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(Ad) When you need a personal loan, your credit score will often determine the terms and interest rate of your loan. However, if you have a bad credit score or little credit history, you may find it difficult to get approved for a loan at all.
Fortunately, there are online lenders that specialize in loans for bad credit borrowers. The best bad credit loans offer reasonable interest rates, flexible payment terms, fast funding, and an easy online application process that can be completed in just minutes.
To help you find the best bad credit lenders, we’ve reviewed the top personal loan companies. We evaluated each online lender on a variety of factors such as reputation, interest rates, fees, speed of funding, credit score requirements, and application process.
Here are our top picks for the best bad credit loans of 2022.
The 6 Best Loans for Bad Credit in 2022
- BadCreditLoans: Best overall
- LendYou: Best for small loans under $2,500
- OneMain Financial: Best for secured loans
- Upstart: Best for lack of credit history
- Upgrade: Best for debt consolidation
- Prosper: Best for peer-to-peer lending
Honorable Mentions: Avant, LendingClub, Cash USA, Money Mutual.
#1. BadCreditLoans: Best Bad Credit Loans Overall
BadCreditLoans is a reputable personal loan service accessible for people with poor credit scores.
This company does not lend money itself. Instead, it works with a selection of lending partners who offer generous eligibility requirements and loan terms.
Loan amount: BadCreditLoans works with lenders offering loans between $500 and $10,000.
Term length: Each lender specifies its own term lengths within BadCreditLoans' network. Your specific term will depend on the amount of money you are borrowing and your creditworthiness.
Minimum credit score: BadCreditLoans doesn't specify a minimum credit score requirement within its lending network, but as its name suggests, it works with consumers with low credit scores.
Eligibility requirements: To qualify for a loan from BadCreditLoans, you must meet the following minimum eligibility requirements:
- Be 18 or older
- Have proof of citizenship or legal residency
- Have a regular income
- Have a checking account in your name
- Provide work and home phone numbers and a valid email address
Because BadCreditLoans is a lending service rather than an actual lender, you can save the time and hassle involved in finding a lender with requirements you meet. Instead, you can simply fill out a form on the BadCreditLoans website with information about your age, location, desired loan amount, and job. Then, the platform will use this information to connect you with lenders who meet your needs.
If you receive a lending offer through the platform, you can accept it by providing an e-signature. Then, the lender will send funds to your personal bank account through direct deposit, getting your loan funds to you quickly.
However, if BadCreditLoans cannot match you with any lenders, the platform may instead show you ads for lenders outside its network or credit repair services. Not qualifying for any of the company's loans may indicate that a credit repair service or debt-relief service would be helpful for you.
BadCreditLoans is a free service that prioritizes your privacy and security. The platform uses encryption technology to keep your personal information secure at all times.
Overall, BadCreditLoans is a trustworthy lending platform offering a convenient method to secure a personal loan, even if you have poor credit.
Pros
- Great option for borrowers with a bad credit score
- No collateral required
- Compare multiple loan options from one interface
- Quick funding after approval
Cons
- Not a direct lender
- Borrowers with a really bad credit rating may pay higher interest rates
#2. LendYou: Best for Small Personal Loans (under $2,500)
LendYou is an online lending platform that makes the process of securing a small loan quick and easy. Like other companies on our list, LendYou does not provide personal loans itself but instead works with other lenders who do.
Loan amount: LendYou facilitates loans between $100 and $2,500.
Term length: Each lender within the LendYou network has its own term lengths and conditions. Be sure to review your specific terms before accepting a loan through the platform.
Minimum credit score: LendYou does not indicate a minimum credit score borrowers must meet. However, it states that borrowers must have a fair credit rating to receive personal loans. It also says that lenders with all credit histories are welcome to apply.
Eligibility requirements: To borrow money through LendYou, you must meet the following criteria:
- Be 18 or older
- Have a valid checking or savings account that allows for direct deposit
- Receive a minimum income of $1,000 per month
- Not be a regular or reserve member of the Army, Air Force, Coast Guard, Navy, or Marine Corps
LendYou offers an entirely online lending process, allowing you to secure loan funds quickly and easily from the comfort of your home. Simply fill out the short form on the LendYou website with information about your financial situation and desired loan amount. The platform will then show you loan offers from lenders within its network who meet your needs.
LendYou also has a convenient mobile app, available for Android and Apple devices. You can apply for and accept loans through this app rather than using a laptop or desktop computer. Once you accept a loan offer from one of the platform’s lenders, you may be able to receive your loan amounts within one business day.
Overall, LendYou is ideal for bad credit borrowers looking for small personal loans.
Pros
- $100 minimum loan amount
- Quick application and approval
- Wide range of loan options to choose from
- No collateral required
- Minimal restrictions on use of funds
Cons
- Not a direct lender
- Can’t borrow more than $2,500
#3. OneMain Financial: Reputable Bad Credit Lender with Loans Up to $20,000
OneMain Financial is a reputable lender offering personal and auto loans. This lender has been in the business for over 100 years and offers personalized service in around 1,400 branch locations nationwide.
Loan amount: OneMain Financial’s loan amounts range from $1,500 to $20,000.
Term length: The lender's term lengths range between 24 and 60 months.
Minimum credit score: OneMain Financial does not specify a minimum credit score requirement.
Eligibility requirements: You must visit one of the OneMain Financial branches to secure a personal loan. While the lender does not specify other eligibility requirements on its website, if it turns down your application, it will email you to let you know why you did not qualify.
OneMain Financial prioritizes its customers’ financial health and well-being. The company provides financial tools and resources both on its website and in its branch locations to help customers make smarter financial decisions.
Additionally, this personal loan company never charges a prepayment penalty. As a result, you can pay off your loan early if you have the money. As a result of its clear terms and fixed rates, less than 10% of OneMain’s customers default on their loans.
While OneMain Financial does not specify a minimum credit score borrowers must meet, it works with fair and poor credit borrowers. Previous customers have commented that OneMain Financial treated them like actual people rather than just a credit score.
Additionally, this lender allows you to receive your loan funds quickly. You can receive your money in your bank account the same day if you gain loan approval by noon.
Overall, if you're looking for a lender that cares about its customers and provides generous loans to bad credit borrowers, we highly recommend OneMain Financial.
Pros
- Option to choose your own payment date
- Offers joint and secured loans
- Fast funding with next-day deposits to your bank account
- Offers direct payment to creditors for debt consolidation loans
Cons
- Interest rates may be higher than other personal loan companies
- Charges an origination fee
- No rate discount for autopay
#4. Upstart: Best Loans for Borrowers with No Credit History
Upstart is a fair online lender offering loans to pay off credit cards, consolidate debt, refinance your car, or pay for a range of other expenses. The company’s rates are lower than those of many traditional lenders and it works with borrowers with poor credit scores.
Loan amount: Upstart lends loan amounts ranging from $1,000 to $50,000.
Term length: Upstart offers loans with three or five-year repayment terms.
Minimum credit score: You must have a credit score of 300 or above on at least one of your credit reports to qualify for an Upstart loan.
Eligibility requirements: Along with the lender's credit score requirement, you must also meet these eligibility requirements:
- Have a U.S. residential street address
- Not live in West Virginia or Iowa
- Be at least 18 (or 19 if you live in Alabama or Nebraska)
- Have a regular source of income
- Have a verifiable name, Social Security number, and date of birth
- Have a valid email address
- Have a personal banking account in the U.S. with a routing number
Upstart uses an easy, transparent lending process. You can check your rates within minutes and receive loan funds within one business day, if you’re eligible.
The lender also advertises that its personal loan rates are 10% lower than traditional lenders, allowing you to save money throughout your loan term. You can also pay back your entire loan amount at any time without facing additional penalties, allowing you to minimize your interest expense further.
To get started with Upstart, you can fill out a short form on the Upstart website. Once you do, you'll be able to see your rates and potential loan terms, should you decide to accept a loan offer through the company. Filling out this form will not affect your credit score.
Overall, Upstart is an excellent lender to consider if you need a large personal loan for debt consolidation, to pay for a new car, or for other significant expenses.
Pros
- Low minimum credit score requirement
- Fast and easy online application
- Check your rates without affecting your credit score
Cons
- Charges origination fees on loans
- No option for secured loans or co-signer
- Loans only available for 3 and 5 year terms
#5. Upgrade: Best for Debt Consolidation Loans
Upgrade is an online lender offering large loans for consumers needing to cover major purchases. The company uses a simple lending process to make loans accessible for a wide range of consumers.
Loan amount: Upgrade offers loan amounts between $1,000 and $50,000.
Term length: Upgrade’s typical term lengths range between 24 and 84 months.
Minimum credit score: Upgrade isn’t completely clear about its minimum credit score requirement: it seems to be somewhere between 560 and 620.
Eligibility requirements: To qualify for an Upgrade loan, you must be at least 18 and live in the United States. You must also have at least two accounts in your credit history and have a maximum debt-to-income ratio of 75%.
You can get started with Upgrade by filling out the short form on the Upgrade website. Simply specify your desired loan amount and purpose, then input your financial information. Upgrade will show you your rates without impacting your credit score.
If you decide to borrow from Upgrade, you can review several loan options and determine which one can help you achieve your financial goals best. Once you accept an offer, you should receive your loan funds in your bank account within one business day.
Upgrade offers flexible loan options to give you the best chance of meeting its repayment terms. The company allows you to choose the monthly payment you need to make throughout your loan term. You can also pick repayment terms that fit your timeline and budget.
This lending company always ensures that its customers understand their loan terms before accepting an offer. For example, Upgrade breaks down the loan amount you will actually receive after paying the origination fee. It also clearly describes the minimum payment you would need to make each month.
Altogether, Upgrade makes the process of receiving unsecured loans simple. While the company has stricter credit requirements than other lenders on our list, it is an excellent choice for consumers who meet those requirements.
Pros
- Low minimum credit score requirement
- Borrowers allowed to use funds for business expenses
- Offers direct lender payout for debt consolidation loans
Cons
- Limited term lengths available compared to other bad credit lenders
- Charges origination fees for all loans
- Penalties for late payments and insufficient funds
#6. Prosper: Best for Peer-to-Peer Lending
Prosper is a peer-to-peer personal lending platform. Unlike the other lenders on our list, when you borrow funds through Prosper, you do not borrow from a financial institution, bank, or credit union. Instead, you receive those funds from traditional investors choosing to invest in you.
Loan amount: Prosper offers loans ranging from $2,000 to $40,000.
Term length: Prosper’s loan terms range between three and five years.
Minimum credit score: Prosper accepts borrowers with minimum credit scores of 640.
Eligibility requirements: In addition to base-level requirements for age and citizenship, Prosper examines your creditworthiness to determine your eligibility for one of its loans. Specifically, you must meet these financial requirements:
- Have fewer than five credit bureau inquiries in the last six months
- Have a maximum debt-to-income ratio of 50%
- Have at least three open trades reported on your credit report
- Have no bankruptcies on your report within the last year
Prosper is the first peer-to-peer personal loan lending platform in the U.S. The platform allows individuals and institutions to invest in loans and handles all loan servicing on behalf of its customers and investors.
Many consumers choose to borrow personal loans through Prosper because they receive a more personal lending experience. Borrowing from an individual or small institution may allow you to experience a more seamless, stress-free borrowing process. You can also know that you are more than just a source of income to your lender.
This platform strives to provide an accessible, fair experience for all borrowers. The company offers low interest rates, with APR ranging from 7.95% to 35.99% depending on your creditworthiness. You can easily review your rates by filling out the short form on the Prosper website.
Once you fill out the form, you can see several loan options with varying terms. Prosper allows you to choose your loan length and adjust your monthly payment to best suit your budget. After accepting a loan offer, you can receive your money by the next business day through direct deposit.
Overall, Prosper is a reliable online personal loan lender offering a personal touch to its lending services.
Pros
- Low minimum credit score requirement
- Offers joint loans
- Quick funding available
- No prepayment penalties
Cons
- Limited repayment terms available
- High APRs compared to other lenders
What Is a Bad Credit Personal Loan?
A bad credit personal loan is simply a personal loan with low minimum credit score requirements, making it accessible for people with bad credit scores. Most lenders only work with consumers with credit scores of “fair” or higher. However, bad-credit loan lenders expand their eligibility requirements to include those with poor or limited credit histories.
A personal loan is money you borrow from a financial institution, credit union, online lender, or individual to use for personal expenses. These loans come with a few components:
- Loan amount: The amount of money you receive from the lender, not including any origination fees you must pay upfront
- Loan term: The amount of time you have to repay the loan
- Monthly payment: The amount of money you'll need to pay each month
- Annual percentage rate (APR): Your yearly interest rate
Your loan company will review various factors to determine the above figures. Typically, the higher your credit score, the more appealing the loan terms.
When you apply for a bad-credit loan, the lender may ask you how you plan to use your loan proceeds. People use the top personal loans to cover a range of expenses. You may want to borrow money through a personal loan for:
- Debt consolidation
- Financing a car
- Healthcare expenses
- Emergency expenses
- Large events, like weddings or vacations
Most personal loans are unsecured, meaning you do not need to put up any collateral to qualify. However, some of the online lenders on our list offer secured loans that require collateral and sometimes come with more appealing terms.
How We Ranked the Best Online Loans for Bad Credit
If you have a poor credit score, you may have trouble qualifying for loans through traditional in-person credit unions and financial institutions. However, there are numerous lenders that are willing to loan money to bad-credit borrowers like you.
Unfortunately, many of these lenders charge incredibly high interest rates with strict repayment terms and severe penalties. When we put together this list of the best bad credit lenders, we prioritized lenders with more agreeable terms and rates. Specifically, we reviewed the following factors when determining which lenders to add to our list:
Eligibility Requirements
Eligibility requirements are the bare-minimum qualifications you must meet to receive a loan. These requirements typically include factors like your credit score, age, income, credit history, and debt-to-income ratio.
When we chose the lenders to add to our list, we looked for ones with varying eligibility requirements. Some of the lenders on our list only require you to be 18, live in the US, and have a bank account. Others require you to meet higher creditworthiness standards and earn a specific amount of money each year.
Including a few levels of eligibility requirements on our list allows you to choose the lender that best meets your needs.
Loan Amounts
Personal loan amounts range anywhere from $500 to $50,000. When we created our list of the best personal loan lenders, we wanted to include options at both ends of this spectrum.
Some of the online lenders on our list, such as LendYou, have a lower maximum loan amount of $2,500. Because this platform facilitates smaller loans, its eligibility requirements for borrowers are less strict. Other lenders, such as Upgrade, allow you to borrow $50,000 in a single loan.
The range of loan amounts on our list allows you to choose a lender offering the loan amount you need to cover your personal expenses.
Term Lengths
When looking for the best place to get a personal loan, we searched for online lenders offering varying term lengths. Typically, the shorter your term length, the more affordable your loan is overall. However, we know that sometimes you may need a large sum of money and can only afford to make small monthly payments.
The lenders on our list offer term lengths ranging from two to five years. Most of these lenders do not have prepayment penalties, so you can pay off your remaining balance early without facing additional charges.
Costs and Fees
Taking out a personal loan isn’t free. When you take out online personal loans, you’ll need to pay interest on top of the original amount you borrowed. You’ll also need to pay an origination fee, which typically comes out of your initial loan funds. If you can’t make your payments on time, you’ll face late payment fees and other penalties as well.
However, when we created our list, we specifically looked for lenders offering affordable fees and interest, even for bad-credit borrowers.
Application Process
One of the appeals of borrowing from an online personal lender is speed. The best online lenders allow you to receive your loan within one business day, giving you access to emergency funds when you need them. To streamline the process, these lenders also utilize speedy application processes and do not require you to provide much documentation to secure your loan.
All of the lenders on our list of the best personal loans for bad credit utilize a fast application process. These lenders each start their loan processes with a quick form, where you'll input information about your financial situation and desired loan amount. Then, most of these platforms show you potential loan offers instantly.
How to Get a Loan with Bad Credit
If you have a bad credit score, you may have trouble securing a personal loan from traditional credit unions and banks. However, you still have loan options, even if your credit is less-than-ideal. You may just need to put in more effort to secure a loan that works for your needs.
Here are the steps you'll need to follow to receive a bad credit loan:
Identify your credit score: You may know that you have bad credit without knowing your actual credit score. However, reviewing your score can help you narrow your options to those that work with borrowers in your credit range. You can check your credit score for free through any of the three major credit bureaus: Experian, Equifax, and TransUnion. Many credit card companies also allow their customers to review their credit scores for free through their online accounts.
Evaluate your budget: Next, you'll want to consider how much money you can reasonably spend each month to pay back a loan. Many people mistakenly believe that loans are free money. However, not only will you need to repay your original loan proceeds, but you'll also need to pay a predetermined interest rate on top of your loan amount. The best lenders clearly define your monthly payments, so you should consider how much you can afford each month before proceeding with a loan application.
Fill out several quote forms: Next, we recommend filling out quote forms with at least a few lenders on our list. These forms allow you to “pre-qualify” for the loans and see your bad-credit loan rates before proceeding. Pre-qualifying with several lenders enables you to compare your rates and choose the most affordable loan offers. However, keep in mind that pre-qualifying does not mean that approval is guaranteed.
Review your loan offers closely: Once you receive offers from a few different lenders, you should take time to review their terms, interest rates, origination fees, and other requirements. You should never accept a loan offer without fully understanding its terms.
Submit an application: While filling out quote forms won’t impact your credit score, submitting an actual loan application will. Most lenders perform a hard credit check as part of the application process, which will probably lower your credit score by a few points. As a result, you should only apply to one lender if you can help it.
Receive your funds: If the lender approves your loan application, you should receive your funds within a few days. Many lenders offer direct deposit, where you receive your money right in your bank account.
How to Improve Your Personal Loan Eligibility
The above process is relatively straightforward. However, unfortunately, you may not meet the minimum credit history requirements to qualify for any personal loans. If you're having trouble qualifying for a loan, you can take these steps to improve your eligibility:
Increase Your Credit Score
Raising your credit score is easier said than done. However, if your score is too low to qualify for even a bad credit loan, you'll probably need to work on raising it before you can receive any loans. Making other loan and credit card payments on time, paying off existing debt, and lowering your credit utilization ratio are all effective steps you can take to improve your poor credit score.
Add a Co-Signer
If your credit score is too low but you need your loan amount soon, consider adding a co-signer to your loan application. A co-signer is another person who also signs your loan and would be responsible for paying back the loan should you fail to make payments.
You should only add a co-signer if you feel confident in your ability to repay the loan. Putting the repayment responsibility on the co-signer is irresponsible and could impact your relationship with that person.
Apply for a Lower Loan Amount
If a lender does not initially accept your application, you may be requesting too much money. Lenders review your income and credit history to determine your loan eligibility. If you are applying for a $50,000 loan but only make $1,000 a month, the lender may determine that lending to you is too risky.
However, lowering your loan amount can reduce the risk of a lender loaning you money. If you make $1,000 a month and request a $1,000 loan, the lender may feel more confident letting you borrow money.
Tips for Comparing Bad Credit Lenders
If you decide to research bad credit loans outside of our list, you should do your due diligence to ensure that the lender you choose is reliable, trustworthy, and affordable. Here are a few tips to help you compare bad credit loans and choose the best option for your needs.
Interest Rates
The interest rate you pay on your loan is one of the most significant factors to consider. If you have a bad credit score, you can assume that your interest rate will not be ideal. However, some lenders will offer you lower interest than others.
One of these easiest ways to compare lenders is to examine their maximum interest rates. Knowing the maximum interest you may need to pay can help you narrow your options to lenders with lower maximums.
Pre-Qualify First
Pre-qualifying for several personal loans can also help you narrow your options. Many online lenders allow you to view your rates without submitting a formal application for a loan. While lenders will perform a soft credit check as part of your pre-qualification, this credit check will not impact your credit score.
By pre-qualifying for several loans, you can gain a better understanding of your loan costs and narrow your choices to the most affordable lenders. You can also understand your eligibility for a loan before applying for it, preventing you from submitting an application that does not result in a loan offer.
Check for Fees
Reputable lenders clearly state the fees they charge on their websites. Some lenders list the minimum and maximum fees borrowers can expect to pay, while others wait to present their fees until you submit a quote form.
In either case, you should be able to review a lender's fees before formally applying. Be sure to examine origination fees, prepayment penalties, interest rates, and other associated fees, then calculate how much you will actually need to pay to receive the loan. Seeing these fees upfront may help you narrow your choices and realize how expensive some loans can be.
What's Needed To Qualify for a Bad Credit Loan
Every bad-credit lender on our list has slightly different eligibility requirements. However, to qualify for any bad-credit loans, you at least need to be 18 years or older, have a regular source of income (whether it’s a job, unemployment benefits, retirement income, etc.), and have a checking account.
Some lenders also require borrowers to meet minimum income requirements. These requirements are sometimes necessary to determine your ability to pay back a loan. Lenders try to reduce risk as much as possible when they provide loans, and as a result, they will not lend money to people without steady sources of income.
When you apply for an unsecured personal loan, you’ll need to provide the following information to qualify:
Proof of identity: To qualify for any loan in the US, you must be able to prove that you’re a United States citizen or a permanent resident. You can provide a driver’s license, birth certificate, passport, military ID, or state-issued ID as proof of your identity.
Employer and income information: Whether a bad-credit loan company has a minimum income requirement or not, it will probably request information about your employment status. You can send proof of income in the form of pay stubs, bank statements, or tax returns. You may also need to provide your employer’s contact information.
Proof of address: Online lenders often have different terms for different geographical locations. As a result, you may also need to supply evidence of your current address.
Some lenders may require you to supply additional information, as well.
Types of Loans for People with Bad Credit
If you have bad credit, you may be able to qualify for a few different types of loans. Here are the most common bad credit loans:
Secured & Unsecured Personal Loans
Personal loans are flexible loans that you can use for pretty much any expense. Once you receive your loan amount, your lender won’t know how you spend the money, allowing you to spend it however you want.
There are two primary types of personal loans: secured loans and unsecured loans.
Secured loans require you to provide collateral in the form of property you own that has significant value. Your collateral will act as a safety net for the secured loan lender, giving them a way to recover the money they loan you if you fail to make payments. They can simply seize the property you put up as collateral and sell it to repay your loan.
If you have bad credit, you may be able to qualify more easily for a secured loan than for an unsecured loan. However, you should only apply for a secured loan if you feel confident that you can repay your loan amount or you don’t mind sacrificing the item you put up as collateral.
Most of the loan options on our list are unsecured personal loans. Unsecured loans do not require you to supply any collateral to qualify. Instead, your creditworthiness is the primary factor lenders will consider in determining your eligibility.
Before you apply for a personal loan, be sure to consider whether a secured loan or unsecured loan would make the most sense for your financial situation.
Payday Loans
Payday loans are unsecured, short-term loans that use your next paycheck as collateral. Payday lenders allow you to take out a loan for the amount equivalent to your next paycheck. Then, on your payday, they will withdraw the funds from your checking account or cash a prewritten check to pay back the loan amount plus interest and fees.
Most legit payday loans require you to repay your loan amount within 14 days. If you cannot come up with the money in this short amount of time, you can then take out another loan with equally high interest rates to cover your balance. This process sends many consumers into a never-ending cycle of debt.
Payday loans typically have extremely high APR compared to other personal loans, even ones specifically for people with bad credit. According to the Consumer Federation of America, most payday loans have a 400% or higher APR.
In most cases, payday loans are more expensive than they're worth. However, if you've exhausted your other options and need emergency funds, they may be worthwhile in some cases.
Cash Advances
Cash advances are short-term loans that you can borrow through your credit card company. Essentially, they allow you to borrow funds against your remaining credit card balance. If you’ve ever inserted your credit card into an ATM or payment machine at a store and seen the option to withdraw funds, you’ve had the opportunity to take out a cash advance.
Cash advances offer a fast and easy way to get a small amount of money for short-term needs. However, these loans for borrowers with bad credit typically have high interest rates, making them expensive overall.
HELOCs for Poor Credit
Home equity lines of credit (HELOCs) are loans that use your home equity as collateral. These loans work similarly to cash advances, as you can borrow against the available equity in your home. You can typically borrow up to 80% of your home's value minus the amount you still owe on your home.
HELOCs usually have lower interest rates than other types of loans, and in some cases, your interest may be tax-deductible. However, you risk losing your home if you cannot repay your borrowed amount on time.
Car Loans
Car title loans are short-term loans that use the title to your vehicle as collateral. When you repay your loan amount plus interest and fees, the lender will return your car title to you. However, if you cannot repay the loan, the lender will seize your vehicle.
While car loans sound nice in theory, they typically have extremely high interest rates, sometimes topping 400%. They also have short repayment terms, around 30 days or less. As a result of these strict terms, car title loans are illegal in 27 states.
If you cannot come up with the funds you need now, you probably will not be able to come up with those same funds plus interest in 30 days. As a result, you should only consider taking out a car title loan if you are confident you will have the money to repay it.
Frequently Asked Questions
Can You Use Personal Loans for Debt Consolidation?
Debt consolidation is one of the primary reasons people take out personal loans.
If you currently have debt with several banks, credit unions, or credit card companies, you may have trouble keeping track of all of your monthly payments. Additionally, some of your loans may have higher interest rates than others, making them more expensive to repay.
However, when you take out a debt consolidation loan, you can use the funds from the loan to pay off some or all of your existing debt. Then, you’ll only need to repay one loan rather than trying to keep track of all of your debt.
If you’re looking for debt consolidation loans, make sure the options you consider have better terms than your existing loans. You may also want to get quotes from several debt consolidation loan providers to find the one with the best rates.
How Much Money Can I Borrow with Bad Credit?
Most personal loan lenders require minimum loan amounts of $500 or $1,000. However, the maximum amount you can borrow with bad credit loans depends heavily on your specific lender. Some of the lenders on our list only allow you to borrow up to $2,500, while others have maximum loan amounts of $50,000.
While bad credit loan companies have minimum and maximum loan amounts in place, these do not mean you will have guaranteed approval for the full amount. Instead, lenders will review your creditworthiness to determine how much they are willing to lend you.
If you have a poor credit history, you probably will not be able to receive a lender's maximum loan amount. If you do qualify, you may face outrageous rates and fees in turn. Instead, you may want to take some time to improve your credit score before applying for a major loan.
Can I Get a Loan with No Credit Check?
Even companies offering loans for bad credit scores will check your credit report and credit score before offering you a loan. Most lenders base their rates on your creditworthiness, which includes your credit score. As a result, even if a lender has no minimum score requirements, it will still want to know your score.
However, not all lenders perform hard credit checks. Some only perform soft credit checks, which do not impact your credit score.
Still, a hard credit check probably will not impact your credit score too drastically. We only recommend avoiding hard credit inquiries if your score is at the low end of a score range and a drop of a few points would send it into the next category.
What Are Bad Credit Loans Mostly Used For?
People use loans from bad-credit lenders for a range of purposes. Once you receive your loan money, you can use it however you see fit. However, you'll probably need to specify how you intend to use your loan on your application, so you should have a practical purpose in mind.
Most borrowers use bad credit personal loans for one of the following reasons:
- To consolidate debt
- To pay for emergency expenses
- To afford medical treatments
- To pay off medical bills
- To fund vacations or weddings
- To pay for home renovations
We recommend only taking out bad credit personal loans for emergency or immediate expenses. If you can wait a year or two to request your loan, you may be able to improve your credit score and receive better terms.
What Is Considered a Bad Credit Score?
Experian, one of the major credit bureaus, breaks down credit scores into five different ranges.
- Poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Exceptional: 800 to 850
While "bad" is not an actual score range according to Experian, most lenders consider "poor" and "fair" scores to indicate significant risk in the borrowing process. Some of the personal loan providers on our list will not loan money to borrowers in the "poor" credit range.
What Interest Rate Can I Expect on a Bad Credit Loan?
Lenders offering loans for bad-credit borrowers typically charge APR between 5% and 35%. If you have a credit score in the "poor" or "fair" range, you can expect your interest rate to be on the higher end of this spectrum.
Lenders charge higher interest rates for borrowers who pose higher risks of non-repayment. If you’ve made poor spending decisions in the past that have landed you with a bad credit score, lenders have to consider that you may make those same choices again.
Can I Get a Loan with No Credit History?
Some lenders do offer loans to people with no credit history. However, because these lenders cannot review your past spending habits to determine your creditworthiness, they often charge high interest rates to minimize their risk.
If you’re new to the world of loans and credit, we recommend applying for a beginner credit card and taking time to build your credit report before applying for a loan. You may also want to ask a family member to co-sign your loan application to lower your interest rate.
Final Thoughts
Overall, loans for bad credit borrowers do exist — you just need to know where to find them. All of the lenders on our list offer generous eligibility requirements, making them suitable for consumers with less-than-ideal credit scores. However, we still recommend taking time to review several options before signing to ensure that you receive the best rates.
If you're having trouble gaining loan approval, we recommend using one of the lending platforms on our list, like BadCreditLoans or LendYou, to narrow your options. However, you may also want to consider putting off your loan application for a few months and improving your credit in the meantime.
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