Personal loans for bad credit are typically meant for borrowers who have a credit score less than 580. While you may find yourself paying higher interest than other borrowers, if you have the ability to repay, there are lenders that can work with you.
Check your credit score. Before you get started, get a recent estimate of your credit score — knowing this can help you find a lender that you’re eligible for.
Shop around. Compare lenders that you can qualify with by looking at factors like eligibility, loan amounts, APR and how long it takes to get your funds.
Prequalify with multiple lenders. Once you’ve narrowed down your list, apply with a few of your top picks to find out what rates, terms and loan amounts you might qualify for. You can combine this and the shopping around step by using a connection service — or multiple connection services.
Apply for the loan. Depending on your lender, you may be able to complete an application online or in store. You might have to submit documents verifying your income and identity before you can sign the contract.
Receive your funds. Most lenders transfer the funds to your bank account, though some might offer a check or even prefilled debit card.
How long does it take?
The time it takes for a lender to finalize your loan and get you funds will vary significantly. Some may be able to finish everything the same day you apply, while others may take a week or two. Check with the lender to get an idea of how long the entire process takes before applying.
What information do I need to apply?
While it varies by lender, you’ll typically be asked to provide the following:
Social Security number
Date of birth
Pay stubs, tax returns or bank statements
Where can I find a personal loan if I have bad credit?
While you might not be able to borrow from a large bank when you have poor credit, you still have several options to choose from.
Online lenders. Online lenders tend to have more forgiving credit requirements than other providers, since many consider factors other than credit when you apply.
Interest rates on a bad-credit personal loan will vary by lender, though you could see rates as low as 28% APR if you borrow from a federal credit union or over 700% APR if you opt for a short-term loan. APRs are higher when you have poor credit since you pose more of a risk to the lender.
While a low credit score won’t necessarily prevent you from finding a loan, your score will impact how much you can borrow and the interest rate you receive. Lenders view lower credit scores as a sign that a borrower is more likely to miss a payment or default on their loan.
Lenders that extend loans to borrowers with bad credit tend to look at your income, current debts and ability to repay instead of your credit score.
6 tips to get a loan with a low credit score
These tips won’t guarantee you’ll be approved for a loan, but they can help increase your chances when you have bad credit.
Check your credit report. Request a free copy of your credit report from one of the three main credit bureaus and look for any errors. Contact your creditor if you notice a mistake to get it fixed before you apply for a loan.
Rebuild your credit. If you aren’t pressed for time, take steps to rebuild your credit before you apply — or consider a credit-builder loan. While it will take time and careful budgeting, improving your score means lower rates in the future and a better chance of being approved for larger loans, like a car loan or mortgage.
Compare multiple bad-credit lenders. If you can’t wait to rebuild your credit, then take the time to prequalify with a few different lenders to find the best offer available to you. You can even let an online loan connection service do the work for you.
Find a cosigner. Having a friend or family member willing to vouch for you and cosign a loan can significantly increase your chances of approval. But they’ll be on the hook for repayments should you find yourself unable to pay.
Opt for a secured loan. Lenders may be more willing to offer you a personal loan — and at lower rates — if you back it with collateral. Just be careful: Defaulting on a secured loan means losing whatever asset you put on the line.
Watch out for predatory lenders. Borrowers with bad credit tend to be targeted more with personal loan scams, so do your research before applying. Check consumer review sites like the Better Business Bureau and Trustpilot to verify the lender is legit. And read over your loan agreement carefully to ensure you understand all of the costs that come with borrowing.
How can I tell if I have bad credit?
The easiest way to know your credit score is to check your credit report. You’re entitled to a free copy of your credit report every 12 months from any of the three main credit bureaus: TransUnion, Equifax and Experian. You can also read our guide to bad credit to learn more about the ways you can tell if your credit is below average.
What to avoid when borrowing with bad credit
Applying for a bad-credit personal loan? There are a few things to avoid:
Fully applying for multiple loans at once. Multiple hard pulls of your credit could impact your score negatively. Instead, try prequalifying with a few lenders to get an idea of what rates you can qualify for.
Just skimming the rates and fees. Many loans for people with bad credit can be costly, so carefully read over the loan contract before you sign. This can help you determine if a lender is right for you — and if you can afford your loan.
Not sure a personal loan is right for you? Consider these alternatives instead:
Credit card cash advance. You can withdraw a cash advance from an ATM if you have a credit card. Check your credit card advance rates first. While they can be high, they might not be as costly as a personal loan with bad credit.
Pay advance. Pay advance apps like Earnin allow you to get an advance on the hours you’ve already worked for an optional tip. And some employers offer pay advances as an employee benefit.
Friend and family loans. Your social circle might be willing to help you out for a lower rate than a personal loan provider. Consider using a service like LoanWell to come up with a legally binding contract.
Bad credit isn’t the end of the line when it comes to taking out a personal loan. Credit unions, CDFIs 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.
It’s possible, but your options will be primarily limited to short-term loans. These can be incredibly expensive and come with the risk of trapping you in a cycle of debt, so consider taking out a credit-builder loan or improving your credit before you borrow.
Elizabeth Barry is Finder's global fintech editor. She has written about finance for over five years and has been featured in a range of publications and media including Seven News, the ABC, Mamamia, Dynamic Business and Financy. Elizabeth has a Bachelor of Communications and a Master of Creative Writing from the University of Technology Sydney. In 2017, she received the Highly Commended award for Best New Journalist at The Lizzies. Elizabeth has found writing about innovations in financial services to be her passion (which has surprised no one more than herself).
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