Best Personal Loans for Bad Credit in 2024

If your credit score has seen better days, you might think getting a loan is off the table. But before you resign yourself to a cash-only lifestyle, know that there are plenty of borrowing options designed specifically for people with bad credit.

Learn about the different types of personal loans for bad credit available, the best loan providers, and tips for choosing the right one for your needs.

What are bad credit loans?

Bad credit loans are personal loans specifically designed for people whose credit scores fall in the “bad” range, typically below 580 on the commonly used FICO scoring model. When unexpected expenses arise, a personal loan can be a lifesaver, and a bad credit score shouldn’t limit you from getting the funds you need.

Bad credit loans work just like regular personal loans. The lender gives you a lump sum of money, which you pay back in fixed monthly installments over a set period of time. Repayment terms are usually 2–5 years, but it depends on the principal amount.

The main difference from traditional loans is that bad credit loans tend to come with higher interest rates. But why the high interest?

Lenders use your credit score to judge how likely you are to pay back a loan on time, also known as your creditworthiness. A low score can suggest you’ve struggled with borrowing in the past, which makes you a riskier bet in lenders’ eyes. And lacking a substantial credit history makes it harder for lenders to understand your creditworthiness. A higher interest rate helps offset that risk for the lender.

Despite the added cost, a bad credit loan can still be a smart move if you need funds and don’t have savings or other borrowing options to turn to. And because personal loans are usually unsecured, you don’t have to put up collateral like your home or car to get approved.

The key is shopping around to find a lender who will work with your credit situation while offering affordable rates and terms. Many online lenders have less stringent requirements than traditional banks, so even with bad credit, you don’t have to turn to payday loans.

What’s considered a bad credit score?

Your credit score is a snapshot of your borrowing history. It’s based on information in your credit report, which includes how many loans and credit cards you have, how much debt you’re carrying, and if you pay bills on time.

A few key mistakes can send your score tumbling. Late payments, maxed-out credit cards, and bankruptcies significantly impact your rating. Sometimes big life events like job loss or even identity theft are to blame. Other times, it’s a matter of taking on too much debt and struggling to keep up.

So what counts as a “bad” credit score? The answer can vary depending on who you ask. But in general, a FICO score below 580 is considered “poor” or “bad.” Here’s how the scoring breaks down:

-800 to 850 is “Exceptional”

-740 to 799 is “Very good”

-670 to 739 is “Good”

-580 to 669 is “Fair”

-300 to 579 is “Poor”

If your score is below 580, it’s natural to wonder if you can get a loan with bad credit. The short answer is that you shouldn’t lose hope. Even within the poor credit range, there’s wiggle room. Some lenders are happy to work with borrowers with scores in the 500s, while others set a harder line at 580 or higher.

No matter the reason for your low score, you can turn things around. Borrowing responsibly, making timely payments, and keeping your debt balances low are all smart moves that, over time, can get your credit score back on track.

Types of loans for bad credit

There are plenty of options available to borrowers with lower scores. Here are some of the most common types:

Unsecured loans for bad credit

These loans don’t require any collateral, like a car or house, to qualify. Instead, lenders base their decision entirely on your financial information, including your income, total debt, and credit history. Unsecured loans for bad credit typically have higher interest rates, but you can find affordable options if you shop around.

Secured loans for bad credit

With a secured loan, you put up something of value as collateral. This could be your car, savings account, or even your home. Because there’s less risk for the lender, these loans can be easier to qualify for and may have lower interest rates compared to unsecured loans. Just keep in mind that if you don’t pay, the lender can seize your collateral.

Co-signed personal loans

Finding a co-signer, like a family member or close friend with strong credit, can help you qualify for a personal loan that you might otherwise get denied for. Your co-signer agrees to take on responsibility for the loan if you can’t pay, which lowers the risk for the lender.

Student loans for bad credit

If you need to borrow for school, federal student loans should be your first stop. They don’t require a credit check, and they come with benefits like income-driven repayment plans and loan forgiveness programs. Private student loans are trickier to get with bad credit, but some lenders do offer them. You may need a co-signer to qualify.

4 of the best personal loans for bad credit

Here are some top loan options for people with low credit scores:

1. Upgrade

Upgrade offers personal loans from $1,000–$50,000 with typical repayment terms of 3–7 years. The credit score minimum for approval is low at 560. This online lender stands out for its generous rate discounts, which reduce the interest you have to pay:

-0.5% autopay discount

-1–3% discount for direct payment to creditors for debt consolidation loans

-Up to 20% discount for using multiple Upgrade products

Upgrade also offers secured and joint loans. The main drawback is the origination fee of 1.85–9.99% deducted, and annual percentage rates (APRs) are in the 8.49–35.99% range, which is pretty high.

2. OneMain Financial

OneMain Financial offers personal loans from $1,500–$20,000 with repayment terms of 2–5 years. It caters to borrowers with lower credit scores and income, taking a holistic view of your financial situation instead of using your credit.

A unique feature is its network of physical branches across 44 states, allowing for in-person service. It also offers secured loan options, which can help you get approved faster.

While OneMain Financial can be a solid choice if your credit needs work, APRs are on the higher side, ranging from 18–35.99%. Origination fees also apply, either as a flat fee of $25–$500 or a percentage of 1–10%.

3. Upstart

Upstart is an online lending platform that uses artificial intelligence to evaluate borrowers. Similar to OneMain, when you apply for a loan with bad credit, Upstart looks at your education, job history, and residence along with traditional factors like credit and income. This approach helps them responsibly approve more applicants. Plus, there’s no minimum credit score required for approval.

Loans range from $1,000–$50,000 with terms of 3–7 years. Most borrowers get an instant decision, and you can receive your funds in as little as one business day. Co-signed and joint loans aren’t available, so you do have to take on the whole responsibility yourself.

Like other bad credit loans, origination fees can be high—up to 12%. And APRs range from 7.80–35.99%.

4. Avant

Avant offers personal loans ranging from $2,000–$35,000 with repayment terms of 2–5 years. The minimum credit score requirement is 580. And like Upstart and OneMain, Avant considers household income, not just individual income, for qualification. But co-signers and co-borrowers aren’t allowed.

APRs start at 9.95% and go up to 35.99%. Avant also charges an administration fee of up to 4.75%, which is deducted from your loan proceeds.

How to get a personal loan for bad credit: Tips for the best terms

If you don’t have good credit, you can still get a good deal. Here are the basics for choosing the best loan for your needs:

- Compare APRs. The APR reflects the true cost of your loan, including interest and fees. Bad credit loans often have high APRs, so compare offers from multiple lenders to get the best rate you can. The higher the APR, the more you pay in the long run.

- Improve your credit before applying. If you’re not in a rush, work on boosting your credit score before applying for a loan. A higher score can mean lower interest rates and better terms, which is well worth the wait. Consider applying for credit-builder loans, reducing your credit card balances, and hunting down and disputing any errors on your credit report.

- Read the fine print. Before signing, understand all the loan’s features and fees, like origination fees, late payment penalties, and prepayment options. These can significantly impact the total cost of your loan.

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