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A low credit score doesn’t have to stand in your way of getting a personal loan to cover an emergency or consolidate debts.
Borrowers with bad credit (a 629 or lower score) may need to put in some extra work to qualify, but doing so can help you get approved and could get you a lower interest rate.
» COMPARE: See your bad-credit loan options
5 steps to get a personal loan with bad credit
Check your credit. Lenders typically have a minimum credit score requirement, and you could be rejected if you don’t meet it. Many financial companies, including NerdWallet, provide free access to your credit score, and annualcreditreport.com offers a free, detailed look at your credit behavior over the years. You may find errors on your report, and fixing them could boost your credit.
Pre-qualify. Pre-qualification shows you what rate, loan amount and repayment term to expect, and it doesn’t affect your credit score. It’s especially useful if you’re trying to determine whether you qualify for a loan and want to compare offers. Many online lenders and banks offer this feature.
Add to your application. Co-signed and secured loans can help you qualify or get a lower rate on a personal loan. With a co-signed personal loan, another person’s credit and income information are added to the application, and that person agrees to pay the loan if the borrower can’t. Secured loans let you offer up collateral — typically a car or savings account — that a lender can take if the loan isn’t repaid.
Apply. It’s helpful to gather the documents you need to apply for a loan beforehand, to speed up the process. These can include W-2s, pay stubs, financial statements and your Social Security number. Some lenders will give you a decision the same or next day after applying.
How bad credit affects a personal loan application
When reviewing your loan application, lenders decide not only whether to approve it, but also what interest rate to charge and how much money to lend to you.
A low credit score tells a lender you may have struggled to make payments toward credit cards or other debt in the past, so the lender may be taking on more risk by loaning you money. This would cause the lender to deny your application or approve a small loan at a high annual percentage rate. If you don’t need the loan urgently, take the time to build your credit before applying.
Here are the average APRs for borrowers in each credit band.
How's your credit?
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified in NerdWallet’s lender marketplace from March 1, 2022, to Aug. 31, 2022. Rates are estimates only and not specific to any lender. The lowest credit scores — usually below a 500 credit score — are unlikely to qualify. Information in this table applies only to lenders with APRs below 36%.
Each lender weighs credit scores differently. Your debt-to-income ratio, employment history and even whether you rent or own your home could also be considered on an application.
Where to get a loan with bad credit
Credit unions. You must be a member of a credit union to borrow from it, but they’re one of the best places to turn if you have bad credit.
Credit unions consider a loan applicant’s history as a member when making a decision, which means a good relationship with the credit union could help with approval.
You may also get a lower rate at a federally chartered credit union because APRs are capped at 18%. Rates from other lenders can go up to 36%.
Online lenders. Some online lenders, like Avant and Universal Credit, lend to bad-credit borrowers. Online lenders may include consumer-friendly features, like fast funding and advice to help build your credit.
It’s best to compare online loans with offers from other types of lenders to find the lowest rate.
Some bad-credit lenders tack on an origination fee that’s usually 1% to 10% of the loan amount. Most lenders take the fee from the loan before depositing the funds into your account, meaning you could end up with less money than you expected. If the fee is included, be sure the remaining loan amount is enough to cover your expense.
Avoid no-credit-check loans
It might seem appealing to borrow from a lender that won’t even look at your credit score, but these lenders often provide predatory high-interest installment or payday loans.
A lender that doesn’t review information like your credit score isn’t thoroughly assessing your ability to repay. Some lenders that offer no-credit-check loans trap borrowers in a cycle of debt by charging high rates that make payments unaffordable, causing them to borrow again when the payment is due.
If you don’t think you’ll qualify with a lender that checks your credit, consider alternatives to high-interest loans.
Calculate bad-credit loan payments
Understand the loan’s monthly payment and total interest costs before you borrow. Making payments on time can help you build credit while missing payments could damage your credit even more. And knowing how much you’ll pay in total interest can help you decide if the loan is worth it.
Many lenders let you preview loan payments during pre-qualification, but you can also use a personal loan calculator to get an estimate.