Updated: November 27, 2024
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Happy Money provides the best bad credit loans, earning a MoneyGeek score of 94 out of 100 for its excellent reputation, transparency, broad range of repayment terms and good customer service. Achieve is the runner-up with a MoneyGeek score of 93 out of 100, offering a transparent loan process and flexible loan terms.
A low credit score, which is often a FICO score below 670 or a VantageScore under 661, isn’t the end of the world. What’s considered bad credit can vary from person to person.
Before getting a personal loan for bad credit, check your credit report, compare interest rates and understand the lender’s eligibility requirements.
Watch out for lenders that advertise no credit checks or those with upfront fees or vague terms and conditions to avoid bad credit loan scams.
Knowing how much you need to pay for a personal loan monthly is helpful if you have a less-than-perfect credit history. To help estimate your costs before taking out a loan, use our personal loan calculator by entering your loan amount, loan term and interest rate.
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Improving a low credit score takes time. Alvin Yam, CFP, shares some strategies to repair your credit gradually:
Get 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.
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.
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.
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.
Consider a credit-builder loan or a secured credit card to build positive payment references over time. These show your ability to manage new credit responsibly.
Improving a low credit score takes time. Consistent debt payments, limited credit use and avoiding new delinquencies can gradually raise your score over a few months. Most negative marks typically disappear from your report after seven years.
To find the best bad credit loan that fits your needs and circumstances, follow these steps when comparing personal loan providers:
Before considering a loan, identify how much you can afford in monthly payments without straining your finances. This will help you narrow down options to loans within your budget.
Review your credit report to understand where your credit stands and address any errors. Knowing your credit score can also give you a realistic sense of the loan terms you may qualify for.
Research and compare rates from different lenders, as interest rates can vary widely for borrowers with bad credit. Choosing the lowest available rate can save you money over the life of the loan.
Late fees, origination fees and prepayment penalties add to the total loan cost. Understanding these personal loan fees upfront helps you avoid unnecessary expenses.
Each lender has unique eligibility criteria, such as income minimums or specific credit score requirements. Make sure you meet these requirements to avoid rejections and focus on lenders that are more likely to approve your application.
To steer clear of bad credit loan scams, watch out for these red flags:
No credit check claims
Legitimate lenders constantly review your credit history, so "no credit check" claims 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 costs 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 one is a 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 — scammers often use this tactic.
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.
We compiled answers to some common 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 varies widely depending on the lender and state regulations. 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 than 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 are structured more like traditional loans with longer repayment terms and potentially lower interest rates.
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 can't 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 slightly impact your credit score. When you apply, lenders conduct a hard credit inquiry, which can cause a small, temporary drop of 5 to 10 points.
However, this drop is usually minor, and your score should bounce back in a few months if you keep up good credit habits. If you compare rates from multiple lenders within 14 to 45 days, those inquiries may be treated as one, reducing the effect on your score.
It's usually better to explore options for business financing, such as business loans, lines of credit or alternative sources like crowdfunding or investor financing. These options are tailored to meet business needs and offer better terms and flexibility.
Defaulting on a loan can have severe consequences for your credit health. Here are some potential outcomes:
MoneyGeek ranked bad credit lenders differently at the national versus state levels. Our personal loan scoring system analyzed each lender's performance in areas that matter most to borrowers, assigning scores based on whether specific features were present or absent across key categories.
About Zachary Romeo, CBCA
Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.
Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.
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
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