Struggling to secure a personal loan for bad credit? You're not alone. Many face hurdles with a lower credit score, but the lending world isn't just black and white. With the proper guidance, finding a bad credit personal loan can be simpler than you think.

In this guide, we'll delve deep into the nuances of obtaining a personal loan for bad credit. From identifying top lenders in the bad credit personal loan arena to understanding the application intricacies, this is your comprehensive source. Every step, insight and tip is designed to boost your chances in the bad credit personal loan market.

What Is a Bad Credit Personal Loan?

At its core, a personal loan is a sum of money borrowed from a financial institution that you agree to pay back in regular installments, typically with interest. But what if your credit isn't sparkling? That's where a bad credit personal loan comes into play.

A bad credit personal loan is specifically designed for individuals with a poor or below-average credit score. Lenders understand that life can throw financial curveballs, leading to credit mishaps. As a result, they offer these loans as a way to provide financial opportunities even to those with less-than-stellar credit histories.

These loans typically feature higher interest rates, shorter repayment terms and smaller loan amounts. While some may require collateral such as a vehicle, they can be more flexible in considering factors beyond just credit scores, like employment history. Many opt for these loans to consolidate high-interest debts, manage unforeseen expenses or as a means to gradually rebuild their credit, provided they're used responsibly.

Compare Lenders Who Offer the Best Bad Credit Loans

When you have a less-than-perfect credit score, finding the right lender can feel overwhelming. But don't worry; there are lenders out there that specialize in offering loans to those with bad credit. In this section, we'll help you compare and find the best ones to suit your needs.

MoneyGeek’s Top Pick for Bad Credit: Upstart

  • Upstart

    • 3.22% to 35.99%APR Range
    • 300Minimum Credit Score
    • $1,000 to $50,000Loan Amount Range
    • 36 to 60 monthsRepayment Terms
    • Next DayTime to Receive Funds


Runner-Up: Upgrade

  • Upgrade

    • 5.94% to 35.47%APR Range
    • 560Minimum Credit Score
    • $1,000 to $50,000Loan Amount Range
    • 36 to 60 monthsRepayment Terms
    • Same DayTime to Receive Funds


Best for Low Rates: Avant

  • Avant

    • 9.95% to 35.95%APR Range
    • 600Minimum Credit Score
    • $2,000 to $35,000Loan Amount Range
    • 24 to 60 monthsRepayment Terms
    • Next DayTime to Receive Funds


Best for Small Loans: Ally

  • Ally

    • 0% to 26.99%APR Range
    • Not DisclosedMinimum Credit Score
    • $500 to $65,000Loan Amount Range
    • Not DisclosedRepayment Terms
    • Same DayTime to Receive Funds


Best for Limited Credit History: LendingPoint

  • LendingPoint

    • 9.99% to 35.99%APR Range
    • 590Minimum Credit Score
    • $2,000 to $36,500Loan Amount Range
    • 24 to 60 monthsRepayment Terms
    • Next DayTime to Receive Funds


What Is Bad Credit?

Navigating the financial landscape requires a fundamental understanding of credit scores and what they represent. A credit score isn't just a number; it's a reflection of your financial habits and trustworthiness to potential lenders. Let's break down the essence of what constitutes "bad" credit and the factors that can lead to it.

What Constitutes "Bad" Credit? Credit scores typically range from 300 to 850. While the exact range can vary based on the credit bureau and scoring model:

  • Excellent: 750 and above
  • Good: 700-749
  • Fair: 650-699
  • Poor: 600-649
  • Bad: 599 and below

If your score falls into the "Poor" or "Bad" categories, it can be categorized as "bad" credit. This label indicates a higher risk to lenders, often leading to unfavorable loan terms or difficulty securing a loan altogether.

How Are Credit Scores Determined?

Credit scores are calculated based on several factors:

  • Payment History (35%): Your track record of paying bills on time. Late or missed payments can significantly lower this score.
  • Credit Utilization (30%): The ratio of your current credit card balances to your total credit limits. A high ratio can indicate over-reliance on credit.
  • Length of Credit History (15%): How long you've had credit accounts open. Having a longer history can be beneficial.
  • New Credit Inquiries (10%): The number of recent requests or inquiries for new credit. Multiple inquiries in a short time can be a red flag.
  • Types of Credit in Use (10%): Diversity of your credit accounts, like credit cards, mortgages or retail accounts.

Common Factors Leading to Bad Credit:

  • Late or Missed Payments: Consistently paying bills late or missing them entirely can significantly hurt your credit score.
  • High Credit Card Balances: Maxing out credit cards or having high balances can negatively impact your credit utilization ratio.
  • Defaulting on Loans: Not repaying loans or facing foreclosure.
  • Bankruptcy: Declaring bankruptcy can severely impact your credit score for several years.
  • Too Many Credit Inquiries: Frequently applying for new credit can indicate financial instability.
  • Lack of Credit Diversity: Relying solely on one type of credit, such as only credit cards, can be detrimental.

Types of Bad Credit Personal Loans

For those with a tarnished credit history, various loan types can cater to specific needs. Recognizing these differences can help you make an informed choice that aligns with your financial situation. Here’s a breakdown:

1. Secured Loans vs. Unsecured Loans

  • Secured Loans: These require you to offer an asset as collateral, like a car or a piece of real estate. The lender can take this asset if you fail to repay the loan. The advantage here is that secured loans often come with lower interest rates because they pose less risk to the lender.
  • Unsecured Loans: These don’t require collateral but usually have higher interest rates. If you default on an unsecured loan, instead of taking an asset, the lender might take legal action or hire a collection agency to recover the owed amount.

2. Payday Loans

Often touted as a way to bridge the gap between paychecks, payday loans are short-term loans with very high interest rates. Borrowers are typically expected to repay the loan in full by their next payday. Given the exorbitant fees and interest, these can lead to a cycle of debt if not managed carefully.

3. Personal Installment Loans

These are fixed-interest loans that you repay in equal monthly installments over a set period. They offer more structure than payday loans, and the repayment terms are usually clearer. The interest rates can still be high for those with bad credit, but they're generally more manageable than payday loans.

4. Title Loans

These are loans where you use your vehicle title as collateral. If you fail to repay, the lender can take possession of your vehicle. While it's a way to get cash quickly, the interest rates can be steep, and the risk of losing your car makes it a less preferred option for many.

When considering a bad credit personal loan, weighing the pros and cons of each type is essential. This not only ensures you get the best possible terms but also that you avoid potential financial pitfalls in the future.

Pros and Cons of Bad Credit Loans

While bad credit loans can provide essential financial relief, they also have certain risks. Different loan types cater to varying needs, but understanding their advantages and disadvantages will help you make a more informed decision. Below is a table outlining the pros and cons of different types of bad credit loans:

Type of Loan

Secured Loans

  • Lower interest rates due to collateral.
  • Higher borrowing limits.
  • Longer repayment terms.
  • Risk of losing the asset if you default.
  • May involve more paperwork and longer approval times.

Unsecured Loans

  • No need for collateral.
  • Quicker approval process.
  • Higher interest rates.
  • Lower borrowing limits.

Payday Loans

  • Fast access to cash.
  • Minimal credit checks.
  • Extremely high interest rates.
  • Short repayment terms leading to potential debt cycles.

Personal Installment Loans

  • Predictable monthly payments.
  • Structured repayment plan.
  • Can be used for various purposes.
  • Higher interest rates for bad credit borrowers.
  • Penalties for missed payments.

Title Loans

  • Quick cash using a vehicle as collateral.
  • No extensive credit checks.
  • Risk of losing the vehicle if you default
  • High interest rates and additional fees.
Key Takeaways

securedLoan icon

Secured Loans often offer favorable terms, but the risk lies in potentially losing your collateral.

loans icon

Unsecured Loans can be easier to obtain but might cost you more in the long run due to high interest.

creditBuilderLoan icon

Payday Loans are a quick fix but can easily trap borrowers in a cycle of debt.

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Personal Installment Loans provide structure, but those with bad credit might face steeper interest rates.

pickupTruck icon

Title Loans can be risky as the borrower's vehicle is on the line.

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Before committing to any bad credit loan, take the time to research multiple lenders and compare terms. A little due diligence can help you secure a more favorable rate and prevent unforeseen complications.

How To Get a Loan With Bad Credit


Check Your Credit Report

  • Obtain a copy of your credit report from major credit bureaus like Experian, Equifax or TransUnion. It's essential to know your status before applying.
  • Carefully review the report and correct any errors or discrepancies you find. This can occasionally boost your score.

Prepare Your Documents

  • Have your proof of identity on hand, such as a passport, driver’s license or other government-issued IDs.
  • Gather your proof of residence, which can be utility bills, a lease agreement or a mortgage statement.
  • Keep your income documentation, like recent pay stubs, bank statements or tax returns, readily accessible.

Demonstrate a Stable Income

  • If you've maintained consistent employment, especially with the same employer for an extended period, highlight this fact during your application.
  • Don't forget to include any alternative income sources you might have, such as income from rentals or freelance work.

Reduce Existing Debt

Make an effort to pay down as much of your current debts as possible. Reducing your debt improves your debt-to-income ratio and establishes you as a committed borrower.


Refrain from Making Multiple Loan Applications

  • Remember, each loan application can result in a credit check, which may slightly lower your score.
  • Lenders might be wary if they see multiple checks in a short duration on your credit history.

Ponder the Use of a Co-signer

If you know someone with a robust credit score willing to co-sign, it can significantly enhance your loan application. But, it's crucial to understand that they will be held accountable if you fail to make repayments.


Research and Apply with Caution

  • Dedicate some time to researching lenders to identify those that are more accommodating to applicants with bad credit.
  • Once you're certain about a lender's criteria and believe you meet them, proceed with the application, equipped with the documents and insights from the earlier steps.

Understand Potential Denials

  • If your loan application is declined, don't be disheartened. It's not uncommon, especially for individuals with bad credit.
  • Lenders are obligated to provide a reason for the denial. Understanding these reasons can provide valuable insights into areas you can improve.

Review and Address Issues

  • Examine the denial reasons. Common issues might include a high debt-to-income ratio, recent late payments or even errors on your credit report.
  • Work on these areas before applying again. For instance, if the issue is a high debt-to-income ratio, consider finding ways to increase your income or reduce debts.

Consider Alternative Lenders or Loan Types

  • Traditional banks aren't the only lenders. Consider credit unions, which often have more flexible lending criteria. Online lenders or peer-to-peer platforms might also be viable options.
  • Also, explore different loan types. For example, a secured loan (where you provide collateral) could be an option if you're denied a personal loan.

Seek Financial Counseling

  • Consider seeking advice from a credit counselor or financial advisor. They can offer personalized strategies to improve your creditworthiness.
  • Organizations like the National Foundation for Credit Counseling provide services that can help you understand your financial situation better and provide guidance on improving it.

Reapply When Ready

  • After addressing the issues leading to the denial and potentially waiting a few months to show improved financial behavior, you can consider reapplying.
  • Remember, each application can impact your credit score, so only reapply when you feel confident in your changes and the potential for approval.

Alternatives To Bad Credit Personal Loans

Having a low credit score can make finding a loan feel tricky. But don't worry! There are many other ways to get the money you need. Our table below shows different options you might consider. Some might be a better fit for you than others. Let's dive in and explore these alternatives to see which one works best for your situation.

Alternative Options

Secured Loans

Require an asset as collateral, like a car or home. They might come with lower interest rates due to reduced risk for lenders, but borrowers risk losing their assets in case of default.

Credit Unions

Not-for-profit, community-focused institutions that may offer flexible lending criteria. They often have more personalized services and might provide loans with better terms for those with bad credit.

Peer-to-Peer (P2P) Lending

Online platforms, such as LendingClub or Prosper, allow users to borrow directly from individual lenders. Rates and approval vary based on lender preferences.

Borrow from Family/Friends

A personal loan option that might offer more lenient terms. However, it's essential to have clear communication, set terms and possibly a written agreement.


Home Equity Lines of Credit allow homeowners to borrow against their home's equity. They offer lower interest rates but come with the risk of losing the home if defaulted.

Employer Advance/Payroll Loan

Some companies offer advances on paychecks or short-term loans, deducted from future paychecks. Useful for emergencies.

Credit Card Cash Advance

An option allowing users to withdraw a certain cash amount, often with high interest rates and fees. Best for short-term emergencies.

Non-Profit Credit Counseling

Organizations like the National Foundation for Credit Counseling offer debt management and budgeting advice. They can also negotiate with creditors to reduce rates or waive fees.

Save and Delay Purchase

Avoid debt by setting aside income for non-immediate needs, promoting responsible financial habits.

Personal Line of Credit

A flexible option allowing for a revolving balance up to a set limit. Interest is paid only on the borrowed amount. They may require a better credit standing.

Co-signer Loans

A loan secured with the help of someone with a better credit score. Co-signers are responsible if you can't make payments.

Pawn Shop Loans

Short-term loans are based on the value of personal items used as collateral. No credit check is required, but high interest rates apply.

401(k) Loan

Borrow against the value of a 401(k) retirement account. No credit check is needed, but potential long-term financial consequences exist.

Government and Local Assistance

Emergency financial assistance programs are provided by local or state governments, helping with needs like housing or food.

Microloans or Microfinancing

Small loans offered by organizations like Kiva to those without access to traditional lending, useful for personal needs or starting a small business.

Avoiding Scams and Predatory Lenders

When you're in a tough financial situation and need money fast, it can be tempting to take any offer that comes your way. However, it's essential to be cautious, as many scams and predatory lenders are out there looking to take advantage of people in vulnerable positions. Here's what you need to know to protect yourself:

Red Flags To Watch Out For

  1. Upfront Fees: Be wary of lenders asking for fees before you've even been approved for a loan. While some legitimate loans might have origination fees, they are typically deducted from the loan amount and not paid upfront.
  2. Too Good to Be True: If a deal seems too good to be true — like an extremely low interest rate despite your bad credit — it probably is.
  3. Pressure Tactics: Watch out for lenders that pressure you to make decisions quickly. A genuine lender will allow you time to read the terms and understand the loan.
  4. No Physical Address: Always check if the lender has a legitimate physical address. If they only have a P.O. Box or no address at all, this is a big red flag.
  5. No Credit Check Claims: While some lenders might be more lenient, be cautious of those claiming not to check your credit at all.
  6. Unsolicited Offers: If you receive unsolicited loan offers via email or phone, tread carefully. Legitimate lenders don't typically operate this way.

Dangers of Certain "Quick Cash" Loans

  1. Payday Loans: These are short-term loans with extremely high interest rates. While they might provide quick cash, they can lead to a cycle of debt that's hard to escape.
  2. Title Loans: Using your vehicle as collateral, these loans can seem appealing due to easy approval. However, you risk losing your car if you can't repay.
  3. Advance Fee Loans: Scammers might promise you a loan in exchange for an upfront fee. Once you pay, they disappear, leaving you with less money than before.

Always prioritize your financial safety. Thoroughly research potential lenders, trust your instincts and be cautious. If something feels off or too good to be true, it might be. It's wise to consult trusted sources, read reviews and even seek a second opinion before committing to any loan, especially if you're unsure about its legitimacy.

Frequently Asked Questions

Navigating the world of bad credit loans can often raise many questions. To help you better understand and make informed decisions, we've compiled a list of the most commonly asked questions and their straightforward answers.

Expert Advice on Best Bad Credit Loans

  1. How can someone tell that an online lender is legitimate and trustworthy when offering personal loans?
  2. Are there any additional fees associated with taking out a personal loan if the borrower has a low credit score?
  3. What advice would you give to those considering taking on a loan with a low credit score?
  4. Are there different terms and conditions for personal loans taken out by people with a poor credit score?
Bill Clifford
Bill Clifford

President at Mindful Mortgage Solutions

Frederick Floss, Ph.D.
Frederick Floss, Ph.D.

Professor of Economics and Finance

Jeff Campbell
Jeff Campbell

Founder at Middle Class Dad Money

Professor David Wilhelm
Professor David Wilhelm

Professor at San Diego Miramar College

Dr. Vladimir Kotomin, CFA
Dr. Vladimir Kotomin, CFA

Associate Professor of Finance at Illinois State University

Dr. Catherine Gilstein
Dr. Catherine Gilstein

Graduate Program Director and Assistant Professor at Chestnut Hill College

Kate Hao
Kate Hao

Founder and CEO of Happy Mango Credit

Todd Schwartz
Todd Schwartz

Chief Executive Officer, Executive Chairman, and Founder of OppFi

Di Qing
Di Qing

Assistant Professor and Director of Financial Planning at Carolina University

Qian Wang, Ph.D.
Qian Wang, Ph.D.

Associate Professor of Finance, College of Business and Computing at Georgia Southwestern State University

Nirit Rubenstein
Nirit Rubenstein

CEO & Co-founder of Dovly

Malcolm Robinson, Ph.D.
Malcolm Robinson, Ph.D.

Professor of Economics at Thomas More University

About Christopher Boston

Christopher Boston headshot

Christopher Boston is a Senior Manager of Content Strategy and SEO at MoneyGeek. For over half a decade, they have crafted hundreds of articles spanning the higher education, mortgage and personal loan industries. Christopher is passionate about using their skills and experience to create quality content that helps people save and spend their earnings efficiently.


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.

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