If you run into financial problems or want to pay down high-interest credit card debt, a personal loan can be a great option. Personal loans can be used for a variety of purposes and typically come with low rates and flexible repayment terms.
But qualifying for a personal loan can be much harder if you have bad credit. Most financial institutions will look at you as a risk, and you may struggle to find affordable rates or get approved in the first place.
The good news is, borrowers can qualify for personal loans with bad credit. The key is to find a lender who specializes in bad credit personal loans.
What is a Bad Credit Score?
Your credit score is a three-digit number that helps lenders decide whether or not you’re a good candidate for a loan. Your score will range somewhere between 300 and 850, and the higher your score, the better.
This score is based on a variety of factors, including your payment history, total debt, and credit history. Every lender can use its own criteria to measure and evaluate your credit score. But FICO and VantageScore are the two most common credit scoring models.
Here is how most lenders evaluate your credit score:
- 800-850: Excellent
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- 300-579: Bad
If your credit score falls within the fair or bad ranges, it will be harder for you to qualify for a loan. At the very least, you’ll end up with higher rates and less flexible repayment terms.
The 5 Best Bad Credit Personal Loans
Most banks and credit unions will look at your credit score and financial history to qualify you for a loan. In comparison, many online lenders offer more flexible requirements and will often consider other factors outside of your credit.
If you’ve struggled to get approved for a personal loan in the past, here are five loans for bad credit you can consider.
|Lender||Best For||Loan Amount||APR Range|
|OppsLoans||Best for bad credit borrowers||$500 to $4,000||59% APR to 160% APR|
|Payoff||Best for paying off high-interest debt||$5,000 to $40,000||5.99% APR to 24.99% APR|
|Upstart||Best for building credit||$1,000 to $50,000||Varies by state — average APR is 24.52%|
|LendingPoint||Best for fast approval and funding||$2,000 to $25,000||9.99% APR to 35.99% APR|
|OneMain Financial||Best for flexible repayment terms||$1,500 to $20,000||18% APR to 35.99% APR|
If you need a small loan to help you get through a financial emergency, you can consider OppsLoans. There are no minimum credit requirements, and the company clearly discloses its rates and repayment terms. To qualify, you need to have a minimum monthly income of $1,500 and live in one of the states that OppsLoans serves.
OppsLoans can be a better option than turning to a payday lender, but its rates are high compared to other lenders on this list. In some cases, the APR is as high as 160%, so be sure to compare all of your possible offers on Fortuna Credit before securing a loan.
Payoff is a peer-to-peer (P2P) lender that helps borrowers pay off high-interest credit card debt. The company offers installment loans between $5,000 and $40,000 with repayment terms between two and five years.
The approval process is quick, and Payoff will make the payment directly to your lenders. And Payoff reports your monthly payments to the three major credit bureaus, so taking out a loan will help build your credit score.
Payoff offers a competitive APR range between 5.99% APR and 24.99% APR. However, the rate you receive will depend on your credit score. Payoff is a better option for borrowers with at least fair credit.
You can use an Upstart personal loan for many different purposes, including paying off credit card debt, paying off medical bills, or financing a major purchase. The company offers loans between $1,000 and $50,000, and there are no origination fees.
The company will also consider alternative factors like your college education and job history to determine whether you’re a good candidate for a loan. This makes Upstart a good option for younger applicants who are just beginning to build their credit history. And the approval process is very fast. According to the company, 99% of loans are funded within a day of being approved.
If a fast application process and funding are important to you, then LendingPoint may be a good choice. The company offers installment loans between $2,000 and $25,000 for borrowers with fair or bad credit.
You’ll start by getting prequalified for the loan with Fortuna Credit and a soft inquiry will be run on your credit so that it won’t affect your score. You’ll receive a decision within seconds and can view your loan options immediately. Once you’re approved for the loan, you can receive the funds within the same day or the following day.
Depending on where you live, you may get an origination fee of up to 6% of the total loan amount added. LendingPoint’s rates may be high, so the company won’t always be the most affordable option.
5. OneMain Financial
OneMain Financial offers personal loans between $1,500 and $20,000, and there are no minimum credit score requirements. The repayment terms are between two and five years, and OneMain Financial lets you choose your payment date.
The rates may be higher than what other lenders charge, and you’ll have to pay an origination fee. If you’ve struggled to qualify for a personal loan in the past, the trade-off may be worth it to you.
OneMain Financial gives you the option to apply with a co-signer or put down collateral, which can help you qualify for better rates.
How to Get Approved for a Loan
If you’ve tried to take out a personal loan with bad credit, then you know how hard it can be. Many lenders don’t offer personal loans to consumers with poor credit. And even if they do, the sky-high interest rates and inflexible repayment terms almost make it not worth it.
And few people have the time or the desire to spend hours researching different lenders and trying to find the best loan terms for their situation. Fortunately, you don’t have to do all that just to take out a personal loan.
It’s possible to take out a personal loan with bad credit, even if you’ve been turned down in the past. Here are five steps you can take to make that happen:
- Request a free copy of your credit report: The first place to start is to request a copy of your credit report at AnnualCreditReport.com. You can request one free copy a year, and you’ll receive your report from each of the three major credit bureaus. Review your reports carefully for mistakes.
- Gather your paperwork ahead of time: When you apply for a loan, you’ll be required to provide a lot of information. This includes things like your Social Security Number, employment history, and bank statements. Get these documents together ahead of time before you begin the application process.
- Make sure you can afford the loan: Before you apply for a personal loan, make sure you can afford to repay it. Create a budget of your monthly expenses and make sure you have room in your budget for the loan payments. Otherwise, you could end up getting denied for the loan or damaging your credit further by missing payments.
- Consider using a co-signer: And finally, if your credit is really bad, you might consider applying with a co-signer. Using a co-signer who has good credit could improve your odds of qualifying for the loan and help you secure lower rates.
- Use a lending marketplace: There are limits to applying for a loan with a single lender, especially if you have bad credit. The lender is going to offer you the rates and terms that benefit the company, not you. In comparison, when you use a lending marketplace you have access to a wide variety of lenders. You can compare your options and choose the loan terms that are best for your situation. For example, Fortuna Credit considers criteria beyond just your credit score, so lenders get a look at your complete financial picture and you may find access to better rates.
The Bottom Line
Hopefully, this article has shown you that it’s possible to qualify for a personal loan, even if you have bad credit. And while you can and should begin taking steps to improve your credit score, there are other things you can do in the meantime.
When you sign up with Fortuna Credit, we ask you some brief questions that help us get a sense of your current financial situation. From there, we’ll match you with the lenders in our network that are a good fit for you.
That way, you receive personalized loan offers without having to spend all your time researching lenders and trying to get prequalified for loans. Plus, we provide you with access to the credit monitoring and budgeting tools you’ll need going forward.
*Any opinions expressed are those of Fortuna Credit and have not been reviewed or approved by any of our partners.