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A bad credit loan is a loan from a provider that accepts borrowers with low credit scores or no credit history. The credit scoring company Fair Isaac Corporation (FICO) defines a poor credit score as a personal credit score below 580 — though some lenders consider a credit score below 670 to be bad credit.
If your credit scores falls within this range, your options are limited. Those that accept bad credit typically charge borrowers who have bad credit APRs above 30%. Getting approved for a bad credit personal loan at an affordable rate can take more steps than your average personal loan application.
Following these steps can help you find the best personal loan available to you — even with bad credit.
It helps to check both your credit report and credit score before you apply for a personal loan. This helps ensure your score is accurate — and avoid a lower rate than you would otherwise qualify for.
Before you start comparing lenders, check your credit report for mistakes that lower your credit score.
Once you're sure your credit report is accurate, get an estimate of your personal credit score.
Credit score estimates are based on a soft credit check. This means they won't affect your credit score — but also aren't guaranteed to reflect what you lender sees.
Start your search by looking for personal loan providers with a minimum credit score requirement lower than your score. Then compare using factors like loan amounts, terms, restrictions on the use of loan funds, interest rates and fees. Also consider a variety of different types of lenders and lending services:
Some short-term lenders offer what they call installment loans for people with a bad credit score or no credit history. In fact, many don't conduct a credit check at all. But they're also the reason the average APR for bad credit borrowers was over 100% in 2019, according to a report by personal loan marketplace LendingTree.
These lenders get around state laws that limit personal loan rates by offering shorter repayment terms and loan amounts under $10,000. These can lead to high monthly repayments and come with the risk of getting caught in a cycle of debt. Save them for emergencies when you can't qualify for a regular personal loan.
Get started on our search by using our personal loans comparison table. Fill out the form to get personalized results. Or, read about our picks for the best personal loans for bad credit.
Prequalifying for a personal loan gives you an estimate of the interest rate, origination fee, loan amounts and terms you might be eligible for.
After you've prequalified for a loan, use our calculator to get an estimate of your monthly payment and total cost.
Enter your estimated loan amount, term and APR for an estimate of monthly paments.
|Loan terms (in years)|
If you prequalify for a loan, the lender will send you instructions on how to complete the application. Often, you can complete the form online — even if you apply with a bank or credit union. However, in some cases you may need to meet with a loan officer.
While it varies by lender, you’ll typically be asked to provide the following information and documents:
If you're applying for a secured loan, you'll also need to provide information about the collateral you're using to back the loan. Usually an unsecured loan requires less information.
Typically, lenders run a hard credit check after you submit the application or once you accept the offer. This will show up on your credit report and lower your credit score by about five points for the next 12 months, according to FICO.
Once approved, your lender will send you a loan offer. With an online lender, you can receive your offer in less than a day. Loan approvals from banks or credit unions can take at least a week — especially if it's a secured. Read over your loan agreement, taking note of the following important information.
If the rates and terms are close to what you expected, sign and return your loan agreement to the lender. Otherwise, go back to another top choice and follow their instructions to apply for a loan. This shouldn't affect your credit again as long as you apply within two weeks.
Once you sign your loan, you should receive your loan funds in your bank account within three business days. If you applied for a debt consolidation loan, some lenders may send the funds directly to your creditors.
These tips won’t guarantee you’ll be approved for a loan, but they can help increase your chances when you have bad credit.
Follow these steps to up your chances of qualifying for a personal loan with a low credit score.
Not sure a personal loan is right for you? Consider these alternatives instead.
Bad credit isn’t the end of the line when it comes to taking out a personal loan. Credit unions, local banks and online lenders all offer options, though how much you’re able to borrow might be limited. And you’ll likely face higher interest rates and fees, since you pose more of a risk to the lender.
Learn more about how it all works with our guide to personal loans.
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