Can You Get a Personal Loan With Bad Credit?

It’s possible to get a personal loan with a lower credit score. If you follow the right steps and repay the loan responsibly, you could even increase your credit score over time. When accessing a loan with a low credit score, it’s important to remember to avoid high-interest or predatory loans that could put you in a difficult financial situation.

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Last Updated: 10/26/2022
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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.

Key Takeaways

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Credit scores ranging between 300 and 579 are usually considered “bad” by lenders. You usually need a minimum credit score of 580 to qualify for a personal loan.

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Having a bad credit score can limit your personal loan options. Plus, you may be offered smaller loan amounts or a higher APR.

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In addition to personal loans, you may be able to get cash advances, credit cards or payday loans with bad credit.

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
  • Credit Score
    FICO
    VantageScore
  • Very Poor

    Under 300

    300-499

  • Poor

    300-579

    500-600

  • Fair

    580-669

    601-660

  • Good

    670-739

    661-780

  • Very Good

    740-799

  • Excellent

    800-850

    781-850

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.

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CASH ADVANCES

A cash advance is a short-term loan offered by credit card issuers and banks. Unlike a personal loan, a cash advance application doesn’t involve credit checks. This means those with bad credit can have quick access to cash — usually through ATMs, banks or convenience checks.

Although getting a cash advance is easy and convenient, it does have some drawbacks. These include high-interest rates, cash advance fees and ATM fees. You may also risk hurting your credit score because added debt increases your credit utilization.

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CREDIT CARDS

Credit cards are a financial tool issued by banks that can be used as short-term loans. They come with a pre-set credit limit that and you can use them for various personal expenses. Low-credit borrowers may benefit from credit cards for bad credit, which can help them establish or improve credit.

You may choose between a secured credit card, which requires a security deposit or an unsecured credit card, which doesn’t need any deposit. Shop around and compare each card’s features to get the best option for your needs and circumstances.

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PAYDAY LOANS

Low-credit borrowers in need of quick cash may also consider payday loans. These loans are less than $500 and typically must be repaid in two to four weeks. Getting a payday loan only requires a pay stub, so those with bad credit may apply for one.

However, payday loans are expensive and carry high-interest rates. Another factor to keep in mind is that they aren’t widely available. Washington DC and 18 states have laws that prohibit or protect payday loan borrowers.

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CALCULATING LOAN PAYMENTS

Before pursuing a loan application, it’s essential to calculate your loan payment and determine if you can afford to pay it back when it’s due. Paying your bills on time and avoiding delinquent debts can help you improve your credit score.

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.

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ONLINE PERSONAL LOAN LENDERS

Online lenders allow borrowers to apply for personal loans in the comfort of their homes. The application is usually fast and convenient and requires documents such as identification, address verification and proof of income. Some online lenders also allow you to pre-qualify for a personal loan, so you can see your interest rates without hurting your credit score.

Many online lenders feature flexible loan amounts, competitive interest rates, minimal fees and fast fund disbursement times. Examples of online lenders include LightStream and Upgrade.

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CREDIT UNIONS

You can get a personal loan with bad credit from credit unions like PenFed and Navy Federal. Credit unions may offer more attractive terms like lower interest rates and fees than traditional banks.

Getting a loan from a credit union requires membership. To become a credit union member, you need to meet requirements, like having a family member who belongs to the credit union, working for a particular employer or living in a specific geographic location.

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DIRECT AND LOCAL LENDERS

Direct lenders are financial institutions that offer personal loans. These can include local and online banks, credit unions and online direct lenders. Some of them accept borrowers with bad credit, though they may charge higher interest rates.

Local lenders allow you to work with a loan officer at a local bank branch or credit union. Your relationship with your local lender may help you score perks like rate discounts despite the bad credit. However, some local lenders take longer to process loans or require you to visit their branch to apply for a personal loan.

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HOW TO COMPARE LOAN LENDERS

When shopping around for bad credit loans, it pays to compare multiple lenders to get the best deal possible. Make sure to look into what each lender has to offer regarding APR ranges, available loan amounts, repayment terms, disbursement times and associated fees. It’s also vital to gather information about their requirements to see if you qualify for their personal loans.

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.

1

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.

2

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.

3

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.

4

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.

5

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.

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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.