Bad credit lenders each have something different to offer borrowers. These lenders report loan payments to the credit bureaus, so your on-time payments can help you build credit.
Borrowers with bad credit can expect an annual percentage rate on personal loans between 20% and 30%. Some lenders may consider what you are using the funds for and how much you are requesting when calculating your rate.
Source: Average rates are based on aggregated, anonymized bid data from pre-qualified users in NerdWallet’s Lender Marketplace from July 1, 2020 through July 31, 2021. Rates are estimates only and are not specific to any lender.
A loan for bad credit is a for borrowers with low credit scores. These loans have fixed rates and are repaid in fixed monthly installments. They are generally not backed by guarantees – they are unsecured. Lenders consider your credit score, credit history, and debt-to-income ratio when deciding whether to lend you money.
Having (300-629 on the FICO scale) does not automatically prevent you from getting a personal loan, but it does reduce your chances of approval. If you qualify, you may get an interest rate at the higher end of a lender’s range.
Many bad credit lenders consider your credit score when applying for a personal loan, but they also consider other factors. Here are some things lenders look for when qualifying you for a loan.
Loans for bad credit generally have higher interest rates than loans for good credit, but you should always compare offers to find the most affordable loan.
There are two ways to measure the cost of a loan:
Annual percentage rate: A loan is similar to its interest rate, but it includes any fees a lender may charge, such as a costs. Most financial experts agree that affordable loans should have an APR below 36%.
Monthly payments: Measure a monthly loan payment against your budget to see if you can afford it. Use a to see your monthly payments on a personal loan with any rate and term.
A longer loan repayment term will allow you to get lower monthly payments, but you will pay more total interest. Aim for a repayment term that keeps your monthly payments affordable, but helps you pay off the loan quickly.
A bad credit loan can be funded the day you are approved or it can take up to a week. During the approval process, a lender may ask you for more documentation, such as W-2 forms and pay stubs.
Consider a lender with bad credit who will help you understand and build your credit. Some lenders will share your FICO score for free and offer financial education to help you discover ways to build credit.
Here are the steps to apply for a loan for bad credit:
A does not require a guarantee. Instead, a lender determines whether you qualify based on factors such as your credit score, income, and cash flow.
It can be difficult for borrowers with bad credit to qualify for an unsecured loan because many banks, credit unions, and online lenders weigh heavily on your credit score when applying for a loan.
Some online lenders, like those listed above, design their unsecured loans for consumers with low credit scores.
Credit standards are generally lower for secured loans, which require collateral, so it may be easier to qualify if you have bad credit.
When you add collateral to an application, the risk to the lender tends to be less – they have something valuable to take if you don’t repay the loan.
Banks and credit unions may allow you to use an account, such as a savings or investment account, to secure the loan. Online lenders more often allow you to secure the loan with a vehicle.
While adding collateral to the loan may help you qualify or get a better rate, weigh the importance of getting the loan against the risk of losing your collateral.
A co-signer with better credit and higher income may improve your chances of qualifying for a loan or getting you a lower rate. It tells the lender that if you don’t repay the loan, someone else probably will.
are not as common as joint loans, where you have a co-borrower. Adding a co-borrower has a similar effect on your ability to qualify, but both borrowers have access to funds from a joint loan. This is not the case with a co-signed loan.
With either option, if you fail to make the payments on the loan, your co-applicant will have to pay and both of your credit scores could take a hit.
A allows you to borrow against your next paycheck before you receive it. These apps generally don’t take your credit score into account when asking for an advance. Instead, they look at your bank account to see when you get paid, how much, and how you spend to determine if you qualify for an advance.
They usually withdraw your funds on your next payday. Advance amounts are generally capped at approximately $250.
These apps may charge fees for things like subscriptions or quick funding, and some ask you to tip them for the service. By using an app, you may be paying to access the money you’ve earned, so this should be one of the last funding options you consider.
If you’re using a cash advance app, check your budget and make a plan to cover your necessary expenses, like bill payments, with a smaller paycheck.
The lenders on this page offer legitimate personal loans. Here are some red flags to watch out for when shopping for a loan.
or guaranteed approval: Reputable lenders look at your finances, including your credit and income, to determine if you can repay the loan. A lender that doesn’t can charge exorbitant rates that could land you in a debt trap.
No state license: The Federal Trade Commission requires lenders to register in the states where they do business. Many lenders list state licenses on their websites.
Request a gift card: No legitimate lender asks for a gift card in exchange for a loan. If you’re asked to provide a gift card — even by someone who says they work for a popular lender — consider it a scam.
No Disclosure of Fees: The Truth in Lending Act requires lenders to disclose the loan’s APR, total interest, and total repayment amount before signing a loan agreement. Ask to see this information before signing and leave if the lender refuses.
As with any debt you incur, have a your personal loan.
Update your budget: Follow a which divides your income into needs, wants, savings and debts to ensure timely monthly payments for your personal loan.
Set up automatic payment: Setting up automatic payments ensures that you make them on time. Over time, this will help improve your credit score. Some lenders offer rate reductions to customers who use autopay.
Stay in contact with the lender: If you lose your job or face a surprise expense and think you might be behind on your payments, contact the lender immediately to find a solution. Some lenders offer hardship programs or go temporarily and waive late fees until you get back on your feet.
NerdWallet’s review process evaluates and scores personal loan products from over 30 lenders. We collect over 45 data points from each lender, interview company representatives, and compare the lender with others who are looking for the same client or offering a similar personal loan product.
Our star ratings award points to lenders that offer user-friendly features. Here are some of the things we look for:
We also consider regulatory actions filed by agencies such as the Consumer Financial Protection Bureau.
We evaluate these factors based on our assessment of which are most important to consumers and their significant impact on consumer experiences. This methodology only applies to lenders who cap interest rates at 36%, the maximum rate that most financial experts and consumer advocates agree is the acceptable limit for a loan to be affordable. NerdWallet does not receive any compensation for our star ratings. Read our.