Personal Loans With Bad Credit and Low Income

If you need money but have a bad credit score and don’t bring in much income, you still have options — but some are better than others. We’ll take a look at the best loans for bad credit and low income, the pros and cons of each, and where an alternative might make more sense.

What are bad-credit, low-income loans?

Bad-credit, low-income loans are available from certain lenders, and have less stringent qualifying criteria relative to many other loans. For example, most personal loan lenders have minimum credit score and income requirements, whereas lenders offering loans for bad credit and low incomes have low or no minimum credit score or income requirements. Instead, they may consider other criteria, like your education and employment.

Generally speaking, payday alternative loans (PALs) and cash advance apps cater to borrowers with bad credit and a low income, while some personal loans and credit cards do as well.

The trick is finding an option that doesn’t charge excessive fees — for instance, payday loans are notorious for charging exorbitant fees and, as a result, have been banned in some states. PALs are usually a good choice if you’re a member of a federal credit union that offers them, while cash advance apps can go either way. You might be able to qualify for a personal loan with bad credit and a low income if you choose the right lender, or are able to secure the loan with collateral or apply with a cosigner.

We discuss these and more options, plus where to find them, below.

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Types of bad-credit, low-income loans

Personal loans

Personal loans are a type of installment loan and are usually unsecured, meaning you don’t need to put up any collateral, like your car or home, to get the loan. You receive the money in one lump sum, though an origination fee may be deducted from the amount you receive.

Like other types of installment loans, you generally make fixed monthly payments over a period of years — repayment terms are commonly available up to seven years, but some lenders offer longer loan terms up to 12 years for certain purposes, like home improvements.

While APRs on personal loans range from around 6% to 36%, you’re likely to see rates on the higher end of the spectrum with bad credit (a FICO score below 580) and low income. And in general, you are unlikely to qualify for a large loan amount with a low income.

To quickly see which lenders might approve your loan, prequalify. You can use a lender marketplace, like Credible, to prequalify with multiple lenders at once. It won’t hurt your credit, but it’s not an offer of credit — meaning if you decide to apply for the loan, your rate could be different. When you apply, the lender will conduct a hard credit check, which could ding your score temporarily, but usually by no more than five points.

Learn More: Does Applying for a Loan Hurt Your Credit Score?

Credit cards

You may be able to get a credit card with poor credit and low income, but your credit limit will likely be low, the APR high, and you may have an annual fee. For instance, the Destiny Mastercard issued by First Electronic Bank has a regular APR of 35.9%, a credit limit of $700, and an annual fee of $175 for the first year ($199 after that).

Credit cards are a revolving debt vehicle, which means you can borrow any amount up to your credit limit. Your monthly payments will vary based on the balance the card is carrying. However, if you only make minimum monthly payments, you could end up being charged interest on the interest you didn’t pay yet — this is called compounding interest — and can lead to out-of-control debt.

PALs

A payday alternative loan is a great option for borrowers with low credit scores. These loans were created specifically for bad-credit borrowers to offer an affordable alternative to high-cost and often predatory payday loans.

PALs have a maximum interest rate of 28% and a maximum loan amount of $2,000, depending on the type of PAL available to you. The repayment terms range from one to 12 months. You’ll need to be a member of a federal credit union to get one, but some offer PALs to new members immediately upon joining — others require a one-month waiting period.

Cash advance apps

Cash advance apps are ways to get small amounts quickly, and instead of charging interest rates, these apps usually charge fees that include membership or subscription fees and optional fast funding fees and tips. You are usually expected to repay the full amount on your next payday. The amount you qualify for isn’t based on your credit score, but on the amount of consistent income you receive.

Cash advance apps can be a good option for small amounts of money as long as you avoid paying fast funding fees and skip the optional tip. Add-on fees can send cash advance APRs into the triple digits, putting them on par with payday loans.

Learn More: How To Get a Payday Advance Loan Online

Compare bad-credit and low-income loans

When comparing lenders, there are a few factors you should consider:

• Cost of borrowing: The amount you’ll pay in interest and fees determines the cost of borrowing. Compare each loan’s APR to get an apples-to-apples cost comparison for loans, including upfront fees.
• Funding time: If you need money quickly, seek out a lender that offers fast funding times — some personal loans can get you funds the same business day you’re approved or the next without an extra fee. Others can take a week or longer to get the money to you. Cash advance apps often charge expensive fees to send money instantly.
• Repayment terms: The repayment term is how long you’ll be repaying the loan. Generally speaking, the longer the repayment term, the more you’ll pay in interest but the lower your monthly payments will be. Opt for the shortest repayment term where the monthly payment is still affordable for you.
• Lender reputation: Research lenders on sites like Trustpilot and the Better Business Bureau to check their reputation and make sure they aren’t a scam or predatory. Some lenders and some specific loan types, such as payday loans or title loans, have bad reputations and should be avoided.

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How to get a personal loan with bad credit and low income

If you’re having difficulty qualifying for a loan, you might consider applying with a cosigner or a co-borrower, or looking for a secured loan. A cosigner is someone who agrees to take responsibility for the loan with you — which makes you less of a risk from the lender’s perspective. Ideally, they have a high income and a high credit score, which can help you qualify for personal loans with more attractive terms.

A co-borrower is different from a cosigner in that while both take on responsibility for the loan, a cosigner does not share the funds, while a co-borrower does. A co-borrower with a good income and credit score may help you qualify for a loan or secure a lower interest rate.

While most personal loans are unsecured, you might find it easier to qualify for a personal loan if you seek out a secured loan. A secured loan is backed by something you own, like your home or your car, and if you default on the loan, the lender could seize that item.

Best loans with cosigners

Best secured loans

Types of loans to avoid

When you have a low credit score and low income, payday loans and car title loans may seem like the best (or only) options available to you. However, these loans are extremely expensive and have a history of trapping borrowers in costly borrowing cycles. If your loan application has been denied elsewhere, make sure you understand fully how these loan types work before applying for one.

Payday loans

Payday loans are for small amounts, usually up to $500, and generally are due on your next pay date — thus the name. When you take out the loan, you’ll give the payday lender a paper or electronic check for the total amount you owe and it will automatically pull that amount out on your next pay date. Payday loans charge fees of up to $30 for every $100 borrowed, which can take a substantial chunk out of your paycheck.

Say you borrow $500 from a payday lender for two weeks at that maximum rate — on your payday, you’d see $650 disappear from your account (unless you contact the lender about rolling the loan amount or renewing the loan prior). That equates to a 782% APR, which is many times higher than the APR on virtually any other type of loan.

But payday loans are not only expensive; they’re also linked to lending practices that the Consumer Financial Protection Bureau has found to be deceptive and can lead to cycles of expensive re-borrowing, where fees can be more costly than the total amount borrowed.

Learn More: Payday Loans vs. Personal Loans

Title loans

Car title loans are also short-term, very costly loans. These loans are secured by your vehicle and you can lose your car if you can’t make your payment. Car title lenders usually offer you a loan amount of 25% to 50% of your car’s value. These loans are usually due in 30 days or less and have monthly finance fees of up to 25%, and may tack on additional fees as well.

If you borrow $500 with a financing fee of 25%, you’ll owe $625 on your due date. If you can’t make that payment, you could lose your car. Like payday loans, many title lenders offer rollovers that can exponentially increase the cost of borrowing and trap you in a costly debt cycle.

Because of the high costs and extra risks associated with these loans, they should be avoided.

Methodology

Credible evaluated the best personal loan lenders for bad credit and low income based primarily on minimum credit score and income requirements, whether cosigners are allowed, and whether secured loans are available. We also considered the customer experience, each lender’s APR range (in particular, its maximum fixed rate), available loan amounts, funding time, loan terms, fees, and discounts. 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.

Bad-credit, low-income loans FAQ

How to get a low-interest loan with bad credit and low income

Seek out loans created for borrowers with bad credit or low income, ask someone to cosign or co-borrow the loan with you, or look for a secured loan that you can provide collateral for. Payday alternative loans, available from credit unions, are also an excellent option for poor credit borrowers.

How can I improve my chance of approval for a loan?

Adding a cosigner or a co-borrower with a good credit score and income can help your application. You can also apply for a secured loan and put your home or car up as collateral — though you run the risk of losing that asset if you default on the loan.

Are there personal loan lenders who don’t check credit?

Yes, some personal loan lenders offer loans without credit checks. Additionally, cash advance apps and payday alternative loans don’t usually base their loan decisions on credit scores but on a steady income stream or your relationship with the credit union, respectively.

Related: Best Hardship Loans for Bad Credit