Personal Loan With a 550 Credit Score: Can I Get One?

With a 550 credit score, you have a few options to get a loan. You're not necessarily limited to short-term loans like cash apps or payday loans. In fact, a few personal loan lenders offer longer-term loans and higher loan amounts to borrowers with a 550 FICO credit score. There’s no guarantee you’ll qualify, but there are steps you can take to improve your chances. 

We’ll cover how to get a ‘good’ loan with bad credit, plus which lenders and types of loans are best.

Lenders with loans for bad credit

Best personal loans with a 550 credit score

What are bad credit loans and how do they work?

A bad credit loan is any loan that you can potentially qualify for with bad credit. In this article, we focus on bad credit personal loans, which are a type of long-term installment loan. But many bad credit loans are short-term, high-fee loans that don’t require a credit check. Here’s a breakdown of the most common types:

Recommended

• Personal loans for bad credit: These loans have APRs that top out at 36%; average rates for borrowers with bad credit are around 32% APR, but depend on the loan term you choose, your specific score, your income, current debt, and loan purpose. Loan amounts range from around $1,000 to $50,000, with repayment terms typically between 2 and 7 years. They often require a credit check and report to one or more of the credit bureaus.
• Payday alternative loans (PALs): PALs are available from federal credit unions; loan amounts are available up to $2,000 with repayment terms of up to 1 year. APRs are capped at 28%, making them an excellent option if you need a $2,000 loan or less and are (or can become) a member of a participating credit union. Many credit unions will not check your credit for a PAL.
• Small bank loans: Some banks, like Bank of America and U.S. Bank, offer small loans up to $500 or $1,000 to existing customers. These may have a short repayment period, such as 3 months, during which you’d pay the loan back in equal installments. Fees tend to be relatively low, and a credit check may not be required. 

Use with caution

• Cash advance apps: Cash apps review your banking history to assess how much you’re eligible to borrow, though loan amounts are usually well under $1,000. Repayment is typically deducted from your checking account on your next payday. Though they may have no mandatory fees, cash advance apps tend to charge same-day funding fees and “optional” tips. Both can lead to triple-digit APRs — 367%, on average, according to the Center for Responsible Lending. 
• 401(k) loans: If your plan allows them, you may be able to borrow up to 50% of your vested balance or $50,000, whichever is less. Some plans let you borrow up to $10,000 if half your vested balance is less than $10,000. Repayment terms are 5 years. There’s no credit check (it’s your money), and the interest you pay is low and goes into your account. However, you could lose out on years of market gains. And if you leave your job before the loan is paid back, it becomes due, in full, immediately. If you can’t pay it back, it’s treated as a distribution subject to income tax and an early withdrawal penalty.

Avoid

• Payday loans: Payday loans often get a bad rap — and for good reason. The typical payday loan has an APR of almost 400%, according to the Consumer Financial Protection Bureau. Like cash advance apps, this is due to the combination of high fees, small loan amounts, and very short repayment terms. 
• Title loans: A title loan is a secured loan where your vehicle's title is collateral. You can typically borrow a percentage of your car’s value, but if you fail to repay the loan, the lender can repossess your car. These loans often have very high interest rates and fees, making them a risky borrowing option.
• Pawnshop loans: A pawnshop loan is a short-term, secured loan where you borrow money by offering a valuable item as collateral. The pawnshop holds your item until you repay the loan with interest and fees — the amount of which could make the cost of borrowing equivalent to a triple-digit APR. If you fail to repay the loan, the pawnshop keeps the item and can sell it. The loan amount is typically a fraction of the item's value.

Learn More: What Is a Bad Credit Loan?

What is a 550 credit score?

A 550 credit score falls in the poor credit range of the FICO credit scoring system. Any FICO score below 580 is considered bad credit, which is considered a higher risk by lenders. As a result, if you’re approved for a loan with bad credit, you’re likely to be offered an annual percentage rate (APR) over 30%. 

How does credit affect your personal loan rate?

Your credit score plays a major role in determining the APR you qualify for when you apply for a personal loan. In general, the lower your credit score, the higher the rate you’ll likely pay. Here's the latest personal loan interest rate data based on 12 months of borrowing activity on the Credible personal loans marketplace.

Raising your score above 580, into the fair credit range, could significantly improve your chances of getting a loan. Paying off existing debts to lower your debt-to-income ratio (DTI) and maintaining on-time payments are the most impactful steps you can take.

Related: 11 Ways to Pay Off Debt

How does the APR affect your monthly payment?

A lower APR means lower monthly payments and lower overall loan cost, and vice versa. For example, here’s how your credit score could affect how much you’d pay on a $10,000 personal loan with a three-year term. Note that you could save hundreds if you can raise your credit score into the fair credit range. 

You can estimate how much you’ll pay for a loan using a personal loan calculator.

Pros and cons of bad credit personal loans

Pros:

• Access to funds: Provides access to money when other loan options may be unavailable due to a low credit score.
• Could improve credit score: On-time payments can help improve your credit score over time. Using the loan to pay off credit card debt could also help your score.
• Lower rates than some alternatives: Often have lower interest rates compared to options like payday loans, title loans, and pawnshop loans.
• May be less costly than credit cards: Have lower APRs on average than credit cards, typically with fixed rates and simple interest rather than variable rates and compounding interest.
• Potential for debt consolidation: Can be used to consolidate high-interest debt, potentially simplifying and reducing payments.
• Same or next-day funding: Some lenders offer quick funding without an extra fee.

Cons:

• Higher interest rates and fees: Bad credit loans typically have higher APRs compared to loans for borrowers with good credit.
• May hurt credit: Missed or late payments can further damage your credit score. The initial credit check when you apply can temporarily ding your score. 
• May require collateral: Secured loans require collateral, putting assets at risk. With bad credit, you may struggle to get approved for an unsecured loan.
• Shorter repayment terms: Lenders may offer shorter repayment terms, leading to higher monthly payments.
• Smaller loan amounts: Loan amounts may be lower than those offered to borrowers with good credit.

Learn More: Pros and Cons of Bad Credit Personal Loans

How to get a personal loan with a 550 credit score

1. Check your credit score: Your credit score may have gone up or down since the last time you checked. If you don’t know your current credit score, use Credible’s free credit-monitoring tool. Five or 10 points either way could mean the difference between qualifying and not qualifying.
2. Find lenders with low credit score requirements: The first and most important step is to find lenders that offer loans to borrowers with a 550 credit score. You can often find minimum credit score requirements on the lender's websites in their FAQ. You can also use a personal loan marketplace (like Credible) to compare minimum credit score requirements.
3. Prequalify: Next, try to prequalify with multiple lenders to get a sense of which might approve your loan. Prequalification also estimates your rate, upfront fees, and how much you might be approved to borrow. Just note it’s not an offer of credit and the rates and terms of a loan offer may differ from prequalified quotes.
4. Compare quotes: If you were able to prequalify (meaning, one or more lenders provided you with loan quotes), compare them to see which looks best. Consider each quote’s APR, whether an origination fee is charged and how much, the loan amount, length of the repayment term, and monthly payment. 
5. Compare lenders you prequalified with: Consider customer reviews on sites like Trustpilot and the Better Business Bureau, as well as funding times between lenders and whether each charges other fees, like late fees. Make sure the lender reports payments to the credit bureaus.
6. Apply: If you’ve decided a personal loan is the way to go, apply with the lender that provided the best loan quote. Be ready to provide documentation, like pay stubs, to support your income and employment, plus a government ID. At this stage, most lenders perform a hard credit check, which could ding your score by up to 10 points for up to 1 year.
7. Review the loan agreement: If approved, review the loan agreement before signing. Make sure the loan amount, repayment schedule, upfront fees, and APR are as expected. 
8. Await funds: Once you’ve signed the agreement and other documents, the lender will send funds — either directly to your bank account or to your creditors (often an option if you’re getting a debt consolidation loan). 

Learn More: How to Get a Bad Credit Loan

How to improve your credit score

One of the best ways to get a loan with bad credit is to improve your credit score. The best way for long-lasting gains is to make your monthly payments on time and keep credit card balances low. 

• Consistently pay bills on time: Payment history accounts for 35% of your FICO score, the most of any single factor. Set up automatic payments for recurring bills like car payments, credit cards, and personal loans. If a number of your bills are due around the same time each month, reach out to your creditors to change due dates for more breathing room.
• Pay down debt: The amount of debt you owe contributes 30% to your FICO score. Paying down debt, especially credit card debt, can positively impact your credit and your ability to qualify for a personal loan.
• Become an authorized user: If you have a family member or close friend with good credit who’s willing to make you an authorized user on one of their credit cards, you can benefit from their good credit. The account would be entered on your credit report, which means their history of positive payments and available credit would be as well. Both can significantly boost your credit score.
• Don’t close credit card accounts: Closing old credit card accounts with a zero balance may seem like a good idea, but it can drastically increase your credit utilization, which can hurt your credit. Credit utilization represents the amount of revolving credit you’re using relative to the amount available to you. Keeping accounts open once you’ve paid off balances can be a good way to keep your credit utilization ratio low and improve your score.
• Avoid hard inquiries: A hard inquiry often occurs when you formally apply for a loan. A lender may see you as a risk if you seek to borrow money multiple times from different sources within a short period of time. Applications for new credit make up 10% of your credit score.

Related: How To Build Your Credit: A Step-by-Step Guide 

Alternatives to bad credit personal loans

Personal loans come with many advantages, but they’re not for everyone.

• Friends or family loan: No matter the terms, put your agreement in writing, including the loan amount, interest or collateral, repayment period, and due dates.
• Debt management plan: If you’re drowning in debt, seek help from a nonprofit credit counseling agency. A certified credit counselor can help you create a debt management plan that could lower your interest rates and help you pay debt off sooner.
• “Buy now, pay later” (BNPL): BNPL can be a quick, easy, interest-free way to make a retail purchase — as long as you can pay the loan back over 6 weeks, depending on the app. It may not require a credit check, and funding is instant. Just be aware that you’ll need to provide an initial down payment, and payments may not be reported to the credit bureaus. Plus, fees can be hefty if you make them late.

Methodology

Credible evaluated 32 lenders across 1,216 data points to find the best lenders offering loans for borrowers with credit scores of 550 or lower. We chose the best lenders based on the following weighted categories:

• Rates and fees: 18.75%
• Eligibility and options for bad and no credit: 17.5%
• Availability: 12.5%
• Loan amounts and terms: 10%
• Customer satisfaction: 10%
• Customer service: 10%
• Efficiency and fund delivery: 10%
• Discounts: 7.5%
• Credible proprietary data: 3.75%

Credible’s team of experts gathered information from each lender’s website and from our partners directly. We also considered each of our partner lenders’ statistics over a 12-month period — including average funding times, average credit scores for approved applicants, and average rates. Each data point is verified by a senior editor to make sure it’s accurate at the time of publication. 

Learn more about how Credible rates lenders by exploring our personal loans lender rating methodology.

Disclosure: Some lending partners that participate in Credible’s comparison marketplace offer loans to borrowers with scores as low as 550. Borrowers with low scores will have fewer lending options than borrowers with higher credit scores.