Can I get a personal loan with bad credit?
If you have bad credit, it can be difficult but not impossible to get a personal loan. For some, it’s a situation full of painful irony: You have bad credit because you’re in debt; refinancing or consolidating that debt would help improve your credit but you have trouble qualifying for a good loan because you have bad credit.
Fortunately, there are lenders out there who will extend financing to those with less-than-stellar credit. You may not get the lowest interest rate, but you won’t be disqualified simply because your credit score is less than stellar. Lenders will consider other information as well as your credit, such as your income level and whether or not you have a cosigner with strong credit.
One of the most versatile ways to get funding is through a personal loan. Personal loans are unsecured installment loans, which means you’ll get a lump sum upfront to pay off your debts, and you’ll be left with just one fixed loan payment that will be due over a set period of time. Because the loan is unsecured, you won’t have to put up any collateral.
How does a bad credit score affect my loan?
A bad credit score indicates to lenders that you aren’t a reliable borrower. For whatever reason, you have struggled to make on-time payments in the past, or you have taken on a large amount of debt relative to your income.
Because you look risky, they may be more reluctant to lend you money at all. When you are offered a loan, it’s likely to be for a smaller amount with higher interest rates.
How to get a personal loan with bad credit
Whether you’re facing a financial emergency or simply looking to consolidate debt, you’ll want to qualify for the best personal loan rates possible. You may also want to secure your funds quickly. Here are a few steps you could take to improve your odds of approval and to be prepared for the loan application process.
Consider a cosigner
If you have poor credit and need a loan now, consider finding a cosigner with a strong credit score and income. A cosigner is basically someone who promises to repay the debt if you don’t follow through with payments.
You and your cosigner will be equally responsible for the debt. That means if you fall behind on payments, both your and your cosigner’s credit score will take a hit, and debt collectors could go after them if the debt becomes delinquent. That could put a strain on your relationship.
Before locking down a cosigner, make sure you have a plan for repayment. Be honest about your finances with your potential cosigner, too. And don’t take it personally if they decide not to be your cosigner.
Improve your credit score
Just because you have a bad credit score now doesn’t mean you will forever. There are steps you can take to rebuild it.
How to get your credit score: Check your credit cards. Many offer customers access a free FICO score once per month. Otherwise, use a free tool, such as through Discover, which you can access even if you don’t have any accounts with the company.
How your score is calculated: Your credit score is based on your credit report, which includes a record of loans and other accounts in your name and your history of payments. Think of it like your grade point average in school. It’s a score calculated on your overall credit performance over time.
The same way a failed exam would hurt your GPA, a missed credit card payment or significant negative event such as a bankruptcy or foreclosure could hurt your score. Vice versa, if you failed that one exam in the early part of the year but score As on every other exam moving forward, that new positive information will be factored into your score as well and can boost it.
After a lender looks at your credit report, they will take the information and plug it into a scoring model. There are two main models: FICO and Vantage. Ninety percent of lenders use FICO models, so for our purposes, we’ll assume your credit score is calculated using a FICO model.
Credit scores fall into five different categories:
- 750+ – Excellent Credit
- 680-749 – Good Credit
- 620- 679 – Average Credit
- 550-619 – Sub-Prime Credit
- Below 550 – Poor Credit
If you fall into the sub-prime or poor credit categories, you have are going to have a harder time borrowing money — especially with low interest rates.
How to get your credit reports: Every 12 months, you can get a free credit report from each of the three major credit bureaus through AnnualCreditReport.com.
How to improve your score: Once you have your credit reports, check them for accuracy. If you find any errors, take measures to fix them. Doing so could easily boost your score.
Two other things you can do to improve your credit score are make on-time payments and lower your utilization rate (you can do that by paying down your balances). Your utilization rate is calculated by dividing the total amount of all your statement balances by your credit limits.
If you are consolidating debt with a personal loan, making on-time monthly payments may slowly help improve your credit score as you will be eliminating debt.
Have your loan materials handy
After you’ve made sure your credit report contains only accurate information, you’ll want to get your paperwork together. Many lenders will ask you to provide the following:
- Your full name
- Social Security number
- Residency status
- Proof of income
- Information regarding your debts, especially if you are consolidating
The lender may also request supporting documentation. This additional documentation will help the lender answer any questions it may have about your finances.
After lenders review your materials, they will disclose the rates and terms you are approved for. From there, you can decide whether or not to move forward with a loan.
Follow up with lenders that reject you
If you’ve followed the above steps and been rejected for a loan, reach out to the lender and ask why. The information it provides may give you direction on what you need to do before applying again.
For example, if you were rejected because you have a low income, that could be a strong signal that it’s time to pick up extra work. If you were rejected because of your credit score, then go through the steps we’ve outlined above once more.
You may also simply need to wait for your score to improve. There could be a delay between when you get your finances in order and when your credit score improves.
Where to shop for the best personal loans for bad credit
When you’re shopping for a personal loan with bad credit, it’s important to comparison shop. You want to be sure you are getting the best rates and terms before signing your name on the dotted line.
LendingTree, can potentially connect you with numerous lenders who offer personal loans to those with less-than-perfect credit. Their personal loan tool will ask you some basic questions, weeding out lenders who aren’t a good match, and saving you time and unfruitful hard inquiries on your credit report.
As low as 3.99%
Minimum 500 FICO®
Minimum Credit Score
24 to 60
LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.
A Personal Loan can offer funds relatively quickly once you qualify you could have your funds within a few days to a week. A loan can be fixed for a term and rate or variable with fluctuating amount due and rate assessed, be sure to speak with your loan officer about the actual term and rate you may qualify for based on your credit history and ability to repay the loan. A personal loan can assist in paying off high-interest rate balances with one fixed term payment, so it is important that you try to obtain a fixed term and rate if your goal is to reduce your debt. Some lenders may require that you have an account with them already and for a prescribed period of time in order to qualify for better rates on their personal loan products. Lenders may charge an origination fee generally around 1% of the amount sought. Be sure to ask about all fees, costs and terms associated with each loan product. Loan amounts of $1,000 up to $50,000 are available through participating lenders; however, your state, credit history, credit score, personal financial situation, and lender underwriting criteria can impact the amount, fees, terms and rates offered. Ask your loan officer for details.
As of 28-Feb-2019, LendingTree Personal Loan consumers were seeing match rates as low as 3.99% (3.99% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected).
Most LendingClub borrowers have a credit score of at least 600. All loans are issued at a fixed APR between 6.95% to 35.89%. Your credit score, current debt burden and the amount you want to borrow will all affect where you fall in that range. LendingClub issues personal loans up to $40,000.
LendingClub personal loans do come with some fees:
- Origination fees. This will be 1.00% - 6.00% of the amount you’re borrowing. You will not have to pay it upfront; it will be rolled into your loan, and included in your APR.
- Late payment fees. If your monthly payment is more than 15 days late, LendingClub may charge you a late payment fee. This fee will be the greater of $15 or 5% of the unpaid payment.
- Check processing fees. If you choose to pay your loan via paper check, you will be charged a $7 check processing fee.
The application process happens online and will require information about your employment history and income, on top of identifying information like your address and Social Security number. If you’re not confident you’ll qualify with your credit history, you can add a co-borrower with a better history to your application to increase your odds of approval.
“If you’re considering your options and want to talk through your unique situation, don’t hesitate to reach out to us,” said Alia Dudum, spokeswoman for LendingClub.
Minimum Credit Score
36 or 60
1.00% - 6.00%
LendingClub is a great tool for borrowers that can offer competitive interest rates and approvals for people with credit scores as low as 600.... Read More
LendingPoint is on a mission to provide access to financing for those without good credit. “Most of our competitors have started to deny anyone below a 660-680, running up the credit rankings,” said Mark Lorimer, LendingPoint’s CMO. “We’ve started trying to provide access to more — the way down to a 585.”
LendingPoint recently launched a program called Step Into More, which helps those with a lower credit score and other negative aspects of their credit rating get personal loans and improve their score at the same time.
The program starts with a $2,000 loan which is to be repaid over the course of 24 to 48 months at 9.99% – 35.99% APR. If you make on-time payments for the first three months, your interest rate drops by one percentage point. If you continue making on-time payments up to the six-month mark, your interest rate will drop by yet another percentage point. At the twelve-month mark, your interest rate will go down at least two percentage points more if you have consistently made on-time payments.
You may qualify for a personal loan from LendingPoint independent of the Step Into More program — even with a credit score of 585. Your score alone isn’t enough to get you approved; your income, debt and other factors will be a part of the decision process. But Lorimer says that with a 585 credit score,most applicants could expect to be offered an interest rate of 9.99%
35.99% APR. Loan amounts vary from $2,000 to $25,000.
There is an origination fee ranging anywhere from 0%-6% depending on your state of residence. This origination fee will already be accounted for in your APR.
You can apply online and will need to provide basic identifying information such as name, address and Social Security number. You will also need to verify your bank account with the routing and account number. If you need help with the process, the company has telephone support; a live human being can help walk you through the process.
Minimum Credit Score
24 to 48
0.00% - 6.00%
LendingPoint is an online lender that targets borrowers with fair credit, and allows borrowing up to $25,000.... Read More
SoFi doesn’t publish any specifics about its credit score requirements. It is a unique lender in that they focus more heavily on things like education, employment and income potential. Those with higher income or income potential are more likely to be approved. To this end, SoFi’s personal loans come with unemployment protection — which defers payment and helps you find a new job should you find yourself unemployed.
SoFi grants personal loans from $5,000 to $50,000 with interest rates between 5.99% – 16.24% APR after a 0.25% discount for setting up autopay. They do not charge origination fees, and the terms on these loans can be anywhere between three and seven years. If you’re 15 days or more late with your payment, you may be assessed a fee 4% or $5 — whichever is less.
You can apply online. Come armed with your basic contact information, education history and employment information. You may have a hard time getting approved with a bad credit history, but SoFi does a soft pull on your credit report — which does not negatively affect your score. If you have a solid education and earn a decent income, it’s worth seeing if they will take you on.
Minimum Credit Score
24 to 84
No origination fee
SoFi offers some of the best rates and terms on the market. ... Read More
Fixed rates from 5.990% APR to 16.240% APR (with AutoPay). Variable rates from 5.75% APR to 14.60% APR (with AutoPay). SoFi rate ranges are current as of March 18, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.75% APR assumes current 1-month LIBOR rate of 2.50% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
See Consumer Licenses.
SoFi Personal Loans are not available to residents of MS. Minimum loan requirements might be higher than $5,000 in specific states due to legal requirements. Fixed and variable-rate caps may be lower in some states due to legal requirements and may impact your eligibility to qualify for a SoFi loan.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
Read our full review of Avant’s personal loans here.
In some cases, online lender Avant will issue personal loans to those with credit scores of 580. Their personal loans range from $2,000 to $35,000, and have terms between 24 to 60 months. Interest rates are between 9.95% to 35.99% APR.
There is an administration fee of Up to 4.75%. Other fees include a $25 late fee after your payment is 10+ days delinquent, and a $15 fee if your payment is returned.
You can apply online with your name, address, Social Security number and income information. If you are approved, you could have funds in your bank account the very next day.
Minimum Credit Score
24 to 60
Up to 4.75%
on LendingTree’s secure website
Avant branded credit products are issued by WebBank, member FDIC.
Avant is an online lender that offers personal loans ranging from $2,000 to $35,000. ... Read More
Credit unions and community banks
In your search for a lender, don’t overlook credit unions and community banks. Rachael Bator, CFP at Lake Street Advisors, says these institutions tend to have lower minimum credit score requirements on top of lower interest rates. And they are often willing to work with people with low credit scores.
Alternatives to personal loans
Bator says that while a personal loan may be a good option in certain situations, in others you may be served by a different product.
First, she says you can ask family members if they’d be willing to give you a loan. She does note that in order for this money to be considered a loan and not a potentially taxable gift, your family member will have to charge you the applicable federal rate, which is usually much lower than the interest rate you would get with a lender — especially if you have bad credit.
Another area for examination is a home equity line of credit (HELOC). Bator says because your home is put up as collateral, the interest rate on this product tends to be lower than that of a personal loan.
You could also consider a secured loan. This type of loan is backed by collateral, such as property you own. They may be easier to qualify for and come with better interest rates since the collateral you put up reduces the lender’s risk. However, if you fall behind on payments, you’ll risk losing your collateral.
Beware scammers and predatory loans
Since your loan options may be limited due to your credit score, you’ll want to watch out for loan scams or predatory lenders. The following may be signs of a scam:
- You’re not required to submit to a credit check
- Your income isn’t a factor in your loan application
- Your application is guaranteed to be approved
- The lender has a poor or no ranking with the Better Business Bureau
If you’re not sure whether or not a lender is a scammer, take a step back. A quick Google search could reveal issues other borrowers have faced. Call the lender and ask about how it handles loan approvals. If something sounds sketchy, consider looking elsewhere for loan funds.
“The repayment periods are incredibly short,” said Bator. “You can expect to pay outrageous interest rates — they’re illegal in many states for good reason. It’s proven that they don’t help people get out of debt, but rather the debt snowballs into an uncontrollable situation which profits the lender — not the borrower.”
For these reasons, you should stick to trusted and well-known personal loan lenders.