Struggling with bad credit can be one of the most stressful experiences in the world. If a financial emergency strikes or you want to consolidate your debt, you might believe it's impossible to qualify for a personal loan without turning to predatory payday lenders. In most circumstances, that's not true.
Personal loan options can be more limited when your credit isn't in good shape, but that doesn’t mean you have no options. There are lenders who may be willing to offer you a personal loan even if you have a poor credit rating.
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What Is Considered Bad Credit?
The credit scores used by most lenders range from 300–850. If you have a FICO score under 670, you're considered a subprime borrower with a "fair" credit rating, according to Experian. The credit reporting company classifies a FICO score of less than 580 as "very poor."
It's important to understand that taking out a personal loan with bad credit can be quite expensive. Interest rates can often climb into the upper-30% range, based on your credit rating. Other obstacles you could face when you try to borrow with bad credit include lower loan amounts and shorter repayment terms. To help you compare the best loan options available, we've researched more than a dozen personal loans for bad credit. We compared interest rates, fees, qualification requirements, and other loan features.
Avant offers the best overall personal loan to borrowers with credit challenges. If you qualify for funding, you could receive up to $35,000. Interest rates start as low as 9.95%. Although Avant charges an administrative fee, the maximum amount it charges (4.75%) is lower than what you may see from other comparable lenders.
Lower starting interest rate among subprime lenders, but you might pay more if your credit score is on the low end of Avant’s approval range
No prepayment penalty for paying off your loan early
Soft credit inquiry performed when you check your loan options online
Higher interest rates compared to the rate you might receive elsewhere with better credit
Low maximum loan amount of $35,000—higher loan amounts available with other lenders
An administrative fee up to 4.75% may be taken directly out of your initial loan amount
Other important information:
- Minimum/maximum amount you can borrow: $2,000 to $35,000
- APR range: 9.95%–35.99%
- Fees: Avant may charge an administrative fee up to 4.75% that comes directly out of your loan. The lender charges late fees and dishonored payment fees as well.
- Minimum credit requirement: Reported to be 580, but most Avant borrowers have a credit score between 600 and 700.
- Other qualification requirements: Besides checking your credit score, Avant will review your income to see if you qualify for a loan and how much you can borrow.
- Repayment terms: 24 to 60 months
- Time to receive funds: Loan funds may be deposited in your account as soon as the next business day.
Launched in 2017, Upgrade is an online personal loan company offering loan proceeds for a variety of purposes. It also offers borrowers educational and credit monitoring tools to help you get back on the right track.
Interest rates start as low as 6.98% and they offer personal loans up to $50,000.
Higher maximum loan amount compared with other lenders in this category
Soft credit inquiry to check your loan offer and estimated interest rate online
No prepayment penalties if you decide to pay off your loan early
A co-borrower may be needed to qualify for a lower interest rate
Higher origination fees than what some other lenders may charge for subprime personal loans
Funds should be available within 4 business days from the time of approval
Other important information:
- Minimum/maximum amount you can borrow: $1,000 to $50,000
- APR range: 6.98% - 35.89%
- Fees: Origination fees range from 1.5% to 6%, deducted from your loan amount. If you’re more than 10 days late on your payment, a late fee of $10 will be imposed. Same amount may be charged for an failed electronic or check payment attempts.
- Recommended minimum credit requirement: Reported to be 600, but not stated on website
- Other qualification requirements: You should be at least the age of majority in your state, a U.S. citizen or living in the U.S. with a valid visa, have a valid email address and have a verifiable bank account.
- Repayment terms: Choose between 36 and 60 months (three or five years).
- Time to receive funds: Within four business days after your loan is approved, for most people.
Qualifying for a personal loan can be especially tricky if you’ve filed bankruptcy in the past. But if your bankruptcy has been discharged for at least 12 months, LendingPoint might be willing to work with you.
LendingPoint offers loans to borrowers in 49 states and Washington, DCwith credit scores as low at 585. Qualified applicants can borrow up to $25,000 and interest rates start at 15.49% up to 35.99%.
Lower credit scores accepted if you satisfy other qualification criteria
Past bankruptcy isn’t necessarily a deal killer as long as it was discharged at least 12 months ago
No prepayment penalty applies if you want to pay off your loan early
Lower maximum loan amount compared with other lenders
Origination fees can be as high as 6%, depending on the state where you live
Higher interest rates compared to the APR you might be offered elsewhere with better credit
Other important information:
- Minimum/maximum amount you can borrow: $2,000 to $25,000
- APR range: 15.49%–35.99%
- Fees: LendingPoint charges origination fees as high as 6%.
- Minimum credit requirement: 585
- Other qualification requirements: You should be 18 years or older, provide a state or federal ID and Social Security number, and have a bank account in your name. You also need a minimum annual income of $20,000.
- Repayment terms: 24 to 48 months
- Time to receive funds: Once you're approved, you can receive funds as soon as the next business day.
- Restrictions: If you live in the state of West Virginia you cannot receive a loan through LendingPoint.
If you prefer to do business with a lender face-to-face, OneMain Financial may be a good fit. The lender has almost 1,600 branches in 44 states where it offers unsecured personal loans to borrowers with less-than-perfect credit. Interest rates start at 18% and qualified applicants may be able to borrow up to $20,000.
Numerous branches available for borrowers who prefer to meet or pick up funds in person
No prepayment penalty if you opt to pay off your loan early
Soft credit pull used to check for prequalified offers
High starting interest rate compared with some other subprime lenders
Maximum loan amount of $20,000 is low compared with other personal loan providers
Origination fees and late fees may be charged on top of interest costs
Other important information:
- Minimum/maximum amount you can borrow: $1,500 to $20,000
- APR range: 18%–35.99%
- Fees: Origination fees can be up to a flat fee of $300 or 10% of your loan amount, depending upon your state of residence. Late fees also vary by state and can be as high as $30 per late payment or 15% of the size of your monthly payment.
- Minimum credit requirement: Not stated on website
- Other qualification requirements: OneMain Financial will consider the following when you apply for a loan: your credit history, income, debts, and any collateral you wish to provide.
- Repayment terms: Term length may be 24, 36, 48, or 60 months.
- Time to receive funds: You could receive your funds the same day you’re approved, if you opt to pick them up in person. Direct deposit may take one to two business days.
- Restrictions: If you’re pre-qualified for a personal loan with OneMain Financial, you’ll need to visit a branch and meet with a loan specialist in person to complete the application process.
Your Local Credit Union: Best Payday Alternative Loan (PAL)
If you’re struggling with severe credit problems and need a small-dollar loan to get you through an unexpected financial emergency, a payday alternative loan (PAL) is worth considering. PALs are issued by some federally insured credit unions. You can locate a credit union near you at MyCreditUnion.gov.
The maximum amount you can borrow with a PAL is currently just $2,000. But the interest rate is capped at 28%, making PALs a more affordable option than payday loans and even some online personal loans for bad credit.
Lower interest rates than payday loans and some online personal loans
Low application fee is capped at a maximum of $20 nationwide
Small maximum loan amount of $2,000 might not be sufficient to meet your borrowing needs
Minimum membership period in the credit union might be required, depending on the lender
Other important information:
- Minimum/maximum amount you can borrow: Up to $2,000
- APR range: 28% (current maximum)
- Fees: Application fee cannot be more than $20
- Minimum credit requirement: No credit check required with many credit unions
- Other qualification requirements: Requirements vary from lender to lender, but may include direct deposit participation, on-time payment history with other loans from the credit union, and verification of employment.
- Repayment terms: 1 to 12 months
- Restrictions: You should check with your individual credit union to see if PALs are available and if any restrictions apply
How Do You Know What Credit Score Range You Are In?
- Excellent Credit: 800 - 850
- Very Good Credit: 740 - 799
- Good Credit: 670 - 739
- Fair Credit: 580 - 669
- Poor Credit: under 580
What Interest Rate Can I Expect If I Have Bad Credit?
As a reminder, when you have a FICO score under 670, you're considered a subprime borrower. If your FICO score is less than 580, your credit falls into the "very poor" range.
Every lender sets its own criteria (including credit score thresholds) for loan approval and pricing. That makes it difficult to predict precisely what APR you'll be offered for a personal loan if you have bad credit. Interest rates on personal loans can range from roughly 5.5% to 36%. If your credit rating is poor, you should expect to be offered rates on the higher end of that scale.
You may also come across lenders who promise "guaranteed approval" or "no credit check" for bad credit personal loans. Promises like these should be a red flag. Legitimate lenders never make these guarantees, according to the Federal Trade Commission, or even say you're likely to qualify for a loan before you apply.
Where Can I Get a Personal Loan with Bad Credit?
Getting a personal loan with bad credit can be a challenge. Still, you may find multiple lenders willing to do business with you (albeit, typically at a higher interest rate). If you're searching for personal loan options with bad credit, there are two primary loan sources you may want to consider.
- Online personal loans for bad credit: Online lending networks take your loan application and connect you with lenders who may be willing to approve you for a personal loan. Often, you can submit one initial form and compare offers from multiple lenders.
- Direct lenders for bad credit personal loans: Direct personal loans come straight from the financial institution where you’re approved. These may include local banks and credit unions, online banks, and online direct lenders. If you have bad credit, it’s generally best to apply only with direct lenders that are willing to do business with credit-challenged borrowers.
You can find a combination of the best personal loans for bad credit from both types of sources in the guide above.
Personal Loans vs. Payday Loans
When you have poor credit, small payday loans may be easier to qualify for. But they come at a very high cost. The average APR on a typical two-week payday loan of $100 is nearly 400%, according to the CFPB.
If you qualify for a personal loan with bad credit, you may be able to borrow money much more affordably instead of using a payday loan. Even an interest rate near 36%—the upper end of the range for most personal loans—costs far less than the average fees a payday lender may charge.
Additionally, numerous local credit unions now offer payday alternative loans (PALs). These loans may help borrowers with bad credit access more affordable short-term financing. The maximum interest rate on a PAL is 28%.
Personal Loans vs. Personal Installment Loans
In most cases, a personal loan and a personal installment loan are one and the same. Although it's possible to take out a personal line of credit (LOC) when you need to borrow money, a LOC is a revolving account. Most financial experts wouldn't classify a LOC as a personal loan. (Also, if you have poor credit, you may have difficulty qualifying for a LOC.)
Installment loans, like personal loans, get their name because of the way they work. You borrow a fixed amount of money and repay the funds you borrow (plus interest and fees) in fixed payments or installments to the lender. If the lender reports the account to the credit bureaus, a personal loan will generally show up on your credit reports as an installment account.
Personal Loans vs. Peer-to-Peer Loans
A peer-to-peer (P2P) loan is another way to borrow money that's similar to a traditional personal installment loan. If you qualify for a P2P loan, however, the money you borrow isn't necessarily issued by a bank or lender. Instead, the funds are usually lent to you by an investor or group of investors. Like personal loans, many P2P lenders will report your account to the credit bureaus. Additionally, you may need a credit score of 600 or higher to be approved (though every P2P network and investor may have its own approval criteria).
To apply for a P2P loan, you'll need to submit an application through a website that connects would-be borrowers with potential investors. Yet before you commit (or even apply), you should do some research. It's wise to learn more about the rates, fees, and terms you may be offered and compare those to your other available options. Although P2P loans can sometimes feature more relaxed approval criteria than traditional bank loans, you might face higher interest rates and fees as a tradeoff.
The Bottom Line
Just because you have bad credit doesn't mean you need to turn to a predatory payday lender when emergency expenses arise. Even with credit problems, you should still compare all of your available options because a more affordable solution may be available.
Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of personal loan lenders for all borrowing needs. We collected over twenty five data points across more than fifty lenders including interest rates, fees, loan amounts and repayment terms to ensure that our content helps users make the right borrowing decision for their needs.