Finding the right loan when you have bad credit can be tricky. You might feel stuck or overwhelmed, but there are still options available. Best personal loans for bad credit offer a chance to get the funds you need, even if your credit score isn’t where you want it to be.
In this guide, we’ll go over the best personal loan options for people with poor credit. We’ll cover everything from how these loans work to tips for improving your chances of approval. If you’re ready to take control of your finances, keep reading!
What Are Personal Loans for Bad Credit?
A personal loan for bad credit is a type of unsecured loan designed for borrowers with low credit scores. These loans don’t require collateral, which makes them more accessible but also riskier for lenders. Because of that, interest rates are usually higher for people with bad credit.
Bad credit typically means a FICO score below 580. However, different lenders have different criteria, and some may consider a score up to 650 as “poor.” In any case, if your score falls into this range, securing a loan may seem harder, but it’s not impossible.
How They Work
Personal loans for bad credit work just like regular personal loans. You borrow a set amount of money from a lender and agree to repay it over a fixed term, usually with a fixed interest rate. The amount you can borrow, the interest rate, and your repayment term will depend on your creditworthiness and financial history.
These loans are often used for:
- Debt consolidation
- Medical bills
- Home improvements
- Emergency expenses
They may be a good option if you need money fast but don’t have assets to offer as collateral.
How to Qualify for Personal Loans with Bad Credit
Getting approved for a personal loan with bad credit is possible. It all comes down to understanding the criteria lenders use and what they look for in your application.
1. Credit Score
Most lenders will look at your credit score when deciding whether to approve your loan. While a score below 580 is considered bad, many lenders will still offer loans to people with scores as low as 500. Just keep in mind that the lower your score, the higher your interest rate may be.
2. Income Verification
Lenders want to know that you can repay the loan. One of the main factors they consider is your income. Be prepared to provide proof of income through pay stubs, tax returns, or bank statements.
3. Debt-to-Income Ratio
Lenders will also look at your existing debt and compare it to your income. This is called your debt-to-income (DTI) ratio. If most of your income goes to paying off existing debts, lenders might hesitate to approve you for another loan.
4. Employment History
A stable job history shows lenders that you’re reliable. If you’ve been with the same employer for a while, it can improve your chances of getting approved.
5. Co-signer
Some lenders allow you to add a co-signer to your loan application. A co-signer with better credit can make it easier to get approved. Just keep in mind that if you default on the loan, your co-signer will be responsible for the repayment.
Best Personal Loans for Bad Credit in 2024
If you have bad credit, here are some of the best lenders that specialize in offering personal loans to people with poor credit scores.
1. Upstart
Best for Fast and Flexible Funding
Upstart uses a unique method to assess loan applicants. Rather than focusing solely on your credit score, they also consider your education, employment, and income. This makes them a great option for borrowers with limited credit history but a stable job.
- Loan Amounts: $1,000 to $50,000
- APR Range: 6.18% to 35.99%
- Loan Terms: 3 to 5 years
- Credit Score: Minimum of 300
- Pros: Fast approval, quick funding, flexible terms
- Cons: Higher interest rates for those with low credit scores
2. OneMain Financial
Best for Secured Loans
OneMain Financial offers both secured and unsecured personal loans. If you’re open to using collateral, like your car or home, you might be able to get a lower interest rate. This is a good option if you’re willing to put up an asset to secure a loan.
- Loan Amounts: $1,500 to $20,000
- APR Range: 18% to 35.99%
- Loan Terms: 2 to 5 years
- Credit Score: Flexible, but higher rates for poor credit
- Pros: High approval rates, physical branches for customer support
- Cons: Secured loans require collateral
3. Avant
Best for a Simple Application Process
Avant is another great option for people with bad credit who need fast, hassle-free loans. The application process is straightforward, and they offer a fast approval time. If you need quick access to funds, Avant is a solid choice.
- Loan Amounts: $2,000 to $35,000
- APR Range: 9.95% to 35.99%
- Loan Terms: 2 to 5 years
- Credit Score: Minimum of 580
- Pros: Fast application process, no prepayment penalty
- Cons: High rates for low credit scores
4. LendingClub
Best for Debt Consolidation
LendingClub is a peer-to-peer lending platform. This means they connect borrowers with individual investors who fund the loans. They are a great option if you need to consolidate debt or pay for a big expense.
- Loan Amounts: $1,000 to $40,000
- APR Range: 6.34% to 35.89%
- Loan Terms: 3 to 5 years
- Credit Score: Minimum of 600
- Pros: Great for debt consolidation, low rates for qualified borrowers
- Cons: Minimum credit score of 600 required
5. BadCreditLoans.com
Best for Loan Marketplace
BadCreditLoans.com isn’t a direct lender, but a platform that connects you to lenders who specialize in bad credit loans. You can find various types of loans on this site, including personal loans, payday loans, and auto loans. It’s a good option if you’re looking for multiple choices.
- Loan Amounts: $500 to $5,000
- APR Range: 5.99% to 35.99%
- Loan Terms: Varies by lender
- Credit Score: Minimum of 500
- Pros: Multiple lenders, quick approval
- Cons: Loan terms vary, can have high rates for low credit
How to Improve Your Chances of Getting Approved for a Loan
Even with bad credit, there are steps you can take to improve your chances of getting a loan. Here are a few tips:
1. Check Your Credit Report
Before applying for a loan, review your credit report. Look for any errors or discrepancies that might hurt your score. If you find any, dispute them right away to improve your score.
2. Consider a Co-signer
Having a co-signer with good credit can increase your chances of approval and help you get a better interest rate. Just be sure you can meet the repayment terms, as your co-signer will be on the hook if you miss payments.
3. Shop Around
Different lenders have different requirements and rates. It’s worth taking the time to compare multiple options. Use a loan comparison tool to make the process easier.
4. Work on Your Debt-to-Income Ratio
If possible, try to reduce your existing debts before applying for a loan. This can help improve your debt-to-income ratio, which is an important factor in the approval process.
5. Offer Collateral
A secured loan, where you pledge an asset like a car or savings account, may help you get approved with better terms. Just make sure you can make the payments, or you risk losing the asset.
Conclusion
Securing a personal loan with bad credit is possible, though it may require some extra effort and research. There are many lenders that specialize in offering loans to people with poor credit scores. Whether you’re consolidating debt, covering medical expenses, or dealing with an emergency, there are options out there for you.
Be sure to shop around, compare rates, and consider adding a co-signer or offering collateral to improve your chances. With a little patience and planning, you can find the loan that works best for your financial situation.
Frequently Asked Questions (FAQ)
1. What credit score is considered “bad”?
A credit score below 580 is generally considered bad. However, some lenders may approve loans for scores up to 650, though the terms may not be as favorable.
2. Can I get a personal loan with bad credit?
Yes, many lenders specialize in personal loans for people with bad credit. However, these loans often come with higher interest rates and shorter terms.
3. How do I improve my chances of getting a loan with bad credit?
Check your credit report for errors, reduce your existing debt, consider applying with a co-signer, and shop around for the best rates.
4. Are secured loans better for people with bad credit?
Secured loans often have lower interest rates than unsecured loans because they are backed by collateral. If you’re willing to risk an asset, this can be a good option.
5. How long does it take to get approved for a loan with bad credit?
Approval times vary by lender. Many online lenders approve loans within a few minutes, and funds can be disbursed within a couple of business days.