Bad credit: compare the best lenders

Bad credit: what you need to know

What is a bad credit personal loan?

A credit loan is a Personal loan for borrowers with low credit scores. These loans have fixed rates and are repaid in fixed monthly installments. They are generally not backed by collateral – they are not guaranteed. Lenders take your credit rating, credit history, and debt-to-income ratio into account when deciding whether to lend you money.

How a Bad Credit Score Affects Your Ability to Get a Loan

Having bad credit score (300-629 on the FICO scale) doesn’t automatically exclude you from getting a personal loan, but it does lower your chances of getting approved. If you qualify, you could get an interest rate in the upper range of a lender.

Bad loans are often repaid in monthly installments, usually over one to five years. You can use the funds to pay for almost anything, including a home improvement project, medical bills, or credit card consolidation.

Best Loan Companies For Bad Credit

Bad credit lenders each have something different to offer borrowers. These lenders report loan payments to the credit bureaus, so your loan payments on time can help you build your credit.

  • To improve: Ideal for bad debt consolidation loans.

  • Reached: Ideal for borrowers with limited credit history.

  • Loan Club: Ideal for bad credit credit card consolidation loans.

  • Main: Ideal for secured and co-signed bad credit loans.

  • SeedFi: Great for bad credit loans that help you save.

  • Opportune: Ideal for small credit loans.

Bad credit rate

Personal loans can have high rates for borrowers with low credit scores. Borrowers with bad credit can expect an annual percentage rate in their twenties or thirties. Some lenders may take into account why you are using the funds and how much you are asking for when calculating your rate.

Personal loan interest rate by credit score

25.3% (lower scores are unlikely to qualify).

Source: Average rates are based on aggregated and anonymized supply data of users who have prequalified in the NerdWallet lender market from July 1, 2020 through July 31, 2021. Rates are estimates only and are not intended for use. specific to any lender.

How To Compare Loans For Bad Credit

Borrower requirements

Many bad credit lenders consider your credit score on a personal loan application, but they also take into account factors like your monthly cash flow, income stability, employment history, and other debts.

If a lender has a minimum credit score requirement, you will need at least that score – ideally a higher score – to borrow from them.


Bad credit loans usually have high interest rates compared to good credit loans, but you should always shop around to find the most affordable loan. There are two important ways to measure the cost of a loan:

  • Annual percentage rate: A loan annual percentage rate is similar to its interest rate, but it also includes any fees that a lender may charge, such as a creation or prepayment charges. You can use this number to compare the cost of one personal loan to another or to compare it to other options, such as credit cards. Most financial experts agree that affordable loans should have an APR of less than 36%.

  • Monthly installments: Measure the monthly loan payment against your budget to see if you can afford it. You can use a personal loan calculator to see your monthly payments on a personal loan regardless of the rate and the duration. Many lenders show you this information when you pre-qualify. If the monthly loan payments are exceeding your budget, consider cheaper alternatives first.


The repayment terms for bad credit loans tend to be between one and five years. A longer repayment term will lower your monthly payments, but be careful not to let it get too long. The longer your repayment term, the more total interest you will pay. 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 on the same day you apply or it can take up to a week. During the approval process, a lender may ask you for more documents, like W-2s and pay stubs. In this case, the duration of the financing of your loan is also your responsibility.

Credit building tools

If you have bad credit, consider choosing a lender who will help you understand and build your credit. Some lenders will share your FICO score with you for free and provide financial education to help you find ways to build credit.

How to get a personal loan with bad credit

Here are the steps to apply for a bad credit loan:

  1. Check your credit report: Before applying for a personal loan, check your credit report and correct any errors that could affect your score. Increasing your credit by several points can not only improve your chances of qualifying, but also earn you a lower interest rate. NerdWallet Offers free access to your TransUnion credit report. You can also get a free report from each of the big three credit bureaus (the other two are Experian and Equifax) from

  2. Review your budget: Knowing your monthly budget is helpful when you are about to apply for a personal loan. So you will know how much you can afford to pay each month.

  3. Pre-qualify online: Prequalification allows you to see potential loan rate, amount, and repayment term offers from multiple online lenders. The process involves a smooth credit check, which has no impact on your score.

  4. Consider a co-signed or guaranteed loan: Adding a co-signer or collateral, such as a vehicle, to the loan application may improve your chances of qualifying or get you a lower rate. If you cannot pay a co-signed loan, your co-signer will have to pay the funds. With a secured loan, the lender can take your collateral.

  5. Gather your documents: Most lenders will ask for your Social Security number, but some may ask for proof of employment or income. Gather items like tax documents, pay stubs, and W-2s before you apply to speed up the process.

  6. Submit an application: It can take anywhere from a business day to a week for a lender to review an application and fund a loan. The process triggers a serious credit check, which can bring your score down, but it should bounce back over time as you make on-time payments on the personal loan.

Secured loans and unsecured loans

Credit standards are generally higher for unsecured loans than for secured loans, so it may be easier to qualify for a secured loan if you have bad credit.

With an unsecured loan, the lender only uses information about you, such as your credit profile and income, to decide whether or not to lend you. But when you add collateral to a claim, the risk to the lender tends to be lower – something valuable to take if you don’t make the loan repayments.

Banks and credit unions that offer secured loans may allow you to use an account, such as a savings or investment account, to secure the loan. Online lenders more often than not 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.

Detect bad loan scams

The lenders on this page offer legitimate personal loans. Here are some red flags to watch out for when buying a loan.

  • No credit check or guaranteed approval: Reputable lenders search 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 lure you into the debt trap.

  • No state license: The Federal Trade Commission requires lenders to register in the states in which 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 are asked to provide a gift card, even by someone who claims to work for a popular lender, consider this 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 walk away if the lender refuses.

How to manage your personal loan

Update your budget: Follow a budget which divides your income into needs, wants, savings and debt to ensure timely monthly payments for your personal loan.

Configure automatic payment: Setting up automatic payments ensures you’ll make them on time. Over time, this will help improve your credit score. Some lenders offer rate reductions to customers who use automatic payment.

Keep in touch with the lender: If you lose your job or encounter an unexpected expense and think you might be falling behind in payments, contact the lender immediately to find a solution. Some lenders offer hardship programs or temporarily go defer your payments and waive late fees until you get back on your feet.

No more bad loans

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