How to Get a Personal Loan With Bad Credit
A low credit score makes borrowing harder and more expensive, but not impossible. Here's where people with bad credit can still borrow, what to expect on rates and fees, how to improve your chances, and the high-cost loans and scams to avoid.
By Pond.com editors Updated 2 min read
Quick answer
- Credit unions are often the best place to start, including small payday alternative loans with an APR cap of 28%.
- Prequalify with several lenders using soft credit checks, which don't affect your score.
- A co-signer, or a loan secured by savings, can get you approved at a lower rate.
- Avoid payday loans and car title loans, which often cost the equivalent of 300% APR or more.
- Legitimate lenders never guarantee approval or ask for a fee before you get the money.
When money is tight and your credit isn't great, it can feel like the only lenders willing to help are the most expensive ones. There are better options, and knowing them can save you a lot.
This article is general information, not financial advice.
Where to look first
- Credit unions: often more flexible than banks, with lower rates. Many offer payday alternative loans (PALs) to members: small loans, usually up to $1,000 or $2,000, with APRs capped at 28% and application fees of no more than $20.
- Online lenders that work with fair or poor credit. Prequalify to see real rates without hurting your score.
- Your own bank, especially if you've been a customer for years.
Ways to improve your chances
- Add a co-signer with good credit. They're equally responsible for the loan, so only ask someone who understands the risk.
- Secure the loan with savings, a CD or a car. You'll usually get a lower rate, but you could lose what you put up.
- Borrow less, or choose a longer term to lower the payment.
- Pay down a credit card first, if you can, to lower your credit use.
- Check your credit reports for errors and dispute them. See how to check your credit report for free.
What to expect
- Higher APRs: with bad credit, rates can be 25% to 36% or more.
- Origination fees: often taken out of the loan, so you receive less than you borrow.
- Lower loan amounts than borrowers with good credit.
Compare offers by APR, which includes fees. See how to compare personal loan offers.
Loans to avoid
- Payday loans: due in a couple of weeks, often costing the equivalent of 300% APR or more.
- Car title loans: high costs, and you can lose your car.
- Rent-to-own and pawn loans for anything you can't afford to lose.
Scam warning signs
- "Guaranteed approval" or "no credit check" promises.
- Upfront fees before you get the money, sometimes called insurance or processing fees.
- Pressure to act immediately or pay with gift cards or wire transfers.
Common questions
Many lenders treat scores below about 580 as poor and 580 to 669 as fair. Some online lenders work with scores in the 500s, but expect higher rates and fees. Your income and existing debts matter too.
Prequalifying usually uses a soft check, which doesn't affect your score. A full application uses a hard check, which can lower it a few points for a while. Prequalify widely, then apply only for the offer you'll take.
Yes, if you make every payment on time. Payment history is the biggest factor in your score. A small loan you can comfortably repay can help, but a missed payment will hurt.