"Bad credit" is often a general term that covers a broad range of credit scores, from 580 to 300. If you fall somewhere within that range, there are more options available today than ever before.
The catch is you may have to do some extra legwork to find the best option for you. Helping you in that borrowing process is what this guide is all about, and we'll cover a few important topics:
- Where to look for less-than-ideal credit loans and some top lenders to consider applying to
- How to compare loan options so you feel confident you're selecting the highest quality and best-priced option for you
- How to manage loan repayments and use loans to enhance your credit profile for future borrowing
The goal is to help you find the best loan for you right now and set you up for success as a borrower in the future.
Key Takeaways
- "Bad credit" can be a catchall term for scores ranging from 580 to 300. Before applying for a loan, it is important to check your credit score and confirm where you actually fall on the credit spectrum.
- A broad range of small to large loan options exist for individuals with subpar credit, including online loans, lines of credit, mobile app-based lenders, peer-to-peer loans, tribal lenders, and payday alternative loans.
- Although nonprime lenders may focus less on credit scores, they will still conduct a thorough borrower risk assessment, considering factors such as requested loan amount, debt-to-income ratio, employment, and income history.
- High-interest rates and additional fees are typically associated with bad credit loans, making it extra important to compare APRs and be mindful of loan repayments before signing a contract.
Best Loan Options For People With Poor Credit
Borrowers with a not-so-great credit history aren’t without options. Today, more than ever, a wide array of lenders and financial products is tailored to their needs, offering loans of varying sizes, easier ways to access them online, and more flexible ways to repay.
In this section, we define different types of loans and some of the top lenders in each of these categories (scroll below to see who is best for each):
- Online unsecured loans
- Online secured loans
- Lines of credit
- Cash advance apps
- Loan marketplaces
- Payday alternative loans from credit unions
Unsecured Personal Loans
Online personal loans for bad credit offer a lifeline for individuals with low credit scores. These bad credit personal loans provide a convenient way to borrow money with digital applications, eliminating the need for in-person visits or lengthy paperwork.
Particularly for unsecured loans -- where a borrower does not offer an asset like a home or vehicle as collateral -- the interest rates for these loans can vary widely and tend to be higher. APRs for traditional online loans typically range from 6.4% to 35.99%, but if you have poor or very poor credit, some lenders may charge triple-digit APRs.
The good news is that online lenders are known for their approval flexibility and funding speed. Unlike big financial institutions, these lenders may look beyond just a borrower's credit score to consider other aspects including employment, income, and debt-to-income ratio. And, once approved, a borrower can expect to receive funds as soon as the same day or next business day.
While this convenience and speed are alluring, it's essential to compare different lenders and their total costs in order to find the best personal loans for your situation.
Best Bad Credit Loans to Consider
Upstart
Best for debt consolidation loans
Pros
- Loan sizes from $1,000 to $50,000
- No minimum credit score requirements
- Offers competitive rates from 6.4% to 35.99%
- AI-driven underwriting evaluates 1,500 variables beyond credit scores, making borrowers with less-than-perfect credit likelier to be approved
Cons
- Some borrowers may have to pay an origination fee
Read our full Upstart review here.
Universal Credit
Pros
- Loan sizes from $1,000 to $50,000
- Works with credit scores as low as 560
- Interest rates from 11.69% to 35.99% are in-line with similar lenders
- Known for quick loan funding, often just one business day after full approval
- Does not charge early loan payoff fees
Cons
- Charges origination fees totaling 5.25% to 9.99% of the loan amount
- Charges late and insufficient funds fees ($10 each time)
Read our full Universal Credit review here.
Credit Ninja
Pros
- Loan sizes up to $5,000
- Works with credit scores above 500
- Known for fast loan funding, in some cases even same business day
- Strong customer service options, including online chat, email, and phone options
Cons
- Does not share interest rates/fees upfront (must apply to see your rate)
- Not available in all states
Read out full CreditNinja review here.
Uprova
Popular for small loans for bad credit
Pros
- Loan sizes from $300 to $5,000
- Works with credit scores under 600
- Extremely fast funding, sometimes as quickly as 30 minutes
Cons
- Does not share interest rates/fees upfront (must apply to see your rate)
- As a tribal lender, Uprova is subject mainly to tribal and Federal laws and often exempt from stricter state regulations
- Read our full Uprova review here.
SimpleFastLoans
Popular for small loans for bad credit
Pros
- Loan sizes from $200 to $3,000
- Fast approval and funding, usually same day if the application is sent before 2 PM EST
- Also provides an "instant funding" option for Visa or MasterCard debit cards
Cons
- Does not share interest rates/fees upfront (must apply to see your rate)
Read our full SimpleFastLoans review here.
Secured Personal Loans
For those with poor credit, opting for a secured loan might improve a borrower's chances of approval and help them get a lower interest rate. In this scenario, the borrower offers up collateral -- such as a home, vehicle, or savings account -- in order to provide added security for the lender.
The catch is the potential risk to the borrower: if you fail to make the required payments, you could lose your collateral. So, while secured personal loans can provide a pathway to borrow funds, it is crucial to assess your ability to meet repayment terms to minimize the risk of asset forfeiture.
Top Secured Loan Lender To Consider
Best Egg
Pros
- Loan sizes from $2,000 to $50,000
- Competitive interest rates from 8.99% to 35.99%
- Works with credit scores as low as 640
- Provides both secured and unsecured loan options
Cons
- An origination fee is deducted from the funds a borrower receives
Read our full Best Egg review here.
Lines of Credit
For borrowers with poor credit, a line of credit can provide an essential financial safety net. Similar to a credit card that has a credit limit, a line of credit is a specific amount of money that you are approved to borrow against as needed. Unlike a personal loan, you do not receive the full amount of money all at once; you only borrow what you need. As you repay the amount you've borrowed, the line of credit is restored and you can keep borrowing and repaying over and over.
A line of credit is a strong alternative to credit cards because it usually comes with a lower interest rate and higher credit limit. It allows you to borrow only what you need, helping to keep interest costs low. But remember, like any other form of credit, it’s essential to use lines of credit responsibly to avoid falling deeper into debt.
Small Loan Lenders to Consider for a Line of Credit
CreditFresh
Pros
- Offers flexible access to funds ranging from $500 to $5,000
- No minimum credit score requirement
- Transparent fee structure: pay a monthly billing charge, but no origination fees or late fees
- As a bonus, provides free credit monitoring services to their customers
Cons
- Billing cycle fees can be high (10-15% of balance owed)
- Access to a larger line of credit can make nonessential spending tempting for borrowers
Read our full CreditFresh review here.
Elastic
Pros
- Offers flexible access to funds ranging from $500 to $4,500
- No minimum credit score required
- No prepayment penalties or interest rate fees
Cons
- Charges a cash advance fee each time you borrow (5% or 10% of the amount borrowed)
- Carried balance fees each month range from $5 to $350
- Borrowers must be currently employed to qualify
Cash Advance Apps
Cash advance apps (also known as paycheck advance loans) connect to your bank account and provide extra funds when you need them. You don’t pay any interest on the cash advance, and you won’t get denied for having a bad credit score, because these apps do not check your score. Instead, they look at your banking activity to qualify you for a maximum cash advance, and then use your incoming funds to repay the cash advance automatically.
While these apps do not charge interest rates, some have low-cost membership plans, and others may require you to pay a "tip" when you request a cash advance. As with any lender, it's important to fully understand how the fee and repayment structure works before signing up.
Check out three of our favorite cash advance apps below, or read our cash app roundup articles here and here.
Best Cash Advance Apps for Small Loans (Bad Credit or No Credit)
Earnin
Pros
- Provides loans from $100 to $750
- Low fees, capped at $13
Cons
- May require access to your location or verify employment via your work email address.
- May cause your bank to charge an overdraft fee if you don't have sufficient funds on the due date.
Dave
Pros
- Provides loans up to $500
- Borrower can extend repayment date if needed
- Low $1/month membership fee
Cons
- User must also open a Dave checking account to use it
- Charges fees from $3 to $25 for same-day cash deposit
Lenme
Pros
- Peer-to-peer lenders can offer loans from $50 to $5,000
- Borrower can choose to extend their repayment through the app
Cons
- Interest rates will vary by individual offer
- Not all loan requests will receive an offer
Read our full Lenme review here.
Loan marketplaces
Loan marketplaces serve as "loan facilitators" rather than direct lenders. By filling out one application on a loan marketplace website, borrowers are instantly connected to a number of potentially good lender matches based on what they described as their loan need and credit profile.
The benefit of these companies is that they bring qualified loan options to the borrower, making comparison shopping between different loans, rates, and fees easier.
While the "matching" service is free, it is important to note that loan marketplaces are not lenders themselves and do not actually underwrite or fund any loans. Instead, the borrower makes a selection from the lenders they see on the site, and then work directly with that lender to review rates, fees, and terms and get fully approved.
Top Loan Marketplaces
AmONE
Pros
- Serves a range of credit profiles, from poor to excellent
- Offers loan sizes up to $50,000
- Lenders offer competitive terms (12 to 84 months) and APRs (6.4% to 35.99%) based on creditworthiness
- Pre-qualifying does not impact your credit score
- Service is free to use
Cons
- Potential fees aren't transparent until after a borrower matches with a lender
- Some borrowers get frustrated by repeated contact from lenders
Read our full AmONE review here.
Credible
Pros
- Offers comparisons for personal loans, student loan refinancing, mortgages, and home & car insurance
- Does not sell customer data, reducing the number of unsolicited contact from lenders
- Pre-qualifying does not impact your credit score
- Offers useful tools and calculators to help make good borrowing decisions
Cons
- Loan approval is determined by the lender, not Credible
Fiona
Pros
- Offers both secured and unsecured personal loan options
- Loan sizes range from $1,000 to $250,000
- Pre-qualifying does not impact your credit score
- Maintains a large network of reputable lenders
Cons
- Loan approval is determined by the lender, not Fiona
- Not available in all states
Payday Alternative Loans from Credit Unions
Payday alternative loans (PALs) are small, affordable loans offered by federal credit unions as a better alternative to traditional payday loans. These loans offer lower interest rates, longer repayment terms, and no rollover fees, contrasting with the more expensive and potentially harmful traditional payday loan structure.
Eligibility for PALs often focuses on the borrower’s income and ability to repay the loan, and some credit unions may report on-time loan repayments to credit bureaus, helping borrowers build credit history. However, to access PALs, you must be a member of a credit union, and the process for joining is often simple and affordable.
We suggest that you reach out to your local credit union to learn more about their payday alternative loans if that is of interest to you.
Comparing Loan Costs: Interest Rates & Fees
Although bad credit loans might be a financial lifeline, they usually have higher interest rates and fees to counterbalance the perceived heightened risk from the lenders’ perspective. The average annual percentage rate (APR) for bad-credit borrowers can be 20% or higher, significantly increasing the cost of borrowing. This is why it’s crucial to compare loan costs, including interest rates and fees.
Additionally, other fees can add to the cost of your loan. These can include origination fees, late and failed payment fees, and varying late fees charged by specific lenders.
Comparing Annual Percentage Rates
The Annual Percentage Rate (APR) reflects the total cost of borrowing, including both interest and fees, allowing for a standardized comparison of loan costs. Comparing APRs is more comprehensive than comparing interest rates alone, as APR incorporates all borrowing costs, making a loan with a lower APR generally less expensive overall.
Borrowers can secure lower borrowing costs by shopping around and comparing APRs among various lenders. This is why doing research and comparison shopping is such a critical step in the borrowing process: it can save you hundreds or even thousands of dollars over the course of a loan repayment.
Origination Fees & Impact on Loan Cost
Origination fees are an upfront charge by a lender to process a new loan application. These fees are often quoted as a percentage of the loan amount and typically range from 1% to 10% for personal loans. This amount is automatically deducted from the total amount of funds before it is deposited into the borrower's bank account.
These fees compensate the lender for services such as processing, underwriting, and funding the loan. They are determined by factors like the borrower’s credit score, loan amount, repayment term, and income.
It’s important to remember that origination fees are factored into a loan’s annual percentage rate (APR), making the APR a more comprehensive measure of a loan’s cost compared to the interest rate alone.
Other Fees: Late payment, returned payment, and prepayment fees
Different lenders will have different policies when it comes to additional fees. It is important to be fully aware of any potential fees before you sign a contract with a lender, as additional fees could significantly impact the total cost of the loan.
Some of the most typical fees include late payment and returned payment fees, which occur if a borrower fails to make an on-time monthly payment. Normally, these fees are about $15 to $25, and they can add up if a borrower isn't careful. More importantly, because many lenders report to the credit bureaus, missed or late payments can have a negative impact on a borrower's credit score if they become delinquent.
It is crucial to ensure that your budget can accommodate monthly loan payments and not forget to pay consistently. One easy way to keep on top of payments is to set up autopay, where the lender automatically deducts the payment from your checking account each month. Not only does this help ensure you won't forget to pay, but some lenders also offer an interest rate discount for using autopay, which can save you money.
One other less common fee that some lenders apply to a loan is a prepayment fee. In this scenario, lenders who want to maximize the amount of interest they earn on each loan may penalize a borrower for paying off the balance of their loan early. While this is less common, it is important to confirm that you won't pay a hefty fee if you decide to close out the loan balance early.
Managing Loan Repayments
Just as crucial as obtaining the loan itself is managing its repayment. Whether you’re juggling several small loans or grappling with a larger one, having a sound repayment strategy is crucial. In this segment, we’ll explore how to set up automatic payments and budget effectively for loan repayment.
When evaluating bad credit loan offers, it’s important to compare funding time, credit-building assistance, and the flexibility to change payment dates. Companies vary in the repayment terms they offer; some provide only a few options, while others offer greater flexibility to meet the borrower’s needs. Let’s delve into these aspects in the following subsections.
Setting Up Automatic Payments
Automatic payments, or autopay, eliminate the need to remember multiple due dates and help ensure bills are paid monthly. Essentially serving as a "set it and forget it" approach to repayments, borrowers enrolled in autopay authorize their creditors to automatically deduct their monthly payment from their checking account.
On-time payments made possible by autopay help keep accounts in good standing, avoid damage to credit scores due to late payments reported to the credit bureaus, and save money on late fees. Some benefits of using autopay include:
- Avoiding late fees and penalties
- Maintaining a good credit score
- Potential discounts on interest rates from lenders
- Accruing savings over the life of the loan by avoiding fees
By opting into autopay, you can enjoy these benefits and have peace of mind knowing that your payments will be made on time.
Budgeting for Loan Repayment
Budgeting for loan repayment is no less critical than budgeting for everyday expenses. Creating a budget tailored to include loan repayments is crucial for preventing financial strain and ensuring you stay on track.
There are a number of different budgeting techniques and hacks, and it may be useful to do additional research on which may work best for you. But at the end of the day, making sure you have a clear sense of your cash flow vs. your existing monthly expenses is the ticket to confirming you can afford to add a loan's monthly payment to your expenses.
Never take out a loan until you are sure your budget can accommodate the repayments, otherwise you may end up in a worse financial situation than you were in before taking the loan.
Improving Your Credit Profile for Future Borrowing
Obtaining a loan with poor credit shouldn't be an end goal of your financial journey; it should be a stopgap solution on your path toward stable finances and a strong credit profile. Securing better loan options and rates in the future is dependent on improving a bad credit score and developing stronger financial habits. It is crucial to focus on these areas for financial success. This enhancement can even open doors to refinancing a bad credit personal loan with an improved credit score, saving you money sooner than you might think.
If you foresee needing to borrow more money in the future, consider taking steps to improve your credit score before applying:
Credit Builder Loans
Credit builder loans from Self as an example, are designed to assist individuals in establishing credit or boosting a low credit score by making monthly payments over time, which are reported to the credit bureaus. These loans usually offer competitive interest rates or fees, making them a practical option for building or repairing credit.
Throughout the loan term, the borrowed funds are held in an account and only disbursed to borrowers after the loan is fully repaid. This arrangement establishes a history of timely payments, which can improve credit scores.
Regular Monitoring of Credit Reports
Regularly checking your credit reports is no less important than regular health check-ups. It’s essential to catch any inaccurate or missing data that might negatively influence the chances of loan approval.
Being vigilant for unfamiliar names as inquiries on your credit report is vital because lenders and creditors might use third-party companies to obtain your credit information. Ensuring your accounts are reported correctly on credit reports, especially the payment histories, is crucial to maintaining your creditworthiness. Knowing what your credit score is can help you determine whether the interest rates that lenders are offering you are reasonable based on your credit profile.
Responsible Credit Use and Its Benefits
Responsible credit use is the secret sauce to a healthy credit score. Making payments on time and diversifying credit types can bolster a borrower’s credit mix and payment history, enhancing their credit score.
Try to always maintain a credit utilization rate under 30% (in other words, only use 30% of the total amount of available credit to you at any given time). And, of course, ensure that payments are always made by their due date to save on late fees and take strides towards a healthy credit profile.
The Bottom Line
People with bad credit have more loan options today than ever, including online loans, lines of credit, mobile app-based lenders, peer-to-peer loan platforms, tribal lenders, and payday alternative loans. Although these loans are readily available, it is critical to always take the time to carefully assess what the total cost of a loan will be before accepting an offer.
With careful research and healthy financial behaviors, borrowers can not only get the cash they need in the short term, but use the loan to start improving their standing in the eyes of the credit bureaus with on-time payments. A bad credit loan can be the first step toward financial health and a whole world of prime credit options in the future.
Frequently Asked Questions
Which loan is easiest to get with bad credit?
A secured loan is easiest to get with bad credit because it requires collateral such as a car, home, or savings account, making it less risky for the lender.
Can I borrow money with a 500 credit score?
Yes, you may be able to get a personal loan with a 500 credit score if you have a stable source of income and meet other lender criteria, but you should expect to pay higher fees and interest rates.
How to borrow $500 quickly?
To borrow $500 quickly, consider options like a paycheck advance from a loan app, a small personal loan with quick funding, or a payday alternative loan. However, be cautious as these options often come with high fees that may be challenging to repay in a short timeframe.
What is a credit builder loan and how does it work?
A credit builder loan is a tool to establish or improve credit by making regular monthly payments over time, which are reported to the credit bureaus. The borrowed funds are held in an account and only released after the loan is fully repaid, helping to build a history of timely payments.
What should I consider when comparing loan costs?
When comparing loan costs, consider factors such as interest rates, fees, and the annual percentage rate (APR) which includes both interest and fees. These factors will give you a comprehensive understanding of the total cost of the loan.
