Bad credit doesn’t automatically disqualify you from a personal loan, but it does narrow your options and raise the cost of borrowing. The key is knowing which lenders work with lower credit scores, how to strengthen your application before you apply, and when a personal loan is actually the right choice versus other alternatives. Here’s a practical guide to getting a personal loan with bad credit without getting taken advantage of in the process.
What “Bad Credit” Means to Lenders
Most lenders use FICO scores to evaluate borrowers. Here’s how scores are typically categorized:
- 800–850: Exceptional
- 740–799: Very good
- 670–739: Good
- 580–669: Fair
- Below 580: Poor (what lenders consider “bad credit”)
If your score is below 580, expect higher interest rates, lower loan limits, more documentation requirements, and some lenders declining your application outright. Fair credit (580–669) gets approved more often but still faces elevated rates.
Lenders That Work with Bad Credit Borrowers
Upstart
Upstart uses an AI-based underwriting model that factors in education, employment history, and other non-traditional signals beyond just credit score. It will consider borrowers with scores as low as 300 in some states. Expect rates on the higher end (up to 35.99%), but it’s a legitimate option when traditional lenders say no.
Avant
Avant specializes in near-prime lending (580+ credit scores) and funds loans as fast as the next business day. Its rates range from approximately 9.95%–35.99%. Origination fee applies (up to 9.99% of the loan amount). Best for borrowers with fair credit who need fast access to funds.
OneMain Financial
OneMain offers both secured and unsecured personal loans with no minimum credit score requirement, focusing instead on your overall financial picture. Secured loans (backed by your vehicle or other asset) offer better rates. Physical branches available in many states. Rates are high — expect 18%–35.99% — but it’s one of the most accessible lenders for poor credit.
OppFi (formerly OppLoans)
An option of last resort for very poor credit, with loans from $500–$4,000. APRs are very high (59%–179% depending on state) but far lower than payday loans, and OppFi reports to credit bureaus — which helps you build credit as you repay. Only consider this if you have no other option and have a plan to repay quickly.
Credit unions
Credit unions are member-owned nonprofits with more flexibility than banks. Many credit unions offer “credit builder loans” or small personal loans to members with poor credit at rates capped at 18% by law (for federal credit unions). Joining often requires a small membership fee and account deposit. If you’re not already a member somewhere, consider looking into local or employer credit unions.
Strategies to Strengthen Your Application
Apply with a co-signer
If someone with good credit — a parent, spouse, or trusted friend — co-signs the loan, you can access rates and approval odds based on their credit profile. Important: the co-signer is equally liable for the debt. A missed payment damages both your credit scores and could damage the relationship.
Offer collateral (secured loan)
A secured personal loan backed by a savings account, CD, or vehicle reduces the lender’s risk and often results in approval and lower rates even with bad credit. Understand the risk: if you default, you lose the asset.
Apply with a co-borrower
Unlike a co-signer, a co-borrower is an equal owner of the loan and equally responsible for repayment. Some lenders (like LendingClub) allow joint applications where both income profiles are considered.
Reduce your debt-to-income ratio first
Lenders look at your DTI (monthly debt payments divided by gross monthly income) alongside your credit score. If you can pay down a credit card or other debt before applying, you may improve your approval odds and rate even without changing your credit score.
Request a smaller amount
A smaller loan request reduces risk for the lender and may tip a borderline application toward approval. Start with only what you genuinely need.
How to Compare Bad-Credit Loan Offers
When your options are limited, comparison matters even more. Before signing:
- Compare APR, not just monthly payment. A longer term lowers the monthly payment but dramatically increases total interest paid.
- Check the origination fee. A 9% origination fee on a $5,000 loan means you only receive $4,550 but repay $5,000 in principal plus interest.
- Verify the lender reports to credit bureaus. Repaying a loan should help build your credit. If the lender doesn’t report, you get the debt without the credit-building benefit.
- Read the prepayment terms. If you get a financial windfall, you want to be able to pay off the loan early without penalty.
What to Avoid
Payday loans
Payday loans charge APRs that commonly reach 300%–500% when expressed annually. They are designed to trap borrowers in a cycle of debt. Avoid them entirely regardless of how urgent the need feels.
Car title loans
You borrow against your vehicle’s title, risking repossession if you miss a payment. APRs are extremely high and terms are short. Your vehicle — often your most essential asset for work — is on the line.
Rent-to-own schemes
Marketed as an alternative to credit, rent-to-own arrangements can result in paying two to four times the retail value of an item over time. Not a loan product, but sometimes marketed as a credit option to bad-credit consumers.
Alternatives to a Personal Loan with Bad Credit
- Credit union credit builder loan: You “borrow” an amount held in a savings account, make payments, and receive the funds once the loan is paid. Builds credit with minimal risk.
- Secured credit card: Deposit collateral, get a credit line, use it responsibly, and build credit over 6–12 months before applying for an unsecured loan.
- Payroll advance: Some employers offer payroll advances at no interest through EarnIn, DailyPay, or similar fintech tools. Lower cost than any loan product.
- Negotiate with creditors directly: If the debt is already delinquent, creditors may settle for less than the full balance rather than pursue collections.
- Nonprofit credit counseling: Organizations like the NFCC (National Foundation for Credit Counseling) offer free or low-cost debt management plans that consolidate payments without a new loan.
Bottom Line
Getting a personal loan with bad credit is possible — but it costs more and comes with fewer options than for borrowers with strong credit. Focus on legitimate lenders (avoid payday and title loans at all costs), strengthen your application with a co-signer or collateral if possible, and compare APRs rather than monthly payments. If borrowing is optional, spending 6–12 months improving your credit score before applying can save you significantly in interest over the life of the loan.
Related: What Is a Co-Signer on a Loan?.