Having bad credit can be stressful, especially when unexpected expenses come up and you need to take out a new loan. A less than excellent credit score can mean higher interest rates, fewer loan options, and the need for a co-signer. Our recommendations for the 5 best loans for bad credit have flexible requirements and favorable terms.
Money’s Top Picks of the Best Loans for Bad Credit of 2021
- OneMain Financial - Best Secured Loans
- Avant - Best for Flexible Payment Options
- Lending Tree - Best Online Lending Marketplace
- LendingPoint - Best for Fast Funding
- Upgrade - Best for Poor Credit Score
5 Best Loans for Bad Credit Reviews
OneMain Financial: Best Secured Loans
- Rates: 18.00%-35.99% APR with an origination fee that can either be a flat rate ($25-$400) or a percentage of the loan amount (between 1% to 10%)
- Term lengths: 24, 36, 48, or 60 months*
- Loan amounts: $1,500-$20,000 (min and max amounts depend on state of residence)
- *Example Loan: A $10,000 loan with a 20.19% APR that is repayable in 60 monthly installments would have monthly payments of $266 with an estimated origination fee of $150.
OneMain Financial offers “secured loans” for people with less than perfect credit, as long as you use your car, RV, camper, or motorcycle as collateral. For a secured loan:
- You will need to purchase insurance to cover the collateral against damage (if you don’t already have it)
- You can apply individually or with a co-applicant
- You may have to visit a local OneMain to provide the necessary documentation to verify your identity
OneMain Financial’s Covid-19 Response: OneMain Financial currently offers online payment options and a mobile app for customers to have easier access to their accounts. If you need special assistance with repayments, you should contact your local branch.
Avant: Best for Flexible Payment Options
Avant stands out for its flexible payment options, including automatic withdrawals, ACH payments, digital checks, credit or debit cards, personal checks, cashier’s checks, or money orders. This financial institution does charge an additional payment fee depending on the payment method you choose. Avant offers:
- Loans for as low as 9.95% APR (with bad credit, you’ll probably qualify for a higher APR)
- Fixed-rate repayments and no prepayment penalty
- If you’re approved for a loan, you could receive the money in your bank account as soon as the next business day
- A late fee may be applied after a scheduled payment is missed, however, the late fee amount varies by state
- Customer service representatives available seven days a week by phone, email, and chat
Avant’s COVID-19 Response: Avant is working with its customers on an individual basis. Those who need special assistance with their loans are encouraged to call the lender at 1-800-712-5407.
LendingTree: Best Online Lending Marketplace
LendingTree is a bit different from the other names on our list. It’s not a lender in itself but rather an online lending marketplace to be used as a comparison tool. LendingTree:
- Connects you with loan companies offering auto loans, personal loans, home equity, home refinance, and debt consolidation loans, among others
- LendingTree partners with companies like OnDeck, Prosper, Marcus by Goldman Sachs, and all of the lenders on this list
- Offers information and resources about down payments, mortgages, and other types of loans
- Offers debt relief programs and online resources to help you rebuild your credit history and score
LendingTree’s COVID-19 Response: As a lender marketplace, LendingTree provides educational resources on managing your finances during this time. For specific assistance with payments and forbearance, customers should contact their lender directly.
LendingPoint: Best for Fast Funding
LendingPoint is an alternative online lender offering personal loans for up to $25,000. They offer the accessibility of an online loan application and the convenience of having the approved funds deposited in your account by the next business day. To qualify for a personal installment loan, you must have a minimum credit score (FICO) of 585 and a minimum $25,000 yearly salary. LendingPoint also offers:
- To review your loan request using alternative applicant data such as your debt-to-income ratio, payment history, and credit card debt, verifiable income, employment status, and job history
- The option to pay off the fixed-rate installment loan in a period of 24 to 48 months
- Prepayment flexibility
- Small loan options for customers with a fair credit score
LendingPoint’s COVID-19 Response: LendingPoint is working individually with its customers, offering several mitigation options, including multiple payment deferment. LendingPoint customers should contact the lender directly if they need assistance.
Upgrade: Best for Poor Credit Score
Upgrade offers personal loans for borrowers with a credit score (FICO) of 620 and no minimum annual income requirement. Upgrade takes into consideration applicants with bad credit, evaluating their free cash flow and current debt-to-income ratio. If your credit score is under their 600 minimum requirement for eligibility, Upgrade accepts co-signers.
This lender offers:
- Unsecured personal loans and personal loans with a fixed rate
- An initial soft credit pull that won’t impact your credit score
- Personal loans for credit card refinance and debt consolidation
- Line of credit through the Upgrade Card
Upgrades’ COVID 19-Response: The online lender works with each individual, offering payment options if applicable. Customers should contact the lender directly or access additional information through their online account.
Interest Rates, Loan Terms, and Other Important Facts About Bad Credit Loans
- If you have a low credit score, you will typically receive loan offers with high interest rates, up to 36% APR, but they should be far lower than those of payday loans.
- Getting approved for a bad credit loan is an excellent opportunity to improve your credit score through timely payments. If used properly, a credit card for bad credit can be a good way to increase your credit score. It is essential to keep track of your card’s credit utilization to avoid damaging your credit even further.
- If you have bad credit, you’ll be targeted by predatory lenders, meaning loans with absurdly high APRs and no credit check. Try to avoid car title and payday loans — also known as cash advances — at all costs. These are the most popular types of scams or predatory loans targeting consumers with a less than average credit score.
- Pay close attention to the loan terms, rates, and fees, and use a personal loan calculator to estimate your monthly payments before deciding on which is the best personal loan for you.
- When applying for a personal loan, you will have to set repayment terms of 12, 24, 36, up to 60 months. Selecting a longer repayment period means a smaller monthly payment, however, it also means paying more interest than with short-term loans.
- Avoid actively applying for multiple loans at once. Research different lenders and loans to find out any prequalification requirements and lowest rates. To determine if you prequalify for a loan, make sure the lender performs a soft credit pull.
- Learning to prioritize your financial obligations can help take some of the stress out of deciding what bills to pay on time.
- The Consumer Financial Protection Bureau offers several different resources to help you manage your debt, including a tool to help you prioritize bills.
Bad Credit Loans Glossary
- Car title loans: small, short-term type of loan with higher than average rates. It uses the title of your car as collateral. They range from $100-$5,550, according to the FTC.
- Payday (cash advance, guaranteed) loans: short-term, high-interest loans with no credit check for immediate cash. Advertised on the radio, television, and even the mall as “GET CASH FAST.”
- Soft credit pull: also called a soft inquiry, looks into your credit history without impacting your credit score. Creditors will initially use this to check if you are eligible for their loans and grant pre-approval.
- Hard credit pull: a credit inquiry that will deduct points from your credit score. This is done when the bank is running an official approval for a loan.
What Is Bad Credit Exactly?
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An unsecured loan does not require collateral. The lender uses the borrower's credit score to determine their approval, being a more suitable option for people with a good credit score.
- Submit a credit dispute letter with everything that is wrong in your credit report, present the correct information, and send the letter to the credit agencies so that they may rectify the mistakes
- Write a goodwill letter to the creditor or collection agency presenting your case as to why those negative entries should be removed
- If you have the means to pay off collections or charge offs, you should first negotiate with the creditor to have the negative entry removed from your credit report
Some companies specialize in credit repair and can help you refute the negative items in your credit report. This is our selection of the Best Credit Repair Companies of 2021.
How the CARES Act Can Help Protect Your Credit Score?
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) places specific requirements on companies providing information about your accounts to credit reporting agencies to reduce the damage done to your score.
If you are no longer able to pay all of your monthly obligations, your first step is to contact your lender and reach an agreement of relief or accommodation. With an accommodation, you can arrange to defer a payment, make a partial payment, forbear delinquency, or modify a loan.
Until April 20, 2021, you will be able to request a weekly free credit report from any one of the three major credit bureaus (Equifax, Experian, TransUnion) through AnnualCreditReport.com, without negatively affecting your credit score.
How We Chose The Best Bad Credit Lenders
Loan Details and Odds of Approval
The first thing we looked at was whether you’re likely to qualify at all with bad credit. Many lenders have set risk thresholds for other criteria, so you could still be denied based on not having enough free cash flow at the end of the month, among other factors.
We considered the loan amounts, the time to pay it off, and their APR ranges. Qualifying for lower interest rates if you have bad or fair credit is difficult, however, these personal loans for bad credit are much better options than those a typical payday lender can offer.
Reporting to Credit Bureaus
The lenders on our list will report your payments to credit bureaus, as opposed to payday lenders. If you make late payments, you could harm your credit score. But as long as you make your payments on time (and even pay off your loan early), it’s likely you’ll see an increase in your credit score, making it easier to qualify for better loans at more favorable interest rates the next time you need cash.