Best Loans for Bad Credit in April 2024

Whether you need to renovate your home, pay off high-interest debt, or make a large purchase, a personal loan can help. But if you have bad credit, it may seem impossible to qualify for a personal loan — unless you know where to look. The lenders below are willing to consider applicants with FICO scores below 580 or will let you apply with a cosigner. Just be prepared to pay a higher interest rate than someone with a good credit score.

Compare bad credit loan rates in April 2024

Best loans for bad credit

Before applying for a loan with bad credit, prequalify with multiple lenders. This way, you'll know which lenders you're most likely to get approved with, which could mean fewer rejections and a better loan buying experience. Just know that prequalification is not an offer of credit and it won't hurt your score. Once you complete a full application, the lender will conduct a hard credit inquiry to officially determine your eligibility, which could temporarily ding your score by a few points.

OneMain Financial: Best bad credit personal loans

Universal Credit: Best debt consolidation loans for bad credit

Avant: Best for all credit types

Upstart: Best fast personal loans for all credit types

Upgrade: Best for fair credit

Methodology

Credible evaluated the best personal loan lenders for bad credit based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Credible’s team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.

Learn more about how Credible rates lenders by exploring our Personal Loans Lender Rating Methodology.

How do personal loans work?

A personal loan is a type of installment loan with a fixed interest rate and, typically, monthly payments that last for the term of the loan. Once your application is approved, you’ll receive a lump sum payment to be used toward almost any purpose. Loan amounts can range from hundreds to tens of thousand of dollars. Repayment terms vary based on the lender, loan purpose, and what you’re approved for, but generally range between one and seven years.

Fees

Depending on the lender, you may also need to pay an origination or application fee that is usually deducted from your loan amount. Origination fees can range up to 12% of the loan amount and can reduce the loan amount you receive. Personal loans for bad credit may be more likely to carry origination fees, so it’s crucial to consider how this will impact your cost as well as available funds.

The APR, or annual percentage rate, shows you how much a loan will actually cost, as it considers the interest rate and fees (like an origination fee). According to the Federal Reserve, the average personal loan interest rate was 12.49% on a 24-month loan in February 2024. But if you have bad credit, your rate could be much higher. Some personal loan rates are as high as 35.99%.

How do secured personal loans work?

Most personal loans are unsecured, meaning you aren’t required to pledge collateral to take out a loan. But if you have bad credit, it can be easier to qualify for a secured personal loan.

A secured personal loan requires you to put down collateral in order to qualify. For example, an auto loan is a form of secured loan because you are using the car you’ve purchased as collateral. Personal loans may also be secured by your car or savings account, for example. Lenders have less risk on secured personal loans because they have the right to repossess the collateral if you default.

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How to get a personal loan with bad credit

The interest rate you’re approved for depends on your credit profile and income. More specifically, lenders typically look at the following financial factors:

• Income: Many lenders have minimum income requirements. They’ll also want to see that you can afford the payment terms of the loan you’re seeking.
• Debts: Lenders consider your debt, especially as it relates to your income. They want to make sure you have enough money left over after other debts are paid to afford repaying the loan. A debt-to-income ratio (DTI) less than 36% is ideal, though some lenders consider higher DTIs. Calculate your DTI by dividing your minimum monthly debt payments by your gross monthly income.
• Credit score: Most lenders prefer borrowers with a FICO score above 670, but some will consider you if you have a FICO score as low as 550 (even lower in some cases).
• Information on your credit reports: Lenders will consider what’s in your credit report, such as whether you have delinquent accounts, late payments, public records, and/or any bankruptcies.

If you have bad credit, it’s still possible to get a personal loan, though your options are more limited compared to someone with good credit. Some strategies include:

• Apply with a cosigner: A cosigner is someone who has agreed to be responsible for the loan in case you don’t or can’t pay the loan back. In most cases, this person has good credit — lenders are more likely to make the loan because if you fail to make payments, they can pursue them from your cosigner.
• Look for lenders with low minimum credit score requirements: You can increase your chances of getting a personal loan if you work with a lender who is willing to work with those who have lower credit scores.
• Apply for a secured loan: If you’re willing to put up collateral or an asset to take out a loan, consider applying for a secured personal loan. Lenders may be willing to grant you a loan since having collateral lowers their risk.

How to get approved for a loan with bad credit

Even if you have bad credit, there are ways you can increase your odds of approval. Some best practices include:

• Lower your DTI: Your DTI is the percentage of your gross income you use toward debt. The higher your DTI, the more it appears you need to rely on debt, increasing your risk as a borrower.
• Raise your credit score: If you can wait to take out a personal loan, increasing your credit score can improve your odds. Make a point to consistently pay debts on time, don’t take on more debt, check your credit report, and correct errors on your credit report. You might also want to consider services like Experian Boost that claim to raise your score by reporting payments like rent and utilities to the bureaus — for a fee.
• Seek a lower loan amount: The more lenders lend to a borrower, the higher of a risk it tends to be for them. Lowering the amount could lower their risk and help you get your loan application approved.

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How to apply for a loan with bad credit

Once you’re ready to take out a personal loan, use the following steps to guide you:

1. Shop around: Find lenders willing to work with bad-credit borrowers (like the ones listed above). Then, prequalify before you formally apply. Most personal loan lenders let you prequalify — with no impact to your credit — directly on their site. This gives you a sense of what you can qualify for and which lenders offer the best terms.
2. Compare loans and lenders: Once you’ve prequalified, compare loan terms and APRs between lenders to find which best suits your needs. Also consider lender fees, such as an origination and late fees, as well as available discounts, such as autopay and direct deposit.
3. Complete and submit application form: Apply on the lender’s website or via a personal loan marketplace, and fill out the required information, including your name, contact details, Social Security number, desired loan amount, and loan purpose. At this point the lender will run a hard credit check, which will slightly drop your credit score temporarily. You may be required to provide additional documentation such as pay stubs, bank statements, or other proof of income. If you’re getting a secured loan, you may need to submit documentation that proves how much your collateral is worth.
4. Sign closing documents: If your application is approved, the lender will ask you to sign closing documents once you review your role and responsibilities as a borrower. You will also need to tell the lender where to send the loan proceeds. This may be your bank account, or could be directly to your creditors if you’re getting a debt consolidation loan.

FAQ

What are good loans for bad credit?

The best types of loans for bad credit are those from lenders with flexible credit score requirements, as well as secured loans. Since all loans carry some risk, it’s best to consider the advantages and disadvantages of loans from different lenders before making a decision.

Where to apply for loans with bad credit?

You can apply for loans for bad credit online or in person at credit unions and banks. It’s best to prequalify with multiple online lenders first to get a sense of what lenders are willing to offer you, and compare. Prequalification does not impact your credit.

How to get a loan fast with bad credit?

You may be able to get a fast loan with bad credit if you apply with a cosigner who has a good credit profile. Not all lenders accept cosigners, so find ones that do. Otherwise, lenders may more readily approve your application if you’re willing to put down collateral for a secured loan.

What is a payday alternative loan?

A payday alternative loan (PAL) is a type of loan offered by some credit unions as an alternative option to expensive payday loans. Loan amounts typically range from $200 to $1,000, loan terms are longer (from one to six months) and APRs are capped at 28%.

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