Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Updated on Thursday, February 4, 2021
Getting loans for poor credit may be challenging, but it isn’t impossible. You could find a cosigner for your loan or apply for a secured loan. Some lenders even issue bad credit loans to borrowers with thin credit files.
Read below for more information on reputable personal loan companies who may lend to you, and what to do if you still don’t qualify.
What is a bad credit personal loan?
A bad credit loan often refers to a personal loan with fixed rates that may be available to borrowers with low credit scores. As personal loans are often unsecured, meaning they aren’t backed by collateral, lenders with low credit requirements can be hard to find.
However, some loan companies, such as Upstart, take your job history and educational performance into account when assessing your loan application. If you have bad credit, these types of companies may be easier to qualify for.
If approved for a bad credit personal loan, be prepared for high rates. A low or unestablished credit score can signal to lenders that you could be a risky candidate for a loan. Higher rates will follow as a result. The average APR for a bad credit personal loan ranges from 28% to 32%, according to ValuePenguin. (APR, or annual percentage rate, is the annualized cost of taking out a loan.)
Which loan company is best for bad credit?
A low credit score doesn’t always reflect how responsible you are with credit. If you don’t often use a credit card or have never taken out a loan before, your low score could be the result of a thin credit history. The good news is that as long as you have a clean history with no late payments and a low credit utilization ratio, you may still qualify for a loan.
Each personal loan lender has its own set of requirements, but many lenders will give you an idea of your eligibility without hurting your credit score. Here are five personal loan companies for bad credit borrowers that let you prequalify with a soft credit pull:
Good for: Personal loans with a co-borrower
LendingClub is a peer-to-peer loan marketplace; it matches borrowers with potential investors. Although you have limited repayment options, you have the flexibility to borrow between $1,000 and $40,000.
Expect an origination fee of 3.00% - 6.00% to be deducted from your loan amount. For borrowers who want to potentially snag better loan terms, it’s best to apply with a co-borrower.
36 or 60
3.00% - 6.00%
LendingClub is a great tool for borrowers that can offer competitive interest rates. The loan application process is done online and only takes a few minutes to complete without hurting your credit. The loan processing time can take a while and you might not get approved if you have missed payments in the past.
Good for: Borrowers with education and job history
Upstart assesses your creditworthiness not just by your credit score, but through a combination of other factors such as your job and career history, education and even your standardized test scores. You could receive your funds as quickly as the next business day, but be ready for an origination fee of Up to 8.00% to be deducted upfront from the total amount of your loan. Loan amounts range from $1,000 to $50,000
Minimum Credit Score
36 or 60
Up to 8.00%
Upstart is an online lender created by ex-Googlers.... Read More
Good for: Fast funding and secured loans
If you need cash in a pinch and can qualify for a loan from Avant, you could get the funds in your bank account by the next business day after you’re approved. Loan amounts start at reasonably low $2,000 and cap out at $35,000, though these amounts differ if you opt for a secured personal loan.
Avant may be a good option for self-employed borrowers. The lender will consider your application as long as you can provide two years’ of tax returns to verify your income. While Avant doesn’t charge any prepayment fees, you could be charged for late or incomplete payments as well as an administrative fee (also known as an origination fee) of Up to 4.75%.
Minimum Credit Score
24 to 60**
Up to 4.75%**
Avant is an online lender that offers personal loans ranging from $2,000 to $35,000. ... Read More
*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.
Based on the responses from 7,302 customers in a survey of 140,258 newly funded customers, conducted from August 1, 2018 - August 1, 2019, 95.11% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.
Good for: Comparing multiple lenders
Prosper works similarly to LendingClub; the peer-to-peer marketplace helps match borrowers with investors who may fund their personal loan. Loan amounts are from $2,000 to $40,000, with limited repayment options of 36 or 60 months and a slightly higher APR cap compared to LendingClub.
Note that it could take up to 14 days to get funded for your loan and residents of Iowa or West Virginia are not eligible.
Minimum Credit Score
36 or 60*
2.41% - 5.00%
Prosper is a peer-to-peer lending platform that offers a quick and convenient way to get personal loans with fixed and low interest rates. ... Read More
*For example, a three-year $10,000 personal loan would have an interest rate of 11.74% and a 5.00% origination fee for an annual percentage rate (APR) of 15.34% APR. You would receive $9,500 and make 36 scheduled monthly payments of $330.90. A five-year $10,000 personal loan would have an interest rate of 11.99% and a 5.00% origination fee with a 14.27% APR. You would receive $9,500 and make 60 scheduled monthly payments of $222.39. Origination fees vary between 2.41%-5%. Personal loan APRs through Prosper range from 7.95% to 35.99%, with the lowest rates for the most creditworthy borrowers. Eligibility for personal loans up to $40,000 depends on the information provided by the applicant in the application form. Eligibility for personal loans is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All personal loans made by WebBank, Member FDIC.
Good for: Borrowers with no credit
If you have an extremely low or unestablished credit score, you could be eligible for financing from OppLoans at an extremely high cost. APR rates range from 99.00% to 199.00% and are significantly higher than any of the other loan companies in this list. Still, if your only other option is a payday loan, this lender would be preferable as their rates are still lower. It also offers borrowers free educational courses on budgeting, saving and boosting credit scores.
How to get a personal loan with bad credit
If you or a family member are members of a federal credit union, it may be worthwhile to pursue financing with them. Federal credit unions may offer payday alternative loans (PALs), an affordable alternative to payday loans with longer repayment periods.
PALs I/II loan terms
To increase your chances of getting a loan at reasonable rates, consider asking someone to cosign the loan. A cosigner lets you benefit from their higher credit score and income by agreeing to be legally responsible for the debt’s repayment. This decreases the risk to the lender, which makes them more willing to extend you a loan.
Note that unlike a co-borrower who would share and repay the debt together with you, the intent of getting a cosigner is for you to repay the debt on your own. However, your missed payments will negatively impact your cosigner’s credit, in addition to your own. The lender can also go after them for these missed payments.
What to do if you don’t qualify for a personal loan
Try to avoid payday loans and title loans
If you’re not familiar with payday loans or title loans, you might be wondering what’s so bad about them. After all, they seem convenient — most offer fast cash, and if you live in a populated area, you’ll probably find a payday loan or title loan shop nearby.
However, both come with exceptionally high rates and short repayment periods of just a few weeks. So while they may be convenient options, you should only consider them an option if you know that you can pay off the debt in full and on schedule. Otherwise, you risk falling into a debt trap.
Seek out ways to build your credit
If you don’t qualify for a personal loan, and you can wait to apply, there are a few steps you can take to increase your credit score. For example, you can potentially pay down debt to improve your credit utilization ratio, or you could open a secured credit card and pay it off every month. These methods won’t boost your score immediately, but over time, you’ll see an improvement.
Also, if you haven’t started budgeting and tracking your spending, you should make it a priority — doing so can help you spot problem areas with managing your money.
Enroll in nonprofit credit counseling
You want to make every effort to improve your credit score, even after you’re approved for a loan, because having a good credit score will benefit you in other areas of life. For that reason, you might want to consider teaming up with a nonprofit credit counseling service.
Credit counselors can provide you with personalized advice on your specific situation so you can work on rebuilding your credit score. They can also work with your creditors and negotiate on your behalf to possibly lower interest rates or get better terms on your existing debt.
Visit the U.S. Department of Justice website for a list of accredited credit counseling agencies by state.