefit from Avant’s flexibility: the ability to change your payment date and an option to refinance when you qualify for a lower rate, for example.
Loan terms can range from 2 to 5 years, and Avant caps its loans at $35,000 — higher than most other similar lenders. Expect to pay 4.75 percent of your loan’s balance as an administrative fee.
If you’re sub-580, you probably won’t get approved. But if you try, Avant can give you an estimate based on a soft check of your credit; your score shouldn’t get worse as a result.
- Flexibility resembles prime lender.
- Transparent website lays out fees and rates.
- Changing payment due date possible.
- Refinancing later possible.
- 10-day grace period for each payment.
- Higher APR and fees.
- $20,000 income minimum required.
- Not for very poor credit.
Applicants with any FICO can apply for a loan through CashUSA.com, another marketplace for borrowers. CashUSA’s partners offer loans up to $10,000 for terms ranging from 3 to 72 months.
CashUSA doesn’t require a minimum credit score, but many of its lending partners do. As a result, your lower score will limit your options when you compare loans. Rates can be as high as 35.99 percent for bad credit borrowers.
Limitations also apply to loan amounts. CashUSA has options for $10,000 loans, but your offers may not exceed $1,000 or $2,000, depending on your qualifications.
The good news: You can apply and see your options without a hard credit check. If you decide to go through with the full application, check out the actual lender CashUSA has partnered you with.
- Free application with a soft credit check.
- Wide range of loans and terms available.
- Simple, easy-to-use website.
- Less qualified borrowers have fewer options.
- High interest rates likely.
- Consumer must research partner lenders before using.
Alternatives to Bad Credit Borrowing
Let’s say you need $2,500. With rates as high as 35.99 percent here’s what you’d pay for a 36-month loan:
- Per month: $115
- In total: $4,140
- Cost for borrowing: $1,640
Compare this to the same $2,500 loan at 4 percent interest which would be available to someone with excellent credit:
- Per month: $74
- In total: $2,664
- Cost for borrowing: $164
So with a bad credit loan at 35.99% you’d pay 10 times more for borrowing the same $2,500. And this doesn’t include late fees, late-payment penalties, or the origination fee. (A typical 4 percent origination fee would lower your $2,500 loan to $2,400.)
Some loan applicants, when they see these numbers, want to find alternatives to borrowing at these terms. Here are some ideas:
Ask for Help
It’s no fun, but if you have a friend or family member who has extra cash, you should consider asking for a loan. I’d recommend writing down the terms of the loan and being willing to pay some interest as a way of showing appreciation.
Get a Cosigner
Some lenders, including some on my list above, give better rates when you joint apply with someone else — someone who has excellent credit, preferably.
Your friendly cosigner would be putting his or her good credit on the line for you — saving you a ton in interest charges in the process — so be sure you repay the loan on time.
P2P seems like a great way to avoid the banks and still get the funds you need. But this innovative financing has its own hurdles, and there’s no guarantee you’d succeed.
If you do get one of these loans — from Upstart or Lending Club, for example — remember your loan is being financed by individual investors putting their own money down. If you can’t repay, they could lose.
Help from Work
Does your employer’s Human Resources department offer advances on your next paycheck? It might. How about small personal loans? The terms would most likely be better than the average bad credit loan.
Borrow Against 401(k)
If you’ve been contributing to your 401(k) for a while, you could borrow against your fund’s value. In this case, you’d be borrowing from your future self with the value of your account backing the loan. As a result, you could get more favorable rates and terms.
Ask your HR staff about this option.
What to Know about Bad Credit Borrowing
When the cheaper options don’t work for you, a high-interest loan could be your best choice. But before applying, spend a minute or two getting familiar with the market so you can save. Here’s what to know:
Know How to Get Approved
Before applying, get some papers together: a way to verify your income and some ID, for starters. Have your Social Security number available. This will speed the process of approval.
If you’re using a cosigner, be sure to have his or her income documents and Social Security number available.
As you apply, avoid the temptation to pad your loan amount. Ask for only the amount you need for the problem you’re solving. This restraint will increase your chances of approval and lower your payments.
Know Your Score
Knowing your credit score before applying helps you avoid loans that your score couldn’t secure. This lets you skip the frustration and hassle of repeated denials. And fewer checks on your credit will prevent unnecessary decreases.
Track your score using Credit Sesame or Credit Karma. Both of these free apps can also help you increase your score.
Know Your Rights
Poor or bad credit doesn’t exempt you from consumer protections. You still have rights. For example, you can back out of a loan before finalizing, no matter what the lender says. And, you have the right to see all of the charges you’ll be paying in advance.
This can get a little muddy when you’re using a loan marketplace like PersonalLoans.com. Your agreement will be with the actual lender and not the marketplace itself.
Know Your Payoff Plan
Any loan agreement you enter should have a pre-set exit plan. Most of the lenders on my list offer installment loans which schedule your payments in equal increments for a set period of time. Find out about prepayment penalties, for example, before finalizing your loan.
Know Your Bigger Picture
How does your new loan fit into your overall financial plan? Sure, you’re just trying to survive the week, but it’s good to think about the future, too. What happens after you spend the borrowed money? Will you have a way to avoid needing an emergency loan next month?
If not, it’s time to step back and look for ways to make more money or spend less money. Can you consolidate some other debts? Start a side hustle to make more money?
Know How to Protect Your Property
Often, a lender extends more favorable terms when you’ve put down some collateral. Whether it’s your car title or a lien on your home, your collateral lowers the lender’s risk, which lowers your cost.
But be careful: If you couldn’t repay your loan, your lender would have a legal right to your property. Don’t put your assets on the line to lower finance charges unless you’re sure you can pay off the loan.
Know a Scam When You See It
Someone who offers you a loan on fantastic terms, despite your poor credit history, may be a scam artist. There are multiple warning signs, but most of them boil down to this: The lender seems too good to be true.
Other warning signs:
- Lender asks for money up front.
- Lender’s site isn’t secure (http instead of https).
- Lender has no physical address; only a P.O. Box.
- Lender contacts you first.
How to Improve Your Credit Score
Your new loan could be the first step in improving your credit. Successfully paying off your lender — on time month after month — can help your score. That’s true for all your debts.
But there’s more to improving your credit than paying your bills on time. You should also take these steps:
Find your score
I mentioned Credit Sesame and Credit Karma above. These apps, and others, give you free access to your score on demand. You have to know your score before you can improve it.
Identify your problems
What’s dragging down your score? Do you need fewer accounts? Do you have too many? Here are the main components of your score:
- Payment history: Your habits make up about 35 percent of your score.
- How much you owe: Your total indebtedness influences about 30 percent of your number.
- Age of accounts: Maintaining accounts for years matters to creditors. If you have only new accounts, your score will be lower. This represents about 15 percent of your score.
- Mix of accounts: Having installment loans, like the ones we’ve talked about in this post, along with revolving loans (credit cards), can help raise 10 percent of your score.
- Hard inquiries: Too many loan applications — shown by hard checks on your credit — will drag down your score. This counts for 10 percent of your score.
You may already know your problems. For example, you should know if you’ve had a long history of missing payments. If you aren’t so sure what’s pulling down your score, use a free app to analyze your score’s components.
Finding your problems lets you know where to start the repair process. Opening a new account or two may help you. More likely, you’ll do better to close some accounts to improve your balance of credit types.
Even when you pay off an account completely, you can benefit from keeping the account open and unused.
It’s also possible one of your creditors has misreported information about you. Contact the creditor immediately to start the process of correcting this error.
Time is your friend when you’re improving creditworthiness. Your little changes — like making on-time payments and paying down your debt — will have a growing impact as time passes.
Check your score regularly. A lot of my online accounts show my FICO score as a free bonus. This provides an easy way to keep track of progress.