Best Bad Credit Loans in September 2024 | Bankrate (2024)

Compare rates on personal loans for low credit from Bankrate’s top picks

Use this table to quickly compare key points that make it easier to find the best lender for your credit situation. Ensure you meet the lender requirements and make sure you can get a loan that is within your budget.

A closer look at our top bad credit lenders

In the following section, we take a deep dive into lender details to help you decide which lender is best for your credit situation. We explain why each pick stands out against other bad credit lenders and how they compare to industry averages. When available, you’ll see unique proprietary data showing how other fast real Bankrate users received their funds from each company.

What are bad credit loans?

A bad credit loan is typically designed for borrowers whose credit scores fall between 300 and 579. However, some lenders set their minimum bad credit score standards at 600 or higher. Make sure you know the minimum before you apply.

Bad credit loan funds can be used for a variety of different needs.

• Bad credit debt consolidation loans are often a popular choice to pay off a pile of high-interest-rate credit cards.
• Bad credit emergency loans come in handy to fund urgent expenses, like a car repair or medical procedure, without depleting your savings account.

Applying for a bad credit loan is much the same as any other personal loan. The only difference is that you’ll likely pay a higher APR and may be offered a smaller loan or shorter term than a good or excellent credit borrower.

What is considered a bad credit score?

The FICO scoring system bad credit as a score of 580 or lower, or below 601 using the VantageScore model. Lenders may set their own thresholds higher. You may also hear the term “subprime” when lenders refer to bad credit loans.

Average personal loan rates by credit score

As of September 11, the average personal loan interest rate is 12.35 percent, according to a Bankrate study. But bad-credit borrowers are unlikely to see rates that low. Your rate could be as high as 35.99 percent.

Breaking news you can use about bad credit loans

With the Federal Reserve signaling it could drop the federal funds rate soon, rates on bad credit loans may fall. However, if the economy shows signs of weakening, bad credit loan approval standards may get tougher. If credit card debt is hurting your scores, it may be worth it to look into a bad credit consolidation loan.

Pros and cons of bad credit personal loans

A bad credit personal loan can give you access to quick cash in an emergency, relief from high-interest rate credit cards or help you pay for a large car or home repair. But there are disadvantages to consider before making a decision. Fully weigh the pros and cons of a bad credit personal loan before taking one out.

Types of bad credit loans

Personal loans aren't the only type of bad credit loans available. Each serves a different purpose and caters to a specific financial need.

How to get a personal loan with bad credit

You can get bad credit loans at the same places you would look for traditional loans, such as banks, credit unions and online lenders. There are five key steps to keep in mind when getting a loan with bad credit.

For a more in-depth explanation as to why these steps are crucial and how to find the loan for your credit situation, visit our guide on how to get a personal loan with bad credit.

1. Check your credit score and credit reports

Before beginning the process of applying for a personal loan, get familiar with your credit report and your overall credit health. Most lenders use the FICO or VantageScore scoring models. Each model shows you how your score is being affected by things like late payments, credit inquiries and how much revolving debt you carry.

Look for errors like unreported payments or credit card balances you’ve paid off. Dispute them at least 30 days before you plan to apply for the loan to give your report and credit score time to reflect the corrections.

2. Consider your income and other debts

Stable income is crucial to getting approved for a bad credit loan. A salaried or full-time hourly job gives you a better chance at approval than variable income from tips or self-employment. Bad credit lenders also look more carefully at how much of your paycheck goes towards monthly debt payments.

If your debt-to-income ratio is larger than 50 percent, you may not be approved for a bad credit loan. Also keep in mind that the higher your DTI, the higher your interest rate could be.

3. Calculate monthly payment options

Use personal loan calculator to help you determine whether the new debt payment will fit into your monthly budget. Try different term lengths to seehow much the monthly payment changes. Just watch the total interest cost. The longer the term, the more interest you will pay.

4. Compare bad credit lenders

Community banks, credit unions and online lenders may offer bad credit loans. Keep a close eye on fees which may vary significantly between lenders.
Check into secured loans if you don’t qualify for unsecured loans. They may be easier to get approved for, since they require collateral like a car or home. Just remember the bank could repossess your asset if you can’t pay the loan back.

5. Get prequalified

Prequalifying involves entering some basic information about yourself, including your name, address and income. You also authorize the lender to perform a “soft credit check,” which won’t harm your credit score. Based on the information you provide, the lender will present a list of loan offers that you might qualify for.

6. Add a co-signer if necessary

A co-signer is a close family member or friend who agrees to sign onto the loan with you. Co-signers, if creditworthy enough, can help you get a better rate, a higher loan amount or improved approval odds. Your co-signer becomes legally responsible for the balance. If you miss a payment, not only will it impact your credit, but also your co-signer's.

7. Gather financial documents

Lenders ask you to provide multiple financial and personal documents, like your Social Security number, a valid state ID or proof of legal residence, paystubs and bank statements information. Have this documentation on hand to ensure a smooth and easy process.

8. Be prepared for a hard credit check

A hard credit check — also called a hard pull or a hard credit inquiry — is initiated by the lender when you apply for a loan. You could see a short-term decreaseto your credit score of up to 10 points. If you apply for multiple loans outside of a two week period, it may result in additional hard credit checks.

9. Get your funds

Once you have a finalized offer from the lender, review the loan agreement in full. The time to receive your funds after signing will vary based on the lender you choose, but can take as little as one business day. You’ll need a valid bank account for the lender to deposit your funds into.

Financial wellness check

Before you take out a new loan with bad credit, take a broader look at your financial situation. If you’re having trouble paying bills, maybe it’s time to check your monthly spending, see if you can get better deals on auto insurance or pick up a side hustle to earn a few hundred extra dollars each week. A bad credit score may be a warning sign that it’s time to see a credit counselor for advice about improving your money habits.

Where to get a personal loan with bad credit

Bad credit loans are offered by credit unions, community banks and online lenders. Always compare at least three different offers to make sure you’re getting the best loan terms for your situation.

• Online lenders: You’ll generally find the most competitive terms for low or bad credit with online lenders. They may work with investors willing to take bigger risks on low credit score borrowers than banks and credit unions.
• Banks: If you’ve been a customer at your bank for several years, they may offer personal loans for bad credit. Some banks may participate in no-credit-check small loan programs. The guidelines and requirements vary depending on where you live.
• Credit unions: Check the member benefits to see if your local credit union offers bad credit loans. They also offer payday alternative loans, so check with your local representative before you apply for a payday loan.

Alternatives to bad credit loans

Bad credit loans carry a reputation for high interest rates which can lead to long-term financial damage. Before committing to a loan you're not positive you can manage, consider the alternatives.

How to spot bad credit loan scams

Avoid potential scams while shopping for a personal loan by being aware of these eight red flags.

1. The lender guarantees approval: If you come across a lender that doesn’t ask about your payment history before assuring you that you'll be approved, you might be dealing with a predatory lender.
2. The lender charges upfront fees: Reputable lenders don’t ask for any money to approve you or give you funds. Most deduct them from the amount funded with easy-to-understand written disclosures that give you all the details about the loan you’re taking out.
3. The lender pressures you to act immediately: If a lender claims it can press charges if you don't accept or claims that the offer expires within the same day, it’s a scam.
4. The lender gives you unsolicited offers: UUnsolicited loan offers via email, phone calls, and door-to-door solicitation are not legitimate advertising practices of trustworthy lenders.
5. The lender doesn't have clear contact information: If it's difficult to find the lender’s contact information or you receive emails and texts with clickable links or strange email addresses, it’s a red flag for a scammer.
6. The lender has no physical address: Although online lenders exist, all reputable institutions should have a physical address listed as its headquarters on the website.
7. The lender isn't registered in your state: The Federal Trade Commission (FTC) requires that lenders be registered in the state where they do business. Research whether the business is licensed in your state.
8. The website is not secure: A lender's site should be secure, meaning the website address should begin with "https" and feature a padlock symbol on any page where you're asked for personal information.

Ask the experts: If I get a bad credit personal loan, can I refinance it later?