Best Loans for Bad Credit in 2024

The highest interest rate for loans for people with low credit scores can vary widely depending on the lender and state regulations. In MoneyGeek’s analysis, the maximum rate for unsecured personal loans is 35.99% APR.

The funding speed varies by lender but some can provide funds as quickly as the same day or the next business day after approval. Online lenders often have faster processing times compared to traditional banks.

Yes. Many people use loans for debt consolidation, including paying off high-interest credit card debt. This can be a smart strategy if the loan’s interest rate is lower than a credit card's.

Payday loans are typically small, short-term loans with very high interest rates, intended to be repaid by your next payday. Personal loans for low credit scores, on the other hand, are structured more like traditional loans with longer repayment terms and potentially lower interest rates.

Yes, having a co-signer with good credit can significantly improve your loan offer. Lenders are more likely to offer lower interest rates and better terms if someone with a stronger credit history offsets the risk.

If you're unable to make a loan payment, contact your lender as soon as possible. Many lenders are willing to work with borrowers to adjust payment plans, extend due dates or explore hardship options.

Applying for a loan can potentially impact your credit score, though the effect is typically minor. When you submit a loan application, lenders will perform a hard credit inquiry or hard pull on your credit report. This hard inquiry is recorded on your credit report and can cause a small, temporary drop in your credit score, usually between 5 and 10 points.

However, this drop is generally not significant, and your score should rebound within a few months as long as you maintain good credit habits. If you shop around and compare rates from multiple lenders within a short period of time (typically 14–45 days), those hard inquiries may be treated as a single inquiry, minimizing the impact on your score.

It's generally better to explore options specifically designed for business financing, such as business loans, lines of credit or alternative funding sources like crowdfunding or investor financing. These products are tailored to businesses' unique needs and may offer more favorable terms and flexibility.

Defaulting on a loan can have severe consequences for your credit health. Here are some potential outcomes:

1. Late fees and penalty charges: Lenders may impose late fees, penalty interest rates or other charges for missed payments, which can quickly accumulate and increase the overall loan cost.

2. Damage to credit score: Payment defaults and delinquencies are reported to the major credit bureaus, resulting in a significant drop in your credit score. This can make it harder to qualify for future credit or loans and may also impact your ability to rent an apartment, get hired for certain jobs or obtain insurance at favorable rates.

3. Debt collection efforts: If you continue to miss payments, the lender may eventually transfer your account to a third-party debt collection agency, which can engage in aggressive collection tactics, including phone calls, letters and potentially legal action.

4. Wage garnishment and asset seizure: In some cases, lenders may sue borrowers for defaulted loans and obtain court judgments that allow them to garnish your wages or seize assets like bank accounts or property to recover the outstanding debt.

5. Difficulty obtaining future credit: A loan default will remain on your credit report for up to seven years, making it challenging to qualify for new credit cards, loans or other financing during that time.