Best Personal Loans for Bad Credit of June 2024
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Bad credit loans are available for consumers with credit scores from about 550 to 660. Loans for bad credit are typically offered by online lenders, which provide streamlined application processes and fast funding.
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Best Personal Loans for Bad Credit
What are bad credit loans?
A bad credit personal loan is for borrowers with low credit scores or thin credit histories. Bad credit loan amounts range from about $1,000 to $50,000 and annual percentage rates are capped at 36%.
Like all personal loans, bad credit loans have fixed rates and are repaid in fixed monthly installments for one to seven years. These loans typically aren’t backed by collateral — they're unsecured.
» LEARN MORE: What credit score do you need to get a personal loan?
From the writer: How I made this list
"To build this list, I asked myself ‘which lenders would I recommend to a friend?’ The answer was those with the right mix of approachable borrowing requirements, high star ratings, the ability to fund a loan quickly and low enough minimum APRs that folks have a chance at getting a good rate.
Then, I considered what else a person seeking a bad-credit loan may need. That’s why there are lenders here that offer features like credit-building help, secured loan options and perks for consolidating debt. The goal is to have a versatile list of lenders that could fit many different borrower needs."
— Annie Millerbernd, Assistant Assigning Editor, Personal Loans
Personal loans for bad credit: Pros and cons
A bad-credit loan can help you get through an emergency, consolidate other high-interest debt or make necessary home repairs, but consumers with poor credit frequently get the highest personal loan APRs and fees.
Fast funding.
Fixed, predictable payments.
On-time loan payments build credit.
Rates may be lower than credit cards and other high-interest loans.
Rates are often high.
Consumers with the lowest credit scores may not qualify.
Collateral or a co-signer may be required.
Predatory lenders may seek out bad-credit borrowers.
How to compare bad credit loans
Qualification requirements and cost are the most important features to consider when choosing a personal loan for bad credit. Here are some tips to compare personal loans for bad credit.
Borrowing requirements. Bad-credit lenders consider many factors on a loan application, including credit score, debt-to-income ratio, and whether you’re applying with a co-applicant or collateral.
Annual percentage rate range. Consumers who qualify with bad credit are likely to get a rate near the top of a lender’s range, so it’s a good idea to pay attention to that number. A loan’s APR consists of the interest rate plus any fees.
Legitimacy. Read online reviews from other borrowers, and verify the lender’s state license and physical address to ensure the lender is providing fair, legal loans.
Monthly payments. Review your budget to determine what an affordable monthly payment would be. Then, use a personal loan calculator to see what rate and repayment term you’d need to get that monthly payment.
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Frequently asked questions about bad credit loans
What is bad credit?
Bad credit is reflected in a credit score that’s typically below 630, but lenders and credit scoring companies use different ranges to signal bad credit. The FICO credit scoring considers a score below 580 poor, while VantageScore calls a score of 600 or lower “subprime.”
How does bad credit affect your ability to get a personal loan?
Having a bad credit score makes it harder to qualify for a personal loan. If a lender sees that you’ve missed payments toward credit cards and other types of loans, or that you’re using a lot of your available credit, it may signal to them that adding to your debt with a personal loan could be risky for them.
Bad credit loan rates and fees
The average pre-qualified personal loan rate for a bad-credit borrower was 22.68% in May 2024, according to aggregate, anonymized data from NerdWallet. Here's what personal loan rates look like on average.
Borrower credit rating | Score range | Estimated APR |
Excellent | 720-850. | 11.30%. |
Good | 690-719. | 14.06%. |
Fair | 630-689. | 16.85%. |
Bad | 300-629. | 20.28%. |
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified through NerdWallet from Nov. 1, 2024, through Nov. 30, 2024. Rates are estimates only and not specific to any lender. The lowest credit scores — usually below 500 — are unlikely to qualify. Information in this table applies only to lenders with maximum APRs below 36%.
What fees do bad-credit lenders charge?
One of the most common bad credit loan fees is an origination fee, which is 1% to 10% of the loan amount. The fee is included in your APR, but a lender may take it before sending you the funds, effectively reducing your loan amount, or adding it to your monthly payment.
A two-year, $10,000 loan with a 20% interest rate and a 5% origination fee has an APR of 25.14%. If the lender takes the origination fee before sending you the loan, you’d receive $9,500 and the lender would keep $500.
Lenders also usually charge late payment and non-sufficient funds fees.
How to get a personal loan for bad credit
Here are the steps to get a bad credit personal loan:
1. Check your credit
Fixing errors on your report before applying may improve your chances of qualifying. You can get your credit reports for free on NerdWallet or at AnnualCreditReport.com.
2. Review your budget
Check your monthly income and expenses to see what you can comfortably afford to pay toward a personal loan each month.
3. Pre-qualify with multiple lenders
Many lenders let you pre-qualify online to preview potential loan rates, amounts, repayment terms and monthly payments. Pre-qualification involves a soft credit pull that doesn’t affect your score.
4. Submit an application
Once you’ve found the right lender, gather documents, including proof of income and employment, a government-issued ID and bank statements. Most lenders have online personal loan applications, but your local bank or credit union may require an in-person application. The lender will do a hard credit check when you apply, causing your score to temporarily drop. Expect a decision within a few days.
5. Add the new loan payment to your budget
On-time loan payments can build your credit. Add loan payments to your monthly budget and set up autopay to avoid missing a payment.
Other tips to qualify for a bad credit loan
Include all your income. Showing a lender that you have enough income to make the payments is crucial to approval, so be sure to include all sources of income when you apply.
Request only the amount you need. Asking for a smaller loan won’t guarantee approval, but the larger your requested loan, the riskier it may look to a lender. Requesting a loan amount you can comfortably repay goes a long way — for both you and the lender.
Where to get a personal loan for bad credit
Online lenders: Some online lenders offer personal loans specifically for bad-credit borrowers. These lenders may consider information beyond your credit and income to qualify you, though those are still major factors in a loan decision.
Credit unions: Credit unions rely on traditional information like credit and income but may also consider your history as a member. A member in good standing with the credit union may qualify for a personal loan despite a low credit score.
Types of bad credit loans
Unsecured personal loan
An unsecured loan doesn’t require collateral. Instead, a lender determines whether you qualify based on factors like your credit score, income and cash flow.
When to use an unsecured loan:
To make large purchases, or for debt consolidation and home improvement projects.
If you get a low rate.
Secured personal loan
A secured loan requires you to pledge collateral — usually a vehicle or bank account — to borrow money.
When to use a secured loan:
The rate is lower than with an unsecured loan.
Pledging collateral is worth the risk.
Co-signed personal loan
A co-signed loan requires someone to vouch for your ability to repay the loan.
When to use a co-signed loan:
The rate is lower than without the co-signer.
The co-signer understands the risk.
Joint personal loan
A joint loan is one you get with another person, meaning they share responsibility for payments and can access the funds.
When to use a joint loan:
You get a lower rate than without a co-borrower.
You and the co-borrower need equal access to the funds.
Home equity financing for bad credit
Home equity loans and credit lines allow you to borrow money against the equity in your home. Because they’re secured by your home, you risk losing your house if you default.
When to use a HELOC or home equity loan:
For home improvement projects and repairs.
You have enough equity to borrow against.
Alternatives to personal loans for bad credit
A personal loan may not be the right option if you have bad credit. Even if you’re approved, you’ll likely pay a high APR. Consider these alternatives before borrowing.
Methodology
NerdWallet’s review process evaluates and rates personal loan products from more than 35 financial technology companies and financial institutions. We collect over 50 data points and cross-check company websites, earnings reports and other public documents to confirm product details. We may also go through a lender’s pre-qualification flow and follow up with company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer consumer-friendly features, including: soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus and financial education. Our ratings award fewer points to lenders with practices that may make a loan difficult to repay on time, such as charging high annual percentage rates (above 36%), underwriting that does not adequately assess consumers’ ability to repay and lack of credit-building help. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodologies for personal loans and our editorial guidelines.
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