Can You Get a Personal Loan With Bad Credit?
Updated: September 26, 2023
Advertising & Editorial Disclosure
Because lenders take credit scores into consideration when reviewing loan applications, you may find it difficult to get a personal loan with bad credit. As a rule of thumb, you need a credit score between 580 and 669 to qualify for a personal loan.
Some lenders consider borrowers with poor credit and those with insufficient credit history to generate a credit score. You may be able to take out a personal loan from those lenders with a credit score as low as 300 to 579.
However, expect less favorable terms if you do qualify for a personal loan with bad credit. For instance, you may get a higher interest rate or a lower loan limit.
Is it Possible to Get a Personal Loan With Bad Credit?
A personal loan can be useful for addressing different financial concerns. It can help consolidate debt, finance a home improvement project or fund your dream vacation.
Lenders consider credit score when deciding whether to approve a personal loan application, how much money to lend and what interest rate to charge. This is because credit scores can show how financially responsible an applicant is when it comes to paying debts.
If you have a bad credit score, this may tell lenders that you struggle with making payments toward various debts. As a result, your loan application may be denied, or you may receive a smaller loan at a higher interest rate.
There are lenders that accept applicants with poor credit scores. Shop around and compare multiple options to get the best bad credit loan for you. Minimum credit score requirements vary across lending companies, so be sure to check if your particular credit score is accepted by your chosen lender.
What’s Considered a Bad Credit Score?
Credit scores typically range from 300 to 850. Anything below 580 is considered a bad FICO credit score. On the other hand, bad VantageScore credit scores are those between 300 and 600.
Although what’s considered bad slightly differs between FICO and VantageScore, the factors they use to measure scores are quite similar. These include payment history, length of credit history and credit mix.
Your credit score is likely to take a hit if you don’t make payments on time or you have delinquent bills. Using more than 30% of your available credit can bring your score down. Diversifying your portfolio of credit accounts and lessening the number of hard credit inquiries on your record can help you avoid lowering your credit score.
CREDIT SCORES WITH FICO AND VANTAGESCORE
What Interest Rate Can You Get?
Personal loan interest rates are calculated based on your creditworthiness and take several factors into account. These include your credit score, which is used by lenders to determine the amount of risk they are taking by loaning you money.
Depending on your financial profile, interest rates on personal loans can range from 6% to 36%. If you have a bad credit score, you may be subjected to interest rates on the higher end of the scale. This means you’ll pay more over the life of the loan.
Because the lowest interest rates are often reserved for those with good to excellent credit, it’s in your best interest to improve your credit score before applying for a personal loan.
Loan Options for Bad Credit
It’s possible to take out an unsecured or secured personal loan even if you have a poor credit score. However, those are not your only options. Below, MoneyGeek lists the other types of loans you can get with bad credit.
Where to Get a Personal Loan With Bad Credit
Although getting a personal loan with bad credit can be challenging, some lenders may be willing to extend funds to you. That said, expect higher interest rates or smaller loan amounts if you qualify. MoneyGeek enumerates where to look for loans if you have bad credit in the list below.
How to Get a Personal Loan With Bad Credit
Applying for a personal loan with bad credit is a fairly simple process. You typically submit an application form and several documents to prove your identity, address and source of income. Additionally, you need to meet the lender’s minimum credit score and income requirements.
Below, MoneyGeek outlines important steps you need to take to get a personal loan with bad credit.
Check your credit score
Before you pursue a loan application, it’s critical to check your credit score to determine which lenders you might qualify with. You may pull your credit score from Transunion, Equifax or Experian. Alternatively, you can find out your credit score through credit monitoring services or your credit card provider.
Shop for lenders
Lending companies have varying loan amounts, interest rates, repayment terms and minimum requirements. It’s smart to shop around and compare lenders to determine the option that best meets your needs and situation.
Get pre-qualified
Pre-qualification allows you to see what loan amount, interest rate and loan terms you qualify for. The process uses soft credit inquiry, which won’t impact your credit score. This is useful if you want to compare offers or find out how much the loan would cost you in the long run.
Compare loan offers
As a rule of thumb, you should avoid jumping on the first loan offer you receive. Try to get several offers and compare them to pick the best one for your needs. Make sure to review the interest rates, loan terms and associated fees such as origination fees.
Submit an application
Once you’ve reviewed loan offers and selected a lender, the next step is to provide documents that your lender may require, including identification, proof of income and address verification. You may submit your application online, or you can visit your lender if they have a physical location.
Frequently Asked Questions About Personal Loans
Personal loans, when you have bad credit, can be difficult to navigate. MoneyGeek addresses some frequently asked questions below to help you better understand how to get a personal loan with bad credit.
If you have bad credit, the easiest loan you may get is a cash advance or payday loan. Both loan options do not require a credit check. However, they have some drawbacks, such as higher interest rates and short repayment windows.
Typically, how much you can borrow depends on the lender. Some lenders offer up to $100,000 in personal loans, but their maximum loan limits may not be available to those with bad credit.
Yes, you may be denied a personal loan if you fail to meet a lender’s requirements. Disqualified applicants may have low credit scores or insufficient income.
Yes, it’s possible to get a personal loan without a credit check. However, no-credit-check loans are often risky because they carry high- interest rates.
Personal loans tend to have less favorable terms, such as higher interest rates or smaller loan amounts if you have bad credit. Shop around and compare different loans to find the best option for your needs.
sources
- Experian. "What’s a Good Interest Rate for a Personal Loan?." Accessed October 7, 2022.
- PEW. "How Well Does Your State Protect Payday Loan Borrowers?." Accessed October 7, 2022.
The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about
our editorial policies and expert editorial team.