Key Takeaways

Personal loans for bad credit are available for those with a credit score of under 580. Many lenders tailor their loans for these borrowers and offer fast funding and simple application. But before you apply for a personal loan with bad credit, it’s important to compare the rates offered by different lenders.  

Getting a loan with no credit history or bad credit can be challenging. You’ll need to submit a loan application and agree to a credit check for approval. Borrowers without a track record of paying bills on time are risky for lenders. However, this doesn’t mean you can’t get a loan.

Many lenders specialize in offering personal loans for individuals with bad credit. But be cautious. These lenders may charge higher interest rates, so it’s important to do your research before signing the agreement. In this article, we provide tips to compare lenders, how to apply for loans, and options that may be available.

Understanding Bad Credit

Bad credit indicates a poor credit history and a low credit score. It also indicates late payments or missed payments. Most lenders consider a FICO score of under 580 to be poor. A low credit score impacts your ability to borrow, and you may have to first work on building and improving your credit. You may also need a co-signer for your loan to be able to qualify.

Factors that Contribute to Bad Credit

Several factors that contribute to your credit score include:

  • Payment History: This is the biggest factor impacting your credit score. Payment history refers to whether or not you pay your bills on time, have accounts in collections, or have any foreclosures, lawsuits, wage garnishments, or charge-offs.
  • Amounts Owed: Your credit utilization ratio measures how much money you owe compared to your credit limits. The higher your credit utilization ratio, the lower your credit score is likely to be.
  • Length of Credit History: The average age of your accounts also impacts your credit. Having a longer credit history is helpful.
  • New Credit: Your FICO score also takes into consideration if you’ve recently applied for any new credit and if you've had any hard credit inquiries.
  • Types of Credit: Having a good mix of different types of products, such as mortgages, installment loans, and credit cards, is preferable, but it’s a small component of your credit score.

How to Check Your Credit Score

You can access free credit reports from each of the three credit bureaus online: Equifax, TransUnion, and Experian. You should check your credit reports periodically, especially before applying for any loan or credit card.

Ways to Improve Your Credit Score

Fixing poor credit scores may take effort and time. Credit repair doesn’t happen overnight, but here are a few tips to get you started:

  • Set up autopay on your bank account. This will ensure that you don’t miss any payments.
  • Keep old accounts open if they're active.
  • Don’t apply for new loans or credit cards unless you need them.
  • Pay off credit card debt and loans at the earliest.
  • Monitor your credit reports and get any inaccuracies fixed.
  • Avoid any new debt inquiries.

Types of Personal Loans for Bad Credit Scores

While most people consider personal loans unsecured debt, several other varieties, including secured loans, are available. Traditional banks, credit unions, and online lenders offer personal loans. Online personal loans may be best for you if you're looking for an easy application process and quick funding.

Secured Personal Loans

Secured loans require collateral, like a car or home. Usually, these loans offer higher loan amounts and more favorable terms and rates because there is less risk for the lender. If you have poor credit, it may be easier to qualify for a secured personal loan than an unsecured one. This is a good option for those who are confident that they’ll be able to repay the loan.

Consider items that may qualify for collateral and check if the lender will accept them. Secured debt does come with some risks. Keep in mind that if you default, you’ll be at risk of losing your car or home.  

Unsecured Personal Loans

Unsecured personal loans do not require any collateral. You will qualify for an interest rate based on your creditworthiness. For those with bad credit, it may be harder to qualify for better rates, but there are lenders that cater specifically to borrowers with poor credit.  

If you do qualify, keep in mind that APRs may be higher. It is important to determine if you’ll be comfortably able to pay the installments each month. Shop around, prequalify for the personal loan you're interested in, and compare your options to get the best possible deal.

Joint Personal Loans

With a joint personal loan, two people can apply for a loan together. This is a good option when you do not have good credit, meet the approval requirements, or need competitive interest rates. When you apply for a joint personal loan, the lender will consider both applicants' credit scores and personal and financial information. If approved, both borrowers will be legally responsible to repay the loan.

This type of loan is best for those who are confident that they’ll be able to repay the loan. If you fail to make payments, your co-applicant’s credit may also take a hit. This can affect your relationship with the individual. While this is a good way to increase the odds of approval, it does come with risks that you should consider.  

Pros and Cons to Consider About Personal Loans for Bad Credit

Like any other type of loan, personal loans for bad credit come with benefits and drawbacks. You need to carefully consider these to avoid getting into unwanted debt later.


  • Loans that are tailored for borrowers with less than-average credit scores are likely to have flexible lending guidelines. They may consider other factors into consideration when evaluating your application.
  • The interest rate on these loans is higher when compared to other personal loans, but they still have lower interest rates when compared to credit cards.
  • They may help you build credit and improve your credit score if you continue to make timely payments throughout the life of the loan.
  • Quick access to funds. Many online lenders offer same-day approvals.


  • Interest rates tend to be higher for personal loans with bad credit because they depend on your creditworthiness.
  • There may be high fees involved that can increase the total cost of your loan.
  • If you take out a secured personal loan and default, you may risk losing your car or home.

How To Compare Lenders

There’s no single best lender for personal loans for people with bad credit. Here are some steps you can follow to compare different lenders and find the best bad credit loans:

  1. Determine the right type of loan for you. Joint personal loans, unsecured loans, and secured loans are some of your options. Know what each one offers before you select one.
  2. Prequalify with a few different lenders, preferably three, before you start comparing your options.
  3. Look at the total loan cost instead of just the interest rates. Loans may come with fees, such as origination fees, late fees, and prepayment penalties that may impact how much you pay. Compare the APR range instead.
  4. Pick a lender that offers flexible loan terms. A longer term can reduce your monthly installment, but you’ll pay more in interest. With a shorter-term loan, you’ll pay less interest and can pay off your debt sooner.
  5. Check if the lender offers any useful perks, such as online apps and tools or introductory annual percentage rates.
  6. Look at customer reviews and their experience with different lenders. Pick a lender offering good customer service in person, over the phone, or through online chat.  

The Best Personal Loans for Bad Credit

Here’s our list of the top three lenders offering personal loans tailored for borrowers with bad credit, along with their APR, credit score requirements, and terms:

Loan Amount: $1,000 to $50,000

APR: 8.49% to 35.99%

Term: 2 years to 7 years

Credit Score: 600

Loan Amount: $2,000 to $50,000

APR: 8.99% to 35.99%

Term: 3 years to 5 years

Credit Score: 600

Loan Amount: $2,000 to $35,000

APR: 9.95% to 35.99%

Term: 1 year to 5 years

Credit Score: 550

How To Apply for a Loan

With most lenders today offering an easy online application process, it is fairly simple to apply for personal loans. Here's a step-by-step guide on how to apply for a personal loan with bad credit:

1. Check your Credit Score

Start by getting a free copy of your credit report and check to see where you currently stand. This will help you determine if you meet different lenders' minimum credit score requirements.

2. Find the Right Lender

Seek lenders that look at more than just your FICO score. Depending on your current financial situation, getting loan approval from those lenders may be easier. Some other factors that online lenders may consider are education, employment, income, and debt-to-income ratio.

3. Prequalify Online

Prequalify for the loan online to check if you are likely to get approval, the amount, and the rates you may be eligible for. Prequalification generates a soft credit inquiry, so it’s not likely to harm your credit.

4. Compare Offers

Once you prequalify and have a few different loan options, compare the personal loan rates, repayment period, late payment fees, minimum loan amounts, and other factors to find your best option.

5. Submit an Application

Once you select a lender, you’ll need to submit an application along with the necessary documents. Once the lender receives your application, they’ll review it and let you know their decision. If approved, the loan funds will be transferred to your checking account typically on the next business day.

Five Alternatives to Consider

When you have bad credit, personal loans come with a higher interest rate. If you’re not careful, the debt may become difficult to manage in the future, and you may have to consider debt consolidation, debt settlement, or other methods to pay off your debts. Here are a few other alternatives to consider if you can't qualify for an affordable personal loan with your credit score.

1. Family Loan

If you have family or friends willing to help you, borrow from them instead of taking out a personal loan. You’ll need to work out repayment terms, interest, and payment schedules with them in advance.

2. Peer-to-Peer Loans

Peer-to-peer loans are also known as P2P loans. These loans are not offered by financial institutions but by individual investors. They may be more likely to work with borrowers with poor credit scores and usually offer lower interest rates.

3. Payment Plans

If you need a loan to cover utilities or other bills, consider contacting the service provider directly to see if they have a payment plan. Consumers facing financial hardship can often get an extension or hardship assistance through an affordable payment plan.

4. Medical Bill Assistance

If you are facing a lot of medical debt, you can get assistance in the form of a payment plan, medical credit cards, and negotiators. Many of these options come with interest and fees, so compare your choices to find the most affordable.

5. Increase Your Income

While this may not be possible for everyone, consider increasing your income through a side gig to avoid taking on any bad debt loans. You can also ask your employer if they can provide you with increased hours. Other than side gigs, you may also be able to earn extra cash by selling items on eBay or Marketplace.

The Bottom Line on Personal Loans for Bad Credit

If you have less-than-average credit, getting a personal loan can be challenging. Although there are several lenders with more relaxed qualifying requirements, you may pay higher interest rates. Take the time to compare your options so you can secure the most affordable loan offer.

If you've already accumulated a debt of more than $10,000 through credit cards, personal loans, and payday loans, be sure to consider debt relief options like debt consolidation loans, debt relief, and debt management. Contact TurboDebt for our free consultation to see how we can help you find the right debt relief option for your individual needs.