5 best loans for bad credit in May 2024

To get approved for a loan with bad credit, there are a few things you should do first. 1) Know your FICO credit score to identify which lenders are most likely to give you a loan. 2) Be prepared to pay an interest rate north of 30% — 31.39% was the average personal loan rate for Credible users with scores less than 600 on 5-year loans. 3) Strengthen your application by taking steps to improve your credit or income, or to reduce monthly debt payments.

We cover how to get a personal loan with bad credit, starting with a list of the best lenders for bad credit.

Compare bad-credit loan rates in April 2024

Best loans for bad credit

The Fair Isaac Corporation (FICO) has the most commonly used credit scoring model in the U.S. The model rates credit scores under 580 as “poor,” or bad. Since most lenders prefer to lend to borrowers with good credit, it’s important to find a lender that will consider bad-credit borrowers before you apply.

You can see credit score minimums for each lender below, so check your FICO score from the credit bureaus directly, or use a credit score app. (We’ve included a few lenders with credit scores slightly above 580, if you’re on the cusp.)

Upgrade: Best for fair credit

Universal Credit: Best for debt consolidation loans for bad credit

Avant: Best for all credit types

OneMain Financial: Best for bad credit personal loans

Upstart: Best for fast personal loans for all credit types

Methodology

We evaluated the best personal loans for bad credit based on factors such as minimum credit score requirement, customer experience, maximum APR, maximum loan amount, funding time, loan terms, fees, discounts, whether secured loans are available, and whether cosigners are accepted. Our team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date. Read our full lender rating methodology for more information.

Types of bad-credit loans

Personal loans

Best for: Bad-credit borrowers with a stable and reliable income, borderline bad credit, or those who have a willing cosigner

A personal loan isn’t the only type of bad-credit loan you can get, but it’s generally the best and first to try for. If you can get a personal loan with bad credit, your rate will generally be capped at 36%, whereas other loan types have annual percentage rates (APRs) that can run into the triple digits.

Personal loans also have much longer repayment terms (up to seven years with many lenders), which makes monthly payments smaller and easier to budget for. Plus, personal loan payments are reported to the credit bureaus, so you can improve your credit score if you make on-time payments.

Since collateral isn’t required, personal loan approvals can be quick, and the money could be in your bank account as soon as the same day or the next business day once you’re approved.

Secured loans

Best for: Borrowers that have an asset, such as a car, savings account, or home equity that they’re willing to pledge as collateral

A secured loan is one that is secured by collateral, such as your car, home, or a savings account. Well-known types of secured loans include mortgages and auto loans, but some lenders offer secured personal loans.

To get a secured loan, you need to pledge an asset as collateral, which means the lender can seize the asset if you default on the loan. Below are a few personal loan lenders that offer secured loans. Note that you’ll still need to meet the minimum credit score requirements to qualify.

Cosigned loans

Best for: Borrowers that have a family member or friend who’s willing to vouch for them on a loan

A cosigner is someone who promises to make loan payments if you don’t. The lender considers their income, credit score, and current debt (in addition to yours) when deciding whether to approve the loan and set the rate. Unlike a co-borrower, a cosigner doesn’t have access to loan funds, but is on the hook if you miss payments.

This individual is typically someone you have a close and trusted relationship with, like a family member or long-term friend. However, keep in mind that since they’re also liable for the debt, their credit can be adversely affected by nonpayment and late payments.

You can find personal loans with a cosigner from a handful of lenders.

Emergency loans

Best for: Small same-day loans that can be repaid within two weeks; or longer-term loans if you can’t qualify for a traditional personal loan

Loans that fund as soon as the same day you apply can be considered emergency loans. Some personal loans, as well as cash advance apps and payday loans, fall in this category. How they differ generally relates to the fees or APRs they charge, whether they check your credit, and repayment terms.

• Payday alternative loans (PALs): Many credit unions offer PALs to existing and new members that are designed to be used instead of payday loans, which can often be predatory. PALs are available up to $2,000, have repayment terms up to 12 months, and cap APRs at 28%.
• Cash advance apps: If you’re in need of a few hundred dollars to get you through until next payday, a cash advance via a cash app may be an option. However, these apps can get expensive if you expedite funds for instant delivery. For example, a $5 fee to expedite a $200 cash advance with EarnIn equates to a 65% APR.
• Bad-credit installment loans: There are also installment loan lenders, such as OppLoans, that offer bad-credit loans that can be repaid in monthly installments over a period of years at APRs in the triple digits. While expensive, such lenders are generally a much better option than payday loans.
• Payday loans: Payday loans are often high-fee, two-week, single-pay loans that may create more problems than they solve. How expensive they are depends on your state — for example, payday loan lenders in Idaho charged an average APR of 652% on $500 payday loans, according to Pew research. Lenders often won’t check your credit, though online payday loan lenders may run a soft check. Payday loans can be enticing, as they offer quick access to easy-to-qualify-for cash, but are best avoided.
• “Buy now, pay later” (BNPL): If you need a loan for a retail purchase — say, to replace a broken appliance, buy a plane ticket, or refresh your wardrobe — BNPL could be a relatively low-cost way to cover it. BNPL lenders include Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip. BNPL lenders may let you borrow at a 0% interest rate if you can pay off the purchase within 4 to 6 biweekly installments. Some BNPL lenders may run a soft or hard credit check.

Where can I get a personal loan with bad credit?

Personal loans for bad credit can be found through some banks, credit unions, and online lenders. Most will require a credit check and a full application, which triggers a hard pull on your credit report. But fortunately, you can prequalify without any impact to your credit score, which can give you an idea of which lenders will consider your application and may approve your loan.

Personal loans are available from under $1,000 to $50,000 or more, and repayment terms typically last from one to seven years. Personal loan interest rates generally range from around 6% to 36%, but with bad credit, you should expect a rate at the higher end of that range.

If you need a small loan amount, you may be able to get a small bank loan as an existing customer. For example, Wells Fargo and Chase offer loans up to $500 to eligible customers without a credit check.

Learn More: Where can I get a personal loan?

How to get approved for a personal loan with bad credit

When you apply for a personal loan, lenders look at a combination of factors related to your ability to pay the loan back. For example, they consider the amount you’d like to borrow, your monthly income and outstanding debts, your past borrowing behavior, how stable your income is, and whether you have a cosigner.

Credit score and credit report

Through your credit score and credit report, lenders gauge the likelihood that you’ll repay the loan. If your credit score is low, it suggests you’ve had difficulties making payments on time or in full. This is why it’s crucial to apply with a lender that has a minimum credit score requirement lower than yours. For example, Universal Credit requires a minimum credit score of 560, while OneMain Financial doesn’t have a minimum credit score requirement.

A poor credit background can make lenders less willing to lend you money. However, you can increase your chances of approval for a personal loan with a cosigner or by securing the loan with collateral.

Learn More: What is personal loan pre-approval?

Income

You don’t need to make a lot of money to qualify for a personal loan, but you do need to make at least the lender’s minimum income amount. For instance, OneMain Financial and Universal Credit don’t set a required minimum income, while Happy Money and Upgrade require a minimum income of $25,000 (on loans made through Credible).

You also need to make enough to afford loan payments. If you have bad credit, you’ll likely have higher payments on the same loan amount relative to someone with good credit. In other words, the same loan could cost you a lot more on a monthly basis. This is why it’s important to prequalify to see what rates you might be approved for, and potential monthly repayment amounts. Make sure you can afford payments so you can rebuild your credit in order to qualify for lower rates (and pay less to borrow) in the future.

Current debt

Lenders also consider your monthly debt when determining whether to offer a loan. Specifically, they look at your debt-to-income ratio (DTI), which is a simple calculation that expresses your minimum monthly debt payments as a percentage of your income. Most lenders prefer a DTI below 36%, but some, like Upstart, will consider a DTI up to 45% or 50%, depending on where you live.

You can use our DTI calculator to figure out yours, or use your phone’s calculator and these steps:

1. Add up all your minimum monthly debt payments.
2. Add up your gross monthly income (this is the amount before any taxes or deductions are taken out). You can find it on your pay stub.
3. Divide the amount from the first step by the amount in the second step.
4. Multiply the result by 100.

For example, if you have a $500 car payment, a $150 minimum credit card payment, and a $200 personal loan payment, your total minimum monthly debt obligation is $850. If your gross monthly income is $4,000, your DTI is 21%.

($500 + $150 + $200) / $4,000 = 0.2125 

0.2125 x 100 = 21.25% DTI

Improve your credit score

While improving your credit score can take months, there are some quick credit wins you may be able to use:

1. Request a credit limit increase: A credit limit increase can reduce your credit utilization, which can boost your score. (Credit utilization can contribute up to 30% to your FICO score.) Since credit card companies report monthly to the bureaus, you can see quick score gains as a result.
2. Become an authorized user: If you have a close friend or family member willing to add you as an authorized user on their credit card, the credit account and limit they have will be added to your credit report. This can result in a substantial increase in available credit on your report, which can translate to a big score move. This person should be responsible in order to benefit from their good credit habits.
3. Use a rent-reporting service: Experian and Self are two providers that let you report regular payments like rent, phone, and utilities. You may have to pay for these services, or your landlord may provide free rent-reporting (check, and make sure you’re signed up).

How to get a secured loan with bad credit

If you don’t have a willing cosigner who can help you get an unsecured loan, another option is to find a secured personal loan. Secured loans require that the loan is tied to collateral, like a bank deposit, car, or other value-based asset.

Since the loan is secured with the collateral, it reduces the financial risk for lenders. As a result, you have a better chance at getting approved.

Your annual percentage rate (APR) can be lower than that on an unsecured loan. The APR is your annual cost of borrowing the loan, including up-front fees, like administrative and origination fees. The lower your interest rate, the less you’ll spend on the loan overall.

Just know that if you don’t make your full, on-time monthly payments, the lender can use your collateral to pay off your loan.

How to apply for a loan with bad credit

If you need a personal loan with bad credit, follow these steps:

1. Confirm how much you can afford: Review your income, existing debt, and monthly expenses to determine your disposable income. With this in mind, determine a maximum monthly payment that you can comfortably afford. This will help you choose a repayment term.
2. Check your credit: See where your credit stands by checking your credit score and requesting your credit report. Errors on your report can drag your score down. Request a free credit report from each credit bureau on AnnualCreditReport.com.
3. Line up a cosigner or collateral: If your credit history confirms that you’re unlikely to qualify for an unsecured loan on your own, use this time to identify your collateral or who you can ask to cosign on the loan. For cosigners, be clear about expectations regarding repaying the loan so the relationship isn’t compromised. If you’re planning on a secured loan, research lenders that offer them.
4. See if you prequalify: Many lenders let you find out if you prequalify for a loan online without impacting your credit. Although prequalification isn’t a guaranteed approval, it can help you understand how likely you might be to be approved for a loan, and it can give you a sense of the rates and loan amounts you might qualify for. Just know that when you formally apply for a loan, the lender will conduct a hard credit inquiry, which can temporarily lower your score by a few points for up to a year.
5. Compare loans: To find the best personal loans, compare prequalification results between lenders. Note the amount you may be approved for, potential APRs, fees, terms, collateral or cosigner criteria, and repayment options.
6. Fill out a loan application: Complete an application for the loan offer you’d like to proceed with. If you’re applying with a cosigner, the application will ask for their personal and financial details, too.
7. Provide supporting documents: The lender may require additional documents before it makes its loan decision. Fulfill requests quickly to avoid delaying the process.
8. If approved, review the loan documents: It’s important to check the fine print before agreeing to a new debt obligation. Make sure the payments are as expected, as well as the loan’s repayment term, interest rate, APR, and any up-front fees, like an origination fee. Sign if the terms are agreeable, so the lender can send your money.

Learn More: How to get a personal loan

Bad-credit loans guide

• Best debt consolidation loans for bad credit
• Best personal loan rates
• Best personal loans with a cosigner
• Best installment loans for bad credit
• Best emergency loans for poor credit

FAQ

What are good loans for bad credit?

Secured and cosigned personal loans can be good options for bad credit. Both allow lenders to mitigate risk of nonpayment, which makes them more likely to approve your application and/or give you a lower rate. If you default, the bank can use the collateral on a secured loan to cover the debt; for cosigned loans, the cosigner is legally responsible for the debt if you don’t pay.

How to get a debt consolidation loan with bad credit

You can get a debt consolidation loan with bad credit by seeking a lender with a low minimum credit score requirement and by securing the loan with collateral, such as your home. You should also consider a range of loan types, including personal loans and home equity loans, to consolidate debt.

How to get a loan fast with bad credit

The best fast loans for bad credit may be small loans offered by your bank or credit union, since these are most likely to have reasonable APRs. For example, credit unions offer payday alternative loans that are designed for borrowers with bad credit who need same-day funds — APRs are capped at 28%. Another option is applying for an emergency personal loan with a lender that has a low minimum credit score requirement.