Unsecured personal loans have some of the strictest borrowing requirements of any credit product. Fortunately, there are personal loans for people with bad credit — you just have to find them.
Getting a personal loan with bad credit is tricky, but possible. If you’re prepared for higher costs and are willing to make some tradeoffs, you can find a loan that fits.
How to get a personal loan with bad credit
Getting a personal loan with bad credit can be done, but borrowers should be aware that they will face higher personal loan rates and fees than those with better credit.
With these high costs, it’s even more important to carefully consider your options. Here are some personal loans for people with bad credit.
Secured personal loans
Borrowers can qualify for secured personal loans with bad credit more easily than unsecured loans, but they’ll have to put up a personal asset as collateral.
The collateral of a secured loan serves as a guarantee of repayment for the lender. If the borrower defaults, the lender can seize the collateral and use it to satisfy the debt.
There are a few different types of secured loans. Some are secured by financial assets, such as a savings-secured loan or a certificate-secured loan. Others are secured by property, such as a home equity loan or an auto equity loan.
Consider this option carefully and make sure you can repay the loan responsibly. Should you fail to do so, you could end up losing your assets and hurting your finances.
Credit union personal loans
As not-for-profit financial institutions, credit unions offer many types of products to help members improve their financial situation.
Credit unions often have more relaxed borrowing standards on their personal loans than banks, offering them to a wider range of credit backgrounds.
Some credit unions even offer loans specifically for people with bad credit. These might include second-chance personal loans or small credit builder personal loans. Credit unions offer these products to help borrowers rebuild credit and get their finances back on track.
Online personal loans
In addition to credit unions, online lenders can be another option to consider if you have poor credit. Some online lenders have relaxed borrowing requirements.
Customers with Avant personal loans, for instance, typically have credit scores between 600 and 700, according to the online lender. These scores would be considered only fair or even poor.
Avant and other lenders might be more likely to approve personal loans with bad credit more often than traditional lenders.
Cosigned personal loans
Enlisting a cosigner with good credit can help a borrower get a personal loan with bad credit.
The lender will consider the cosigners’ credit history along with yours, improving your chances of approval. You could also qualify for lower interest rates based on the cosigner’s positive credit.
If you have someone you trust who is willing to cosign, this could be a good option. However, you’ll need to be extra careful with your finances and diligent about payments.
Any negative marks on this loan will reflect poorly on both your and your cosigner’s credit histories. And if you become unable to make payments, your cosigner will be on the hook to your lender.
In peer-to-peer (P2P) lending communities, borrowers take loans out from individual investors. These platforms can be a good place to look for personal loans with bad credit.
P2P lenders are often more willing to take the risk of offering personal loans to borrowers with less-than-perfect credit. But P2P lenders will also expect a bigger reward for their risk, earned with higher interest rates.
Borrowing from friends or family members
Finally, consider turning to individuals in your support network for a personal loan. Borrowing from family and friends has its own complications, but a bad credit score isn’t usually one of them.
Your credit history is unlikely to impact your loan from a friend or family member, and they might even charge you low or no interest on the deal.
Make sure to discuss and agree to all the details of the loan and repayment. It could even be helpful to draw up some paperwork to make the personal loan more formal.
Avoid these 3 personal loans for people with bad credit
Just because you qualify for a personal loan with bad credit doesn’t mean it’s a wise choice. In fact, some can be outright harmful, with expenses and terms that make it expensive and difficult to get out of debt.
Avoid these predatory personal loans for people with bad credit. With sky-high interest rates and fees, these costs can trap borrowers in a debt cycle. The risk of the loan damaging your finances is too high.
1. No-credit-check loans
Lenders might advertise no-credit-check loans as an option for borrowers with bad credit. As the name indicates, lenders won’t check your credit or consider your score when offering you a loan.
But these no-credit-check loans can carry high interest rates, often as much as 200% or more, even from online lenders. Rates this high cost borrowers too much, and make it very hard to afford loan payments.
2. Payday loans
Like no-credit-check loans, payday loans are easier to get with bad credit. These loans are usually smaller, averaging $350. But they are due in a single payment within a short period, typically two weeks. They also carry high APRs, usually at 400% or more.
The terms make payday loans costly and difficult to repay. “Payday loans create a debt treadmill that makes struggling families worse off than they were before they received a payday loan,” reports the Center for Responsible Lending.
3. Car title loans
Along with payday loans, borrowers should avoid car title loans. Car title loans are a kind of secured loan, but they carry very high interest with APRs of 100% or more, and often over 200%.
Even worse, falling behind or defaulting on this loan will not only rack up fees — it will put the borrower’s car at risk of repossession. For many who rely on their cars to get to work, losing it could be disastrous.
Borrowing with these three types of loans is never a good idea. Fortunately for people with bad credit, today there are many alternative options available to get cash when it’s needed.
Interested in a personal loan?Here are the top personal loan lenders of 2017!
|Lender||Rates (APR)||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Important Disclosures for Citizens Bank.
Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
Citizens Bank Disclosures
Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of July 1, 2017, the one-month LIBOR rate is 1.22%. Variable interest rates range from 6.01% - 15.96% (6.01% - 15.96% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% - 16.24% (5.99% - 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
|5.67% - 29.99%||$1,000 - $50,000||Visit Upstart|
|5.17% - 14.24%1||$5,000 - $100,000||Visit SoFi|
|8.00% - 25.00%||$5,000 - $35,000||Visit Payoff|
|5.99% - 16.24%2||$5,000 - $50,000||Visit Citizens|
|5.99% - 35.89%||$5,000 - $50,000||Visit LendingClub|
|5.25% - 12.00%||$2,000 - $50,000||Visit Earnest|
Student Loan Hero Advertiser Disclosure
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.