How to Get a Loan With Bad Credit in 10 Simple Steps + 7 Great Lender Options

You might think having a bad credit score means you won’t qualify for a loan. This is false.

People with bad credit can borrow money all the time. You just need to find the right lender.

Key Points

  • There are several loan options for borrowers with poor credit
  • These include secured loans, peer-to-peer loans, personal loans, payday loans and cash advance apps.
  • “Bad credit” means a credit score lower than 580 (the average FICO score in the U.S. is 711)
  • If you have bad credit, a loan will cost you significantly more than borrowers with excellent credit will pay.

It’s Possible to Get an Installment Loan with Bad Credit

Thousands of online lenders promise to help borrowers with bad credit. Not all of them are trustworthy and there are a lot of scammers. We’ve rounded up some of the top choices.

READ MORE: Got $50K or more in debt? Here’s how to pay it off

7 Legitimate Loan Options for Bad Credit Borrowers

These seven lenders offer the best loan options with fast funding, even if you have a low credit score:

LenderLoan amountRepayment periodAnnual percentage rate rangeMinimum credit scoreOrigination fee
Avant$2,000 to $35,0002 to 5 years9.95% to 35.99%580Up to 4.75%$500 up to $10,00090 days to 72 months5.99% to 35.99%6001% to 8% 
Lending Club$1,000 to $40,000.24 to 84 months6.34% to 35.89%6003% to 6% 
Lending Point$2,000 to $36,50024 to 72 months7.99% to 35.99%5800% to 6%$250 to $35,00061 days to 96 months 5.99% to 35.89%6001% to 5%
Upgrade$1,000 and $50,000
24 to 84 months8.49%-35.99%5602.9% to 8%
Upstart$1,000 to $50,00036 to 84 months6.5% to 35.99%3000% to 8%

READ MORE: Need money now? 40+ ways to get it

Step By Step: How to Get a Loan with Bad Credit

Trying to get a loan when you have a bad credit score can seem daunting. Don’t be intimidated. It’s really a simple process. Start with the first step, and when the first is finished, move on to the next.

1. Review Your Credit Scores and Credit Reports

Before you start any application process, knowing where you stand is important. Start by examining your credit history. There are plenty of free ways to do this.

Your credit card companies and credit services like Credit Karma provide free credit scores. Federal law entitles you to a free copy of your credit report from each of the three major credit bureaus yearly. You can request those at

Check for negative marks that could hurt your chances of loan approvals. If you find that errors or old debt are dragging your score, make sure you request corrections before applying for a personal loan.

READ MORE: How to get a free credit score

2. Calculate the Monthly Payment You Can Afford

You will only hurt your financial situation more if you can’t afford your loan payments. It will make your credit score worse and cause bills to pile up or late fees to accrue. Plus, payment history is a key component of your credit score. 

Review your budget and estimate the monthly payments you can afford. There are any number of personal loan calculators available that can help with this. A single late payment will hurt your credit score for seven years, so it’s crucial that you can afford the monthly payment for any new loan.

Pro tip: Not sure how to get started? Schedule a free consultation with a credit counselor. There’s no commitment, and they will help you figure out how much you owe and how much you can afford to repay each month.

READ MORE: Best credit counseling agencies

3. Compare Loans

Don’t assume that you’ll only qualify for a bad credit loan. If you have a savings account with a traditional bank or credit union, you may have options with lower interest rates: review loan rates, bank account requirements and repayment periods.

If not, online lenders often use criteria other than creditworthiness, including your job history and monthly income, to determine loan eligibility. 

READ MORE: Best small loans

4. Get Prequalified

Prequalifying usually only requires a few minutes to complete an application and won’t affect your credit score. That’s because you’re not submitting a full application, so the lender will only run a soft credit check (sometimes called a soft credit inquiry).

Check with multiple lenders or try a broker that matches lenders and borrowers. Get multiple loan offers and compare the interest rates, loan terms and other loan costs, including origination fees and prepayment penalties. Does the lender offer an interest rate discount if you set up autopay? 

Pro tip: Sometimes a loan with lower rates is the more expensive option due to excessive fees. 

5. Look for a Lender With Minimal Credit Score Requirements

Most lenders are pretty clear about their minimum credit score requirements, and others have no minimum credit score at all. That’s because they instead prioritize other factors, like steady pay and employment history.

READ MORE: Loans with basically no credit check

Pro tip: No-credit-check lenders are taking a higher risk when offering loans to bad-credit borrowers. They offset this risk by charging higher interest rates. If your credit score is high enough to qualify for a loan with a lender with more stringent requirements, it will almost always save you a significant amount of money. 

6. Add a Co-Signer

If you’re unable to prequalify for any loans at all and you don’t have assets, add a co-signer to the application. This is usually a friend or family member who is willing to sign a loan contract with you. If your co-signer has a good credit score and steady income, this can significantly boost your chances of approval.

Just be aware that if you default on your loan, your co-signer will be on the hook to repay the money.

7. Apply for a Secured Loan

If you have assets, like a home, property or vehicle, you could try a secured loan. Secured loans are backed by collateral. Because the risk for borrowers is higher (if you default you could lose the asset that backs the loan), credit score requirements are usually more lenient. 

8. Gather Your Paperwork

A lender will require several documents to complete your loan application. Get these ready before you begin the application process. You likely will need to provide:

  • Personal contact information
  • Social Security number
  • Pay stubs
  • Bank statements
  • Driver’s license or other official ID
  • W-2 forms for two years
  • Two years of tax returns
  • Current bills to verify your address

9. Apply

When you officially submit your loan application, your credit score will likely fall a few more points. This is because the lender will perform a hard credit check. If you have too many recent hard credit checks on your credit report, it will look like you’re struggling.

As long as you make on-time monthly payments, your credit score should rebound quickly.

10. Wait

Prequalification doesn’t mean loan approval is guaranteed (though it boosts your chances). Some lenders offer near-instant approval, while others may require a few days or even weeks for your application to be reviewed. Once you have a loan agreement in place, loan funds should be available by the next business day.

Secured vs. Unsecured Bad Credit Loans

There are two different approaches when looking for a bad credit loan.

The one that will work best will depend on your financial situation and the risk you’re willing to take.

  • Secured loans: These require an asset as collateral. Borrowers are asked to use assets such as deeds, personal property, bonds or stocks to “secure” a loan. The risk is higher for borrowers because the creditor will seize the asset if you fail to repay the loan.  Mortgages and auto loans are examples of secured loans.
  • Unsecured loans: Unsecured personal loans do not require collateral. Lenders assess your creditworthiness and use that to determine whether to lend you money. The risk for lenders is higher because there is no asset to seize if you fail to repay your loan. Student loans, personal loans and credit cards are examples of unsecured loans.

READ MORE: Secured vs. unsecured debt

What’s Considered Bad Credit?

Bad credit usually means a credit score below 580.

If you have bad credit, your credit report likely contains one or more of the following:

  • Bankruptcy
  • Charged-off debt
  • Repossession
  • Foreclosure
  • Debt in collections
  • Missed monthly payments
  • Repayment defaults
  • High debt-to-income ratio

Other Types of Loans for Borrowers with Bad Credit

Bad credit loans have higher interest rates, making them very profitable for lenders. That means there are a large array of options. This includes:

Not sure how peer-to-peer lending works? Check out this video for a quick explanation:

Don’t Turn to Payday Loans

Payday loans are short-term loans that target borrowers with bad credit. They usually have to be repaid on your next payday.

When you shop for a loan, stay away from payday loans or any type of loan that promises no credit check.

These types of loans have sky-high interest rates (they can even be higher than 1,000% APR) and are designed to leave borrowers trapped in a cycle of debt that can take years to escape.

READ MORE: How to get relief from payday loans

The Bottom Line

Bad credit won’t automatically prevent you from getting the financial help you need. It can, however, make your loans more expensive. Whether you need help with debt consolidation or just a small loan to help cover an emergency expense, bad credit loans are almost always better than payday loans.


Is There a Difference Between Bad Credit Loans and Payday Loans?

Yes and no. Payday loans are a form of bad credit loans that grant people with poor credit funds, which are meant to be repaid when they receive their next paycheck. Bad credit loans, on the other hand, refers to all the loan products that are specifically developed for borrowers with poor credit – that includes payday loans, subprime loans, peer-2-peer loans, personal loans, and credit union loans.
So, while all payday loans are bad credit loans, not all bad credit loans are payday loans.

What Should I Watch Out for With Bad Credit Loans?

If you intend to get a loan with bad credit, you should principally watch out for payday loan scams, as well as predatory lending – in which quasi-regulated lenders try to exploit desperate borrowers by offering quick loans at exorbitant interest rates.
You should also pay very keen attention to any extra charges and hidden fees attached to the bad credit loans. They could easily pile up over time and substantially increase the cost of the loan.
In particular, try your best to completely avoid payday loans. They might seem attractive and tempting at first, but they’re a nightmare when it comes to repayment.

What Are the FICO Credit Score Ranges?

Credit scores range from 300 to 850. No matter how bad your credit is, your credit score will not fall below 300. Though there are some slight variations due to different credit scoring models, these are the credit score ranges:
Poor credit: 300-579
Fair credit:  580-669
Good credit: 670-739
Very good credit: 740-799
Excellent credit: 800-850

Can I Get a Personal Loan With a Credit Score Under 500?

It’s possible – but your options will be limited. According to Rod Griffin, senior director of public education and advocacy for the credit bureau Experian, 680 is the minimum credit score that most lenders have set for competitively-priced personal loans.
If you have less than that, you’ll end up having to turn to a more-expensive loan. 

Are Bad Credit Loans Safe?

From a security standpoint, yes. As long as you use one of the lenders we recommend, your loan will be secure. 
Whether they are financially safe is a different question: that depends on a number of personal factors, including your financial situation, credit score, the lender you’re dealing with, the loan repayment terms, and your goals.
If used as an alternative to payday loans or title loans, they are definitely safer. They can also be a good option if you need help with debt consolidation. But if you’re using them for discretionary spending like a vacation, they may not help your overall financial situation, and if you can’t afford the payments and fees start to mount, you could be left deeply in debt with even more damage to your credit score.

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