Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."
You’ll typically need good-to-excellent credit to qualify for a personal loan. That means your credit score should be 670 or higher if you want more lending options and more favorable loan terms.
Fortunately, all is not lost if your credit score is below average. While qualifying for a personal loan with a credit score of 550 can be challenging, several lenders offer personal loans to borrowers with less-desirable credit.
Before you begin the process, it’s essential to understand how your credit score impacts your lending options and how to get a personal loan with a credit score of around 550.
- What is a personal loan?
- What’s the minimum credit score needed
- Can you get a loan with a score under 550?
- How to get a personal loan with bad or no credit
- How credit scores affect loan rates
- Pros and cons of personal loans for bad credit
- How to improve your credit score
- Alternatives to personal loans
What is a personal loan?
A personal loan is an installment loan that allows you to borrow money for various purposes. Unlike funds from a mortgage or auto loan, which must be used to pay for your house or car, respectively, a personal loan can be used to finance a home renovation project, consolidate high-interest debts, or for just about any reason.
Personal loans are typically unsecured, meaning you don’t have to secure the loan with collateral. Repayment terms on these loans typically range from two years to six years. According to the most recent data from the Federal Reserve, the average interest rate on a 24-month personal loan is 11.48%. The rate you receive may be higher or lower, depending on your income, debts, credit score, and other factors.
What’s the minimum credit score needed
Generally, you need good-to-excellent credit to get approved for a personal loan — a good credit score is usually considered to be 670 or higher.
However, some lenders do accept poor and fair credit scores. Keep in mind, though, that personal loans for bad credit usually come with higher interest rates compared to good credit loans.
Can you get a loan with a score under 550?
Yes, some personal loan lenders are willing to work with borrowers who have credit scores of 550 or lower. For example, the minimum required credit score for an Avant personal loan is 550, and OneMain Financial doesn’t require a minimum credit score at all.
You could also focus on building your credit before applying for a personal loan. Some potential ways to do this include making on-time payments on all of your bills and paying down credit card balances.
Before you take out a personal loan, it’s important to compare as many lenders as possible to find the right loan for your needs. Be sure to consider not only credit requirements but also interest rates, repayment terms, and any fees charged by the lender.
Here are Credible’s partner lenders that offer personal loans to borrowers with credit scores from 550 to 600:
Min. credit score: 550
Avant offers personal loans from $2,000 to $35,000 with repayment terms from two to five years. If you’re approved, you could get your funds as soon as the next business day.
Learn More: Emergency Loans: How to Get a Personal Loan Fast
Min. credit score: 600
In addition to your credit score, Best Egg looks at more than 1,500 proprietary credit attributes from sources that include external data providers and your digital footprint. This means Best Egg might be more willing to work with you compared to traditional lenders if you have less-than-perfect credit.
With Best Egg, you can borrow $2,000 to $50,000 with terms from two to five years.
Min. credit score: 600
If you need a cosigner, LendingClub might be a good option — it’s one of the few lenders that accept co-borrowers on personal loans. You can borrow $1,000 to $40,000 with three- or five-year terms.
Min. credit score: 600
LendingPoint specializes in working with borrowers who have near-prime credit — usually meaning a credit score in the low 600s. You can borrow $2,000 to $36,500 with terms from two to six years.
Min. credit score: None
Unlike many other lenders, OneMain Financial has no minimum required credit score — which means you might have an easier time getting approved even if you have poor credit. In addition to your credit history, OneMain Financial considers your financial history, income, and expenses to determine your creditworthiness.
You can borrow $1,500 to $20,000, with repayment terms from two to five years. Keep in mind that larger loan amounts might require collateral.
Learn More: Pawn Shop Loans: Are They Ever Worth It?
Min. credit score: 560
Universal Credit has a minimum credit score of 560 — perfect for borrowers with poor credit. They also offer free credit score monitoring, educational tools, and personalized recommendations to help you build your credit.
You can borrow $1,000 to $50,000, with repayment terms from two to five years.
Min. credit score: 600
With Upgrade, you can borrow $1,000 to $50,000 with a two-, three-, five-, or six-year term. Additionally, Upgrade provides free credit monitoring and educational resources that could help be helpful for building your credit.
How to get a personal loan with bad or no credit
If you’re ready to apply for a personal loan, follow these four steps:
- Check your credit. When you fill out an application for a loan, the lender will perform a credit check to determine your creditworthiness — so it’s a good idea to check your credit beforehand to see where you stand. You can use a site like AnnualCreditReport.com to review your credit reports for free. If you find any errors, dispute them with the appropriate credit bureaus to potentially boost your credit score.
- Compare lenders and pick a loan option. Be sure to compare as many personal loan lenders as you can to find the right loan for your situation. Along with credit requirements, consider interest rates, repayment terms, and any fees charged by the lender. After you’ve compared lenders, choose the loan option you like best.
- Complete an application. Once you’ve picked a lender, you’ll need to fill out a full application and submit any required documentation, such as tax returns or pay stubs.
- Get your funds. If you’re approved, the lender will have you sign for the loan so the money can be released to you. The time to fund a personal loan is usually about one week — though some lenders will fund loans as soon as the same or the next business day after approval.
How credit scores affect loan rates
Your credit score plays a major role in determining the interest rates you could qualify for when you apply for a personal loan. In general, the lower your credit score, the higher the interest rate you’ll likely get.
Keep in mind: Average personal loan rates on most unsecured loans range from 4.99% to 36%. The higher your interest rate, the more you’ll pay in interest over the life of the loan.
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 the average APRs are based on the personal loan interest rates borrowers received when they applied for a personal loan through Credible in May 2021.
|Credit score||Average APR||Monthly payment||Total interest||Total repayment cost|
|600 or below||31.87%||$435||$5,654||$15,653|
If you decide to apply for a personal loan, be sure to consider how much that loan will cost you. This way, you can be prepared for any added expenses.
You can estimate how much you’ll pay for a loan using our personal loan calculator below.
Enter your loan information to calculate how much you could pay
With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan.
Need a personal loan?
Compare rates without affecting your credit score. 100% free!
Checking rates won’t affect your credit score.
Pros and cons of personal loans for bad credit
As with any financial product, always consider the benefits and downsides before deciding whether to take out a personal loan for bad credit.
- Less stringent criteria: While personal loan lenders typically require borrowers to have good or excellent credit, some lenders have less restrictive eligibility requirements. As such, these lenders work with borrowers with less-than-ideal credit. In this case, lenders may lend more weight to your income, overall debt, and factors other than your credit score.
- Flexible financing: You can use your loan funds for virtually any purpose, from covering a large unexpected expense to financing a kitchen remodel.
- Fast funding: Banks and credit unions typically fund loans within 1 to 5 days. Even better, many online lenders can disburse funds as soon as the same day you apply.
- Improve credit profile: You can build your credit by making consistent on-time payments on a personal loan. Remember, your payment history makes up 35% of your FICO credit score.
- High interest rates: Lenders typically reserve their best interest rates for borrowers with solid credit. If your credit score isn’t what you’d like, you may receive interest rates from lenders ranging from roughly 6% to 36%, depending on your credit and other factors.
- Costly fees: Lenders offering personal loans for borrowers with bad credit reduce their risk by charging higher fees and interest rates, which ultimately results in higher APRs. Fees may include an origination fee to process the loan and an early repayment penalty.
- May require collateral: While most personal loans are unsecured, your lender may want you to provide collateral to secure your loan. Be aware that the bank can seize your collateral if you fail to make your payments as agreed.
- Potential credit harm: Just as making your payments on time can build your credit, late or missed payments can negatively affect your credit.
How to improve your credit score
Taking steps to improve your credit score can help you qualify for a personal loan and with better rates. Here’s how:
- Consistently pay your bills on time. Payment history is the most important factor in calculating your FICO credit score. Ensure you’re never late by setting up automatic payments for recurring bills like car payments, credit cards, and personal loans. If a significant number of your bills are due around the same time each month, consider reaching out to your creditors to change due dates to give yourself more breathing room.
- Pay down your debt. Your credit utilization ratio is another important factor in your credit score, making up 30% of your FICO Score. Credit utilization is the percentage of your available revolving credit you’re currently using. Lenders consider borrowers with high credit utilization ratios to be riskier. As such, paying down your debt can positively affect your credit and your ability to qualify for a personal loan.
- Don’t close old credit card accounts. Closing old credit card accounts with a zero balance seems like a good idea on the surface. Keep in mind, however, that closing a line of credit lowers the amount of credit available to you, resulting in a higher credit utilization ratio.
- Avoid hard inquiries. A hard inquiry is when a lender or creditor pulls your credit to evaluate your creditworthiness for a credit card, loan, or other financial product. The inquiry will appear on your credit report and could cause a temporary dip in your credit score. A lender may view you as being a greater credit risk if you seek to borrow money multiple times from different sources. Remember, applications for new credit make up 10% of your credit score.
Alternatives to personal loans
Personal loans come with many advantages, but they’re not for everyone. If a personal loan doesn’t suit your needs, it’s good to know you have other options, such as:
- Borrow from friends or family. If you’re going through a rough financial period, a close friend or relative may loan you the money you need. While asking for financial help can be awkward, those closest to you are often happy to help. What’s more, you may be able to borrow the money with no interest. No matter the terms, it’s still a good idea to put your agreement in writing, including the loan amount, interest or collateral, repayment period, and due dates.
- Use a credit card. If you have available credit on a credit card, consider using it instead of a bad credit personal loan. Similarly, taking out a new credit card is another option. The interest rate and fees will be high, but a new card may compare well with a bad credit personal loan. You can avoid paying interest if you repay the debt in full by the card’s due date.
- Consider a debt management plan. If you’re drowning in debt, consider turning to a nonprofit credit counseling agency for help. A certified credit counselor can help you create a debt management plan to pay off your debt sooner, potentially lower your interest rates, and improve your overall financial picture.
- Ask about a paycheck advance. If you simply need a cash infusion to address a financial emergency, consider asking your employer for a salary advance. In this case, your employer gives you money upfront and deducts the amount from your future earnings. An advance could help you steer clear of high interest charges that come with a bad credit personal loan, but you’ll need to plan for the reduced paychecks to come.
Dori Zinn has contributed to the reporting of this article