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Personal loans for bad credit
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3 year loan
Bad Credit Loans: What You Need to Know
January 11, 2021
What is a personal loan for bad credit?
An unsecured personal loan is a fixed-rate loan that is not backed by collateral. Instead, lenders consider your credit score, credit report and debt-to-income ratio. Having a bad credit score (300-629 on the FICO scale) doesn’t automatically disqualify you from getting a personal loan, but it lowers your chances of approval. If you do qualify, you may get an interest rate at the high end of a lender’s range.
Bad credit loans are often repaid in monthly installments, usually over one to five years. You can use the funds for almost any purpose, whether you need to cover a large expense or consolidate your debt.
What rate should I expect on a bad credit personal loan?
Personal loans can have high rates for borrowers with low credit scores. Bad-credit borrowers can expect an annual percentage rate in the high 20s or 30s. Some lenders may consider what you’re using the funds for and the amount you request when calculating your rate.
Personal loan interest rates by credit score
How's your credit?
28.7% (Lowest scores unlikely to qualify.)
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified in NerdWallet’s lender marketplace between Jan. 1, 2020, and Dec. 31, 2020. Rates are estimates only and not specific to any lender.
Can I get a personal loan with a bad credit score?
Some online lenders cater specifically to people with bad credit. Many of these loan companies review your credit score when deciding whether to lend you money, but they may also consider factors beyond your score, such as your education, where you live and the type of work you do.
Consider these four steps for getting a loan with bad credit:
Check your credit report: Before you apply for a personal loan, check your credit report and address any errors that could be impacting your score. Bumping your credit several points can not only boost your chances of qualifying, but also get you a lower interest rate. NerdWallet offers free access to your TransUnion credit report. You can also get a free report from each of the three big credit bureaus (the other two are Experian and Equifax) from AnnualCreditReport.com.
Visit a credit union: Personal loans from reputable online lenders are fast and convenient, but you may get a lower rate and more personalized service from a credit union. The maximum annual percentage rate offered at federal credit unions is 18%.
Pre-qualify online: If you can’t get a loan through your local credit union, compare offers from multiple online lenders. The easiest way to compare actual rates is to pre-qualify. Pre-qualifying typically involves a soft credit check, which does not impact your score. You can also use a personal loan calculator to see what rates may be available to you, based on your credit and the loan amount you want.
Submit an application: Applying for a loan can take anywhere from one business day to a week, and the process triggers a hard credit inquiry. That can temporarily hurt your credit score, but it should rebound over time as you make on-time payments on the personal loan.
How to manage your personal loan
As with any debt you take on, have a plan to pay off your personal loan.
Update your budget: Follow a budget that divides your income into needs, wants, savings and debt to ensure timely monthly payments toward your personal loan.
Set up autopay: Setting up automatic payments ensures you’ll make them on time. Over time, this will help improve your credit score. Some lenders offer rate discounts to customers who use autopay.
Keep in touch with the lender: If you lose your job or encounter a surprise expense and think you may fall behind on payments, contact the lender right away to work toward a solution. Some lenders offer hardship programs or will temporarily defer your payments and waive late fees until you get back on your feet.
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Annual Percentage Rates (APR), loan term and monthly payments are estimated based on analysis of information provided by you, data provided by lenders, and publicly available information. All loan information is presented without warranty, and the estimated APR and other terms are not binding in any way. Lenders provide loans with a range of APRs depending on borrowers' credit and other factors. Keep in mind that only borrowers with excellent credit will qualify for the lowest rate available. Your actual APR will depend on factors like credit score, requested loan amount, loan term, and credit history. All loans are subject to credit review and approval.