Best Personal Loans for People With Bad Credit

Are you worried your credit score is too low to take out a loan? Fortunately, there are personal loans out there available to people with poor credit scores. Bad credit loans won’t have the most attractive terms, but they can be a lifesaver at the right time, especially if you pay them off as fast as possible.

This guide will go over all your options, including the best loans for bad credit, how to get one, and some tips for building your credit score. To start, let’s go over what qualifies as a bad credit score.


What Is a Bad Credit Score?

Credit scores range from 300 to 850. Your score is based on a number of financial factors, including your history of paying loans and credit cards, outstanding debts, and account inquiries from lenders and other companies.

Scores below 630 are considered to be very poor. Anything between 630 and 750 is fair, between 700 and 800 is strong, and above 800 is excellent. Many loan companies set a cutoff of 600, and they offer lower amounts and higher interest rates to people with low credit scores.

To check your score, you can set up a free account with Credit Karma. As a commercial business, Credit Karma provides this service in exchange for ads for credit cards and other financial products.

You can also request one free credit report per year from each of the three major credit bureaus – TransUnion, Equifax, or Experian – at, plus you can purchase one for $9.95 at any time.

Before applying for a loan, you should check your credit score to make sure you have the most up-to-date information. What role does your credit score play in the loan application process?


If your credit score has sunk below 600, you may have difficulty getting a loan. Luckily, you still have some options.


Why Do Lenders Care About Your Credit Score?

With the exception of some “payday lenders,” all banks and other lenders look at your credit score when determining whether you qualify for a loan and if so, what its terms will be. Lenders seek to reduce risk, and they look at your credit score as an indication of your past financial behavior.

Will you be able to pay back the loan? Is there a possibility that you’ll default? A very low credit score indicates that you’re a risky candidate for a loan, and lenders may be wary of granting approval. Even young people who are new to credit may have trouble qualifying, because they have little financial history to indicate their future behavior.

A credit score of 600 is a common cutoff for loans, but there are some that will waive this minimum. Read on to learn about the four types of loans for people with bad credit, along with the best lenders for each type.


Lenders don't want to approve a loan if they're worried you won't be able to pay it back.
Lenders don’t want to approve a loan if they’re worried you won’t be able to pay it back.


What Are the Options for Bad Credit Loans? 4 Types

There are four main types of loans for people with bad credit scores: unsecured loans, secured loans, peer-to-peer loans, and payday loans. Unsecured loans are regular loans that you can get a bank or credit union, but they may require a higher credit score.

Payday loans are the least attractive option for bad credit loans, as they can come with absurdly high interest rates. If at all possible, you shouldn’t take on a loan with an APR (annual percentage rate) higher than 36%.

Read on to learn about the four different types of loans, followed by recommendations for the best loans of each type.


1. Unsecured Loans

Unsecured loans are typical loans from a bank, credit union, or another lender. Student loans, personal loans, and lines of credit on credit cards are all usually unsecured loans. Federal student loans can be especially easy for people with low credit to get because, even though they’re not secured by collateral, they can never be discharged.

You’re loaned a certain amount of money with a variable or fixed interest rate and a payment plan. You don’t have to put up any collateral, like your car or house, because the lender feels confident that you’ll pay off the loan in time.

Unsecured loans are the most reliable and appealing loans, but they’re also the hardest to qualify for with a credit score under 630. Even if you do qualify, you might only get a small amount or a high interest rate above 20% or 30%.

However, you might still be able to get decent terms on an unsecured loan as long as you have a credit score of at least 550. Try a credit union first, since credit unions tend to offer lower rates and fees on loans than banks do.


Best Lender for an Unsecured Loan: Avant

Avant offers unsecured loans to people with a credit score of 580 or above. You can get a loan of up to $35,000, and there are no origination fees. The money is immediately disbursed, sometimes even the same day that you apply. APRs range from 9.95% to 36%. Avant is available in 44 states.

Other lenders that offer good terms on unsecured loans for bad credit are Net Credit,, and One Main Financial.


Federal student loans are available to young people with a range of credit scores, since they can never be discharged in bankruptcy.


2. Secured Loans

Another option for bad credit personal loans is a secured loan, or a loan that is “secured” by a piece of collateral. Car loans and mortgages are automatically secured loans, because the banks could take back your car or house if you fail to pay.

With a personal secured loan, you would put up an asset as collateral. This option can be helpful if you don’t qualify for an unsecured personal loan or if you’re seeking better interest rates, a higher loan amount, or a more flexible repayment plan.

If you’re positive that you’ll be able to pay back the loan, then a secured loan can offer more appealing terms to people with bad credit scores. However, you also have to go into the agreement with the understanding that the bank can seize your house, car, or whatever collateral you put up if you’re not able to pay in time.


Best Lender for a Secured Loan: Springleaf Financial

Springleaf Financial has no minimum credit score cutoff and may work with borrowers with a range of credit scores. It offers loans between $1,500 and $10,000 with APRs ranging from 25% to 36%.

You can apply online or at one of its 820 branches. Springleaf Financial is available in 41 states.


If you fail to pay back a secured loan, then the lender can seize your car, house, or whatever asset you put up as collateral.
If you fail to pay back a secured loan, then the lender can seize your car, house, or whatever asset you put up as collateral.


3. Peer-to-Peer Loans

Peer-to-peer loans are an increasingly popular form of lending that’s entirely conducted online. The loan isn’t backed up by a bank, but rather by everyday investors. P2P lending is like a Kickstarter project; it offers crowd-sourcing for people who need a loan.

You might be able to get better terms on a peer-to-peer loan than you would on a loan from a bank, depending on your credit score and income. Peer-to-peer loans are typically available to people with a credit score of 600 or above, though a few companies require a minimum of 640 or 660.

The downsides of peer-to-peer lending companies? Most charge origination fees when they disburse a loan, and they aren’t available in all states. Maine, Iowa, and North Dakota, for example, block the top three peer lending companies, Peerform, Prosper, and Lending Club. Finally, peer-to-peer loans typically take a few weeks to process, so you wouldn’t be able to access your funds immediately.


Best Peer-to-Peer Lender: Peerform

Peerform stands out as the best P2P lender because of its low cutoff credit score of 600. It offers loans of up to $25,000 with APRs ranging from 7.12% to 29.99%.

Peerform charges an origination fee when it disburses your loan of up to 5%, depending on your creditworthiness. You may have to wait two weeks to get your funds. Peerform is available in 37 states.

Two other good choices for a P2P loan are Prosper, which requires a minimum credit score of 640, and Lending Club, which requires a minimum credit score of 660.


Peer-to-peer loan companies skip the banks. They rely on everyday investors to crowdsource loans.
Peer-to-peer loan companies skip the banks. They rely on everyday investors to crowdsource loans.


4. Payday Loans

Your last option for loans with bad credit is what’s called a payday loan. These loans tend to be low-dollar, typically up to $1,000. They will be disbursed right away, but they can come with ridiculously high interest rates. Some of these loans are attached to interest rates of 300% or higher.

It’s more common to get an interest rate between 30% and 100%. These interest rates may not be terribly burdensome if you pay off the loan on its first due date, like with your next paycheck. Basically, these loans are useful if you need immediate cash, are willing to pay a fee to get it, and can pay off the loan right away. If you find yourself in an emergency, then a payday loan could help you out.


Best Search Engine for Payday Loans:

If you’re looking for a payday loan, then your first step should be to explore your options via a lender search service. helps you compare loan offers. You’ll enter some personal information, and then you’ll compare your offers.

To use the site, you need to be 18 or older, have a phone number and email address, be a US citizen or legal resident, and have a checking account. You also must show that you’ve had an after-tax income of at least $1,000 a month for the past 90 days.

You may be able to access the funds of a payday loan the same day you apply. Just remember that they tend to come with high interest rates and can represent a real financial danger if you don’t pay them off as soon as possible.

A runner-up for the best payday bad credit loan search service is Again, make sure you understand the fine print, so you don’t end up paying more in fees and interest than you borrowed in the first place.

A final option, and one that can be useful for young people who haven’t built up any credit yet, is applying for a loan with a co-signer.


When you get a payday loan, you can usually access the money immediately.
When you get a payday loan, you can usually access the money immediately.


Applying for a Loan With a Co-Signer

You might get better offers on a loan if you apply with a co-signer who has strong credit and a steady income. Your co-signer agrees to be responsible for the debt if you’re unable to pay it, thereby reducing risk in the eyes of the lender.

When you apply this way, your co-signer will likely have to provide documents, like proof of income or tax returns from previous years. Undergraduates often apply for student loans with a parent as a co-signer. A co-signer can increase your chances for approval and get you lower interest rates if she has a good income and credit score.

Some companies geared toward young people with co-signers are Backed, One Main, and Freedom Plus.

Now that you have a sense of your options and the best lenders, what should you look out for as you search around for loans with bad credit? Be cautious if you see any of the following policies.


Applying with a co-signer can help you qualify for a loan with better terms.
Applying with a creditworthy co-signer can help you qualify for a loan with better terms.


Searching for a Loan: Watch Out for These Red Flags

When you start looking for lenders with lax credit score requirements, you might encounter disreputable companies with predatory policies. Beware of these warning signs so you don’t end up scammed out of your savings.

First, don’t trust a company that guarantees a loan without reviewing your personal information first. Legitimate companies will at least look at your income, and most need to see your credit score, as well, before giving you a loan.

You also should never pay fees for filling out an application. A loan may have an origination fee, but you shouldn’t have to pay anything for the initial application.

Third, be wary if a company appears to be pushing you for too much personal information right off the bat. Usually, you only provide the really personal stuff once you know the terms of your potential loan. Similarly, you should also be cautious about a company calling and asking you lots of questions that you never reached out to in the first place!

Finally, don’t let a company pressure you into agreeing to a loan before you’re sure. You’re totally free to shop around and compare your options, and you should do this to make sure you’ve found the best offer. Don’t let a pushy representative talk you into signing anything before you’re ready.

Once you’ve chosen, applied for, and gotten your loan, you should make sure to make all your payments in full and on time. By responsibly paying back your loan, you’ll be gradually improving your credit score. What else can you do to bring your credit score up?


When searching for a loan with bad credit, be on the lookout for loan sharks. Sharks have no business lending money.
When searching for a loan with bad credit, be on the lookout for loan sharks. Sharks have no business lending money.


Building Your Credit Score

Applying for loans with bad credit scores can be tricky, and you’ll have a much easier time of it in the future if you can bring your credit up into the high 600s, 700s, or even 800s. As you read above, your credit score is based on your payment history, debt, and other financial behavior.

To improve your score, you need to show a history of on-time payments with any loans and credit cards. If you don’t have one already, you might get a secured or unsecured credit card. Make sure to pay off the balance in full every month, as carrying a balance can further hurt your score and cost a lot of money in interest.

If you have a lot of student debt, you might look into loan consolidation or refinancing options to ease your monthly payments and pay your loan off faster. If you’re struggling to keep up with monthly expenses, then you should take time to look over your finances, create a budget, and come up with ways to stick to it.

Let the primary rule of personal finance guide your plans: always spend less than you earn. If you take a proactive approach to your personal finances, then you can undo damage from the past and start building your credit score today.

In closing, let’s go over the key points you should remember as you search for personal loans with poor credit.


To build your credit store, make sure all your loan and credit card payments are on time.
To build your credit store, make sure all your loan and credit card payments are on time.


Loans for Bad Credit: Final Thoughts

If you have bad credit, don’t worry! It is still possible for you to qualify for a loan. You might be able to get a regular unsecured loan, ideally from a local credit union, as a credit union tends to offer the best terms.

If you don’t qualify or want to look for better terms, you could try offering collateral, applying with a co-signer, or working with a peer-to-peer lender. If you need cash fast and have a reliable plan for repayment, then you can also get cash fast with a payday loan.

Before you apply for a loan, take time to write down a budget and plan for paying the money back. Since bad credit loans often come with high interest rates, you don’t want to get stuck in a cycle of debt or risk making your credit score worse. By paying back the loan on time, you can take steps toward improving your credit score.

With a higher credit score, you’ll qualify for loans, mortgages, or credit cards in the future with even better terms. If you’re applying for a loan with bad credit, take some time to figure out how this loan fits into your plans to build your credit score.


What’s Next?

Are you wondering what kind of credit card you can get with a low credit score? Check out this guide for the best credit cards for people with bad credit. [coming soon]

Do you have average or good credit and want to know which credit card is best for you? This guide has a personal spending quiz to help you match up with your best credit card.

Is your credit score low because you have trouble meeting your monthly expenses? Head over to this guide for 100 top ways to save money and take control of your personal finances.