Best Personal Loans in January 2026

Best personal loan lenders of 2026

How to get a loan with bad credit

Getting a loan with bad credit can be difficult. According to 12 months of Credible personal loans data, less than 1% of borrowers with bad credit were able to prequalify for a personal loan. So how are the bad-credit borrowers who do qualify able to? There are a few steps that can make a big difference:

1. Improve your credit score

A FICO score closer to 580-669 (fair credit) could make you eligible for a loan with more lenders. For instance, OneMainFinancial requires a minimum FICO score of 540, while Reprise requires a minimum 550 FICO score. And if you can breach the fair credit boundary, you could be eligible for a loan with lenders such as Avant, Universal Credit, and Upgrade.

Start by checking your credit report for errors — if a paid account has been misreported, for example, file a dispute with the bureau reporting the error. Otherwise, practice good credit habits by paying debts on time and keeping your credit utilization low. On-time payments can lead to score improvements within six months. 

2. Reduce your debt-to-income ratio

It may seem counterintuitive, but if there’s a way for you to pay down debt before you apply for a loan, you could improve your chances of qualifying. Your debt-to-income ratio (DTI) represents the percentage of your income that goes toward debt — add up all your minimum monthly debt payments and divide that by your total monthly income (before taxes). The lower your DTI, the better. A DTI above 50% could be a red flag that might lead to a loan denial, especially if paired with bad credit.

3. Apply with a cosigner or co-applicant

A cosigner and co-applicant are not the same thing, but either can help you qualify for a loan. 

• Cosigner: This is someone who doesn’t take out the loan with you but guarantees that you’ll repay it. If you don’t make payments or make late ones, they (and their credit) are on the hook.
• Co-applicant or co-borrower: Unlike a cosigner, this is someone you take out a personal loan with, also known as a joint applicant. They have equal access to the loan funds and share responsibility for repayment. You might take out a joint personal loan with your spouse, for example, to finance home repairs or improvements. 

Lenders that allow cosigners on loans are not common, but a few exist. Joint loans, however, are more widely available. Either way, the lender considers the other person’s income, credit score, and debt along with yours. A good credit history and/or a high income on their part could greatly improve your chances of qualifying for a loan with bad credit. 

By the numbers

13.72% and 18.10% — The average APRs on 3-year personal loans and 5-year personal loans, respectively, for Credible borrowers with 720 FICO scores and higher. Week ending January 11, 2026

Regardless of your credit score, you’ll generally pay a higher interest rate for a longer repayment period. This is important since the combination of a higher rate and more monthly payments can increase your total interest costs significantly. For example, borrowers with excellent credit could reduce their APR by around 6 percentage points, on average, by choosing a 3-year over a 5-year term loan. In the example above, this would save over $3,000.

How applying impacts your credit score

If you are approved for and accept a personal loan, it will be recorded on your credit report, along with a hard credit check — the latter can ding your score by up to 10 points for one year, but most people’s scores drop less than five points.

The difference is when the hard credit check is applied. Here’s a rundown of which actions can impact your credit score and how:

• Prequalifying won’t hurt your credit: A soft credit check is run to determine APRs, loan amounts, and terms you’re likely to qualify for — it won't affect your credit score.
• Applying for a loan with most lenders will ding your score: When you submit your application is when most lenders perform a hard credit check. Even if you don’t move forward with the loan, the hard check would still apply and your score could drop. A few exceptions include BHG Financial, 60 Month Loans, and Upgrade. These lenders place the hard pull after you accept the loan, but not if you don’t. 

While prequalification won’t hurt your credit, prequalification quotes are not lender offers. Your rate could change once you formally apply (or you might not be offered a loan at all). You’ll need to apply to receive an actual loan offer, which is why it’s advantageous to apply with lenders that don’t hard-pull your credit until you accept an offer.

How borrowers use their Credible personal loans

Credible borrowers used their personal loans in more than 20 different ways last year. However, the five most common loan purposes accounted for almost 87% of loans approved through the Credible marketplace:

1. Debt consolidation: 40.83%
2. Credit card refinancing: 23.88%
3. Home improvement: 9.77%
4. Major purchase: 7.65%
5. Paying bills or rent: 4.64%

Less common uses for loans included special occasions, medical expenses, moving, and car repairs. 

It's worth noting that the top two loan purposes on the Credible marketplace involve paying off debt. According to Experian, the average American consumer has $6,735 in credit card debt and $18,909 in personal loan debt — two types of consumer debt that you can address through debt consolidation or credit card refinancing. 

Read More: Personal Loan Statistics, Trends, and Demographics in 2025

When not to get a personal loan

Borrowing money via a personal loan or any other type of loan is not a decision to take lightly. At a minimum, make sure you:

1. Can afford monthly payments for the duration of the loan’s term: Do you plan to leave your job before the repayment period is up? Will you be adding other expenses to your budget that could make it hard to cover payments down the line?
2. Are paying a reasonable APR based on your credit score and income: Only borrowers with exceptional credit are eligible for sub-10% APRs, very good and good credit borrowers generally get rates in the mid-teens, fair credit rates are typically over 20% APR, and bad credit rates are often over 30% APR. 
3. Actually need the money: If you don’t need the money or item you’re purchasing, don’t borrow. Saving up for big purchases is often a better way to go.

While that covers the basics, there are a number of scenarios in which a personal loan may not be the best choice. Here are a few:

When another borrowing option is better

Personal loans are best for mid-length borrowing needs — between two and seven years — when you don’t have or want to secure the loan with collateral (like your home or car). But other loan types can be more cost-effective, especially if you can pay them off over a short period or if you’re willing and able to provide collateral. For instance:

• Credit cards: Credit cards generally let you borrow interest-free for the span of one billing cycle (roughly 30 days), making them the go-to for very short-term borrowing. Many also provide longer 0% APR promotional periods if you can qualify — often between 12 and 21 months. If you’re confident you can pay off the amount you need within an interest-free period, that’s likely a better choice. 
• Home equity loans and HELOCs: If you own your home and have sufficient equity to qualify (often at least 15%), you could get a much lower interest rate with a home equity loan or home equity line of credit. However, you’re required to secure the loan with your home, which means it’s at risk if you can’t make payments. If you use a home equity loan or HELOC to make improvements to your home, you may be able to deduct the interest payments on your tax return.

You’ll apply for a mortgage within the year (with an exception)

Unless you’re consolidating credit card debt, it’s often best to avoid applying for any new credit before you apply for a mortgage. This is because when you apply for most loans, a hard credit pull is recorded on your credit report, which can drag your score down up to 10 points. In turn, this could increase the rate you get on a mortgage. 

But if you use an installment loan (and not another credit card) to consolidate credit card debt, you could substantially lower your credit utilization. This, in turn, could increase your credit score more than enough to offset the hard credit check. Another benefit is that you could potentially lower your monthly payment, thereby reducing your DTI (debt-to-income ratio) — which could help you get a lower rate or larger loan amount on a mortgage.

You want to consolidate debt, but can’t get a lower interest rate (with an exception)

Generally, you should only replace one loan (or loans) with another if you can save money. So, if you can’t, it doesn’t make sense to. The exception is if you can’t afford to make your monthly payments. In that case, it could make sense to accept a higher interest rate with a longer repayment term to avoid credit damage from missing payments. You also might want to mix and match in this case — only consolidate your higher interest debts and keep the low-rate loans. 

Methodology

Credible's rating system incorporates 1,216 data points across 32 partner and non-partner lenders. We rate lenders based on these 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 gathers information from lender websites and directly from our partners. We consider partner lenders' statistics over a 12-month period — including average rates, average funding times, and average credit scores for approved applicants. 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.

Where we get our data

Credible is a personal loans marketplace that partners directly with lenders to offer loans for a wide range of credit profiles and loan purposes. Because of these relationships, we have access to the most current interest rates that real borrowers are being approved for, along with average rates by credit score and loan purpose, approval rates overall and by lender, and more. The data we use is primary source data, updated weekly, and does not include any personally identifiable information about borrowers.