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 Personal loans through Avant, 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 2019!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com
**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|5.74% – 16.99%1||$5,000 - $100,000|
|7.54% – 35.99%||$1,000 - $50,000|
|7.99% – 35.89%*||$1,000 - $50,000|
|5.99% – 24.99%2||$5,000 - $35,000|
|5.99% – 29.99%3||$7,500 - $40,000|
|6.79% – 20.89%4||$5,000 - $50,000|
|9.99% – 35.99%5||$2,000 - $25,000|
|6.95% – 35.89%6||$1,000 - $40,000|
|6.99% – 18.24%7||$5,000 - $75,000|
|9.95% – 35.99%8||$2,000 - $35,000|