Best Loans for Bad Credit in 2024
Updated: April 26, 2024
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With a MoneyGeek score of 94 out of 100, Happy Money stands out as the best overall lender for consumers with low credit scores. This provider stands out for its clear loan terms, quality service and swift application process. Avant follows closely behind with a MoneyGeek score of 93 out of 100. It features flexible loan terms, an efficient application system and a solid reputation among customers.
A low credit score, typically meaning a FICO score below 670 or a VantageScore less than 661, isn’t the end of the world. Bad credit can be subjective; what’s considered bad for one person may not be bad for another. MoneyGeek compared lenders based on factors like interest rates, loan terms, customer service, application process and lender reputation to gather our recommendations for the best loans for people with low credit scores.
- Happy Money
- 94MG Score
- 11.72% to 17.99%APR Range
- 640Minimum Credit Score
- $5,000 to $40,000Loan Amount Range
- 24 to 60 monthsRepayment Terms
Happy Money is the best overall lender for bad credit loans, with a MoneyGeek score of 94 out of 100. It also scored very well at the state level due to its competitive average APR. This fintech company partners with federally insured credit unions to offer personal loans specifically for debt consolidation. Borrowers with a minimum credit score of 640 can take out loans from $5,000 to $40,000, with repayment terms between 24 and 60 months. There are no late, early repayment or other fees, but an origination fee ranging from 1.5% to 5.5% will be deducted from the loan amount at the time of funding.
Pros
- No late, early repayment or other fees
- Performs soft credit inquiries
- Lower maximum APR than competitors
Cons
- Only offers loans for debt consolidation
- Charges an origination fee
- Doesn’t accept co-signers or co-borrowers
Best Overall Loan for Bad Credit
- Avant
- 93MG Score
- 9.95% to 35.99%APR Range
- 580Minimum Credit Score
- $2,000 to $35,000Loan Amount Range
- 12 to 60 monthsRepayment Terms
Avant is our runner-up pick for lenders serving consumers with low credit scores, earning a MoneyGeek score of 93 out of 100. Although it’s not a lender, it works with WebBank, a state-chartered FDIC bank member, to originate personal loans. It only requires a minimum credit score of 580 to qualify for its personal loans. Interested applicants can borrow from $2,000 to $35,000, with repayment terms between 12 and 60 months. Avant doesn’t charge prepayment penalties but imposes administration fees up to 9.99%, as well as late and dishonored payment fees.
Pros
- Minimum credit score requirement of 580
- No prepayment penalty
- Does soft credit pulls
- Next-day funding available
Cons
- Maximum loan amount of $35,000
- Charges late, administration and dishonored payment fees
- No co-signers or co-borrowers allowed
Runner-Up Best Loan for Bad Credit
- Achieve
- 93MG Score
- 8.99% to 35.99%APR Range
- 620Minimum Credit Score
- $5,000 to $50,000Loan Amount Range
- 24 to 60 monthsRepayment Terms
With a MoneyGeek score of 93 out of 100, Achieve can be a good option for consumers with low credit scores. Achieve originates loans from Cross River Bank, a New Jersey State Chartered Commercial Bank, or Pathward, an FDIC member. It requires a minimum credit score of 620, and those who qualify can borrow from $5,000 to $50,000, which can be repaid in 24 to 60 months. Aside from not charging prepayment penalties, Achieve also offers rate discounts for adding a qualified co-borrower, showing proof of sufficient retirement funds or choosing to use the loan funds to pay creditors directly.
Pros
- Offers interest rate discounts
- Doesn’t charge prepayment penalties
- Conducts soft credit checks
Cons
- 1.99% to 6.99% origination fee
- Loan amount caps at $50,000
- Not available in some states
Other Options for Bad Credit Loans
- Prosper
- 91MG Score
- 8.99% to 35.99%APR Range
- 600Minimum Credit Score
- $2,000 to $50,000Loan Amount Range
- 24 to 60 monthsRepayment Terms
Another solid option for bad credit loans is Prosper, which earned a MoneyGeek score of 91 out of 100. It offers personal loans originated by WebBank, an FDIC-insured industrial bank. Loan amounts range between $2,000 and $50,000, while repayment terms are available from 24 to 60 months. Prosper sets a minimum credit score requirement of 600 for its personal loans and allows for joint applications. However, there’s an origination fee, which varies between 1% and 7.99%, in addition to charges for check payments, late payments and insufficient funds.
Pros
- No prepayment penalties
- Allows joint applications
- Does soft credit inquiries
Cons
- Charges origination and late fees
- $50,000 borrowing limit
How to Repair Bad Credit
Improving a low credit score takes time. Alvin Yam, CFP, provides some strategies to repair your credit gradually:
Check Your Credit Reports (1–2 Weeks)
Obtain your free annual credit reports from the three major bureaus: Experian, Equifax and TransUnion. Review them for errors, missed payments or fraudulent accounts that could drag down your scores. Dispute any inaccuracies through the credit bureaus' dispute processes.
Pay Bills on Time (2–6 Months of Good Payment History)
Payment history is the most significant factor impacting your scores. Get current on any past-due accounts and commit to paying all future bills on time, every time. This positive payment history will start offsetting previous delinquencies within a few months.
Reduce Credit Balances (3–12 Months)
Your credit utilization ratio, or the amount of revolving debt you carry compared to total credit limits, comprises about 30% of your score. Focus on paying down credit card balances to below 30% of the limits. Incremental improvements in this ratio can boost your score.
Avoid New Credit Applications (6-12 Months)
Too many hard inquiries from applying for new credit can hurt your scores. Take a break from new applications until your credit improves. Each inquiry stays on your report for about one year.
Build Positive Credit History (12–24 Months)
Consider a credit-builder loan or a secured credit card to build positive payment references over time. These help demonstrate your ability to manage new credit responsibly.
Be Patient (18–36 months)
You can't repair a low credit score overnight. However, consistent debt payments, limited credit usage and the avoidance of new delinquencies should gradually improve your score every few months. Most negative records should fall off your reports after seven years.
How to Choose the Best Bad Credit Loan for You
To find the best bad credit loan that fits your needs and circumstances, make sure to follow these steps when comparing personal loan lenders:
Determine Your Maximum Budget
Before applying for a loan, carefully calculate your financial capacity to handle monthly payments. Establishing this budget helps prevent the risk of default, which is especially important as loans for people with low credit scores can have higher interest rates and more stringent conditions.
Check Your Credit Report
Review your credit report for inaccuracies that could negatively impact your loan conditions. By understanding your credit status, you can dispute any errors before lenders assess your application and anticipate the loan terms you might receive.
Compare Interest Rates
Interest rates on bad credit loans can vary widely between lenders. Comparing these rates can help you find a manageable loan that minimizes your payment over time, especially since higher rates significantly increase the cost of borrowing.
Look Out for Fees
Additional personal loan fees can inflate the total cost of a loan beyond the principal and interest. As such, pay close attention to all associated fees, like origination fees or charges for early repayment, to fully understand your financial commitment.
Understand Eligibility Requirements
Familiarizing yourself with a lender’s specific eligibility criteria can save you time and protect your credit score unnecessary inquiries. This ensures that you only apply for loans where you meet the basic qualifications, improving your chances of a successful application.
How to Identify Bad Credit Loan Scams
To steer clear of bad credit loan scams, watch out for these red flags:
No credit check claims: Legitimate lenders always review your credit history, so claims of "no credit check" are often a scam.
Upfront fees: If a lender asks for fees before you receive any money, it's likely not legitimate, as most reputable lenders deduct fees from the loan amount.
Too good to be true offers: Offers that seem too favorable compared to other lenders may be a lure to scam you.
Unsecured website: A secure website starts with "https," indicating that your information is encrypted; an unsecured webpage is a big red flag.
Vague terms and conditions: Legitimate lenders provide clear and detailed loan terms; ambiguity here is a sign of trouble.
Unsolicited offers: If you receive a loan offer without applying, especially via phone or email, be wary — it's a common tactic among scammers.
No physical address: A legitimate lender will have a physical office address; the absence of one is a clear warning sign.
Pressure tactics: Scammers often pressure you to act quickly; reputable lenders allow you to take your time and read the fine print.
It's common for scammers to pose as legitimate lenders to target hopeful borrowers with low credit scores. Having these red flags in mind will help you keep your information and finances secure.
FAQ About Loans for Bad Credit Scores
MoneyGeek has compiled answers to some frequently asked questions about loans for low credit scores to provide valuable insights and help you make well-informed decisions.
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:
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.
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.
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.
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.
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.
sources
- Experian. "What Is a Good Credit Score?." Accessed April 26, 2024.
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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