Best Loans for Bad Credit

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Getting a loan can be difficult if you have less-than-stellar credit. Most banks and credit unions may reject your application, limiting your options to expensive loan offers. However, some online lenders offer favorable terms to those who don't qualify for most personal loans.

Here are our picks for the best bad credit loan companies, which can offer better approval odds and reasonable terms.

Money’s Top Picks of the Best Loans for Bad Credit

• Lending Tree - Best online lending marketplace
• OneMain Financial - Best for secured loans
• Upgrade - Best for joint application loans
• Upstart - Best for people with short credit history

Best Loans for Bad Credit Reviews

The companies listed below are organized alphabetically.

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Why we chose it: LendingTree is an online lending marketplace that makes it easier to compare rates and fees from different companies without having to submit multiple individual applications.

LendingTree has partnerships with top-rated lenders such as Rocket Loans, SoFi, Marcus and all the companies mentioned in this list. It can connect you with providers of personal, auto or home equity loans whether you have fair or excellent credit.

If you create an account, LendingTree also offers several personal finance tools such as a monthly payment calculator and a budget tracker.

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Why we chose it: OneMain Financial offers both unsecured and secured loans for high-risk borrowers.

With OneMain Financial you can apply for a secured loan using your car, RV, motorcycle or a boat as a payment guarantee.

Secured loans are usually easier to qualify for because the collateral guarantees creditors get repaid if you default on the loan. And, if you have poor credit, applying for a secured loan can improve your odds of getting approved and might even get you better rates.

OneMain Financial also offers fast funding. In many cases you can get same-day funding if you get approved by noon. Note, however, that this option is available only if you have a bank-issued debit card. If you opt for a bank account transfer, it will take around one or two business days after the loan closing date.

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Why we chose it: Upgrade allows co-borrowers, which can improve your chances of approval if the second borrower has a better credit score.

Unlike many lenders, Upgrade lets borrowers have a cosigner — that is, someone who can take responsibility for the loan should the main borrower default. This can significantly increase your odds of approval if you have bad credit.

Upgrade’s personal loans are an excellent option for people who want to consolidate debt, refinance credit cards, make home improvements or cover unexpected expenses. If you choose one of their debt consolidation options, Upgrade can simplify the process by paying your creditors directly. In most cases, Upgrade disburses loan funds within one business day after accepting your offer.

However, keep in mind that Upgrade charges a 1.85% to 9.99% origination fee depending on the loan amount, which is deducted from the loan proceeds.

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Why we chose it: Upstart uses alternative data and artificial intelligence to evaluate people with poor or little credit.

The company's loan approval process relies on an applicant's job and school background in addition to their credit information. This can help people with a short credit report but a solid educational background get an excellent loan offer, for example. However, you could still get rejected if you have a low score plus a history of missed payments or charge-offs on your report.

In 2017, at the behest of the Consumer Financial Protection Bureau (CFPB), Upstart agreed to analyze how its loan approval process compares to the one used by traditional lenders. The CFPB later issued a no-action letter to Upstart that required the lender to notify the bureau of changes to its artificial intelligence — said letter was terminated just recently, in June 2022.

According to the results shared with the CFPB, Upstart's tests show that the company approves around 44% more loans than traditional lenders, and their loans’ APRs are about 36% lower.

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Other companies we considered

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Avant

​​Avant offers multiple personal loan options, including debt consolidation. Available terms range from 12 to 60 months, with a maximum loan amount of $35,000. According to Avant, most of its customers have a credit score of 600 to 700. FICO scores between 600 and 669 are fair but are considered by some lenders as bad credit scores.

Why it didn’t make the cut: In 2019, the Federal Trade Commission (FTC) sued Avant for allegedly engaging in unfair loan servicing practices such as withdrawing money from consumers’ accounts and charging their credit cards without authorization.

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LendingClub

LendingClub offers loans up to $40,000 with terms of 2 to 5 years. Loan options include credit card and debt consolidation with an origination fee ranging from 3% to 8%.

Why it didn’t make the cut: Although its stated minimum credit score is 600, a company representative stated that the average credit score of borrowers approved by LendingClub is 700 or more with an average income of around $100,000.

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LendingPoint

LendingPoint uses artificial intelligence to analyze several factors, including the applicant's location and cost of living, instead of only relying on the traditional loan approval process.

Why it didn’t make the cut: The company has a minimum credit score requirement of 580, but it only reports to two (Experian and TransUnion) of the three main credit bureaus, a drawback for those consumers who are trying to build or repair their credit using a personal loan.

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Oportun

Oportun offers personal loans of up to $10,000, including co-signed and secured loan options, to borrowers with little or no credit history.

Why it didn’t make the cut: The lender operates in a limited number of states and reports customer accounts to only two of the three main credit bureaus — TransUnion and Equifax. Having your on-time payments reported to every bureau is a must if you want to improve all of your three credit reports.

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PenFed Credit Union

PenFed offers loans up to $50,000 with repayment terms of one to five years.

Why it didn’t make the cut: Applicants with bad credit scores could have a harder time getting approved with PenFed than with other companies in our list.

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Prosper

Prosper is a peer-to-peer lending platform that connects borrowers with individual investors. This system can provide better loan terms compared to traditional lenders in some instances.

Why it didn’t make the cut: However, Prosper requires a credit score of at least 600 to apply. While this falls in the Fair range of the FICO scoring system, it is higher when compared to other online lenders on our list.

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Universal Credit

Universal Credit offers personal and debt consolidation loans with no prepayment penalty and repayment periods of 24 to 84 months.

Why it didn’t make the cut: Universal Credit has a higher starting APR (11.69%) and origination fees (5.25%) than other loan providers on our list.

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Guide to Loans for Bad Credit

Read on to find out how to choose the best personal loans for bad credit and how these loans work.

• What are bad credit loans?
• Types of loans for bad credit
• How to choose a bad credit loan
• How to get a personal loan with bad credit
• Best Bad Credit Loans FAQs
• How We Chose the Best Lenders for Bad Credit

What are bad credit loans?

Bad credit loans let individuals with poor or no credit history borrow a set amount of money and repay it, plus interest, in fixed monthly payments over the loan's term.

A personal loan for bad credit works similarly to any other personal loan. The main difference is that they come with higher annual percentage rates (APR), sometimes as high as 36% or more They are also typically offered by online lenders rather than by traditional brick and mortar institutions.

Lenders are generally hesitant to offer loans to people with bad credit. However, some online lenders offer more lenient terms, making them an option for high-risk borrowers. For instance, some have lower minimum score requirements or consider alternative information during the application process, such as your educational background.

Types of loans for bad credit

There are a few different types of personal loans to consider; however, not all of these options are easy loans to get for borrowers with a low credit score. Depending on how bad your credit is, all or none of these options might be available to you.

Unsecured loans

Unsecured personal loans don't require collateral, that is, an asset to guarantee the loan. To determine if you qualify or not, lenders assess several factors such as your credit history and score, income and employment. It can be difficult for individuals with a poor score to qualify for an unsecured loan unless they find a lender willing to work with high-risk borrowers or find a co-borrower with better credit.

Secured loans

These types of loans are often easier to qualify for and offer lower interest rates than unsecured loans do. However, before applying, make sure you can make the monthly payments. Missing payments could result in losing what you put up as collateral and damaging your credit score further.

Co-signed loans

With co-signed loans, a second person has the legal obligation to repay the loan if the primary borrower defaults. These often offer better approval odds and rates for people with bad credit if the second borrower has a good credit history and a steady income.

Payday loans

A payday loan is a type of unsecured, short-term loan usually meant to be paid back before your next payday, hence the name. These loans are often for small amounts, around $500, and can have APRs that can be as high as 200%. By way of comparison, personal loans with some of the highest interest rates in the market will not charge more than 36%.

Some people with low credit scores turn to payday loans as they have lenient credit requirements and can provide quick cash. However, their staggeringly high interest rates and additional fees can leave some struggling to pay it back. Failing to pay the loan can trigger additional fees, which may lead you to borrow more and increase your debt.

Cash advances

Cash advances are a quick and easy way to get a short-term loan. They are offered by credit card issuers and allow you to borrow against your card's line of credit.

Cash advances don't require a credit check since they are issued directly through your credit card. However, they usually have higher interest rates when compared to your card's standard purchase APR. For example, cards can have a 15 - 20% APR for purchases and around 26% for cash advances. Credit card companies also typically charge an additional cash advance fee ranging between 3% to 5% of the loaned amount.

If it takes you a while to pay the cash advance, it could hike up your monthly bill, possibly making it difficult to pay the loan or your regular credit card balance.

How to choose a bad credit loan

Personal loans for bad credit typically have higher interest rates and fees than other personal loans. However, it's possible to find reasonable offers. Here are a few tips on how to choose the best loan for you:

• Evaluate eligibility criteria: Look for details such as minimum credit scores, minimum income and preferred debt-to-income ratio. Lenders typically list their eligibility requirements on their websites, under their loan descriptions or in the FAQ section.

• Compare interest rates and fees: Compare offers between multiple companies along with their origination, prepayment and late payment fees. Although interest rates for bad credit loans can be as high as 36%, it's possible to find loans with more affordable rates.

• Determine a repayment term: Repayment terms for personal loans usually range between 24 to 60 months. Keep in mind that shorter repayment terms allow you to settle your debt sooner and pay less interest (although your monthly bill will be higher). In contrast, longer repayment terms reduce your monthly bill, but you'll spend more on interest in the long run.

• Consider online lenders: Online lenders usually have more flexible eligibility requirements and lower interest rates than traditional banks, making them a great choice for bad credit loans. These lenders can be convenient, since they let you apply completely online.

• Consider a secured loan or a co-signer: Applying for a secured loan or using a co-signer with better credit may improve your approval odds and help you get a better deal. Secured loans let you back the debt with collateral like a car or house, while adding a co-signer provides additional assurance to the lender that the loan will be repaid.

Note, these options come with additional risks if you default, such as the possibility of damaging your co-signer’s credit score or losing the asset used as collateral.

• Watch out for predatory lenders: Avoid lenders offering loans without a credit check, such as payday loans or car title loans. Although these loans are typically for small amounts, they come with exceedingly high APRs as well as high late fees and penalties.

How to get a personal loan with bad credit

Here are the basic steps you should take to get a personal loan with bad credit:

Evaluate your credit report

Reviewing your credit report can help you better understand your approval odds and spot any inaccurate or outdated financial information that may be impacting your score.

Normally, you can request a free copy of your report from each of the three major credit bureaus annually through AnnualCreditReport.com. However, due to provisions set in place in response to the Covid-19 pandemic, you can access your report weekly. Check out our guide on how to read your credit report for tips on how to interpret the information being reported.

Check your credit score

Credit scores aren't included in your free credit report. There are, however, different options to check your FICO score, which is the most widely used metric. You can either purchase a report directly from the credit bureaus or through FICO's official website. Some banks and credit card issuers also provide this service for free.

You can also consider a credit monitoring service. However, note that the score many credit monitoring services provide is based on the VantageScore scoring system, which isn't a staple amongst creditors and is calculated differently.

Try increasing your score before applying

If getting a loan isn’t urgent, consider trying to improve your score before you apply. If you take the time to repair bad credit before applying for a loan, you could end up saving hundreds — or even thousands — in interest costs. If you need help fixing your credit, check out our reviews on some of the best credit repair companies for more information.

Boosting your creditworthiness can take months. However, it’s certainly possible to improve your credit score if you follow widely accepted tips, such as paying your bills on time and keeping your credit utilization under 30%.

Get prequalified

Lenders typically let you get prequalified online. A pre-qualification lets you check whether you might qualify for a loan, how much money you could get approved for and the interest rate the lender would offer. While these don't represent an official offer, they’re helpful when comparing loan options.

Complete the application

Most lenders let you complete the loan application online. Before you do, make sure you have all the necessary documents. Generally, you have to provide personal information, such as your name, address, phone number, date of birth and Social Security Number. Lenders might also ask for proof of income and employment like W-2s and pay stubs.

How We Chose The Best Bad Credit Lenders

Our picks offer reasonable terms, no prepayment penalties and better approval odds for individuals with low credit scores who may have difficulty being approved for new lines of credit elsewhere.

We evaluated the best lenders for bad credit loans based on the following criteria:

• Credit score and odds of approval: We looked for lenders willing to offer loans to borrowers with scores between 580 and 669 in the FICO score range. Do note that most loan lenders aren't willing to work with customers with scores below 580.

• Loan details: We compared interest rates, loan amounts, repayment terms, funding time, disbursement options and additional fees from several banks and online lenders.

• Credit bureau reporting: We only considered lenders that report payments to all three credit bureaus.

• Consumer satisfaction: We considered the number of complaints each company had with the Consumer Financial Protection Bureau (CFPB) and looked for any history of Federal Trade Commission (FTC) violations. We also took into account customer reviews from reputable sources, like the Better Business Bureau (BBB).

• Customer experience: We favored companies that provide online pre-qualification forms, a streamlined online application process, several customer support channels, financial education resources or a mobile app to manage loan payments.

Summary of Money’s Best Loans for Bad Credit

The companies below are organized alphabetically.

• Lending Tree - Best online lending marketplace
• OneMain Financial - Best for secured loans
• Upgrade - Best for joint application loans
• Upstart - Best for people with short credit history