Best loans for bad credit in September 2024 (2024)

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Best bad credit loans

• Upgrade: Best for long repayment terms.
• LendingPoint: Best for fast funding.
• LendingClub: Best for co-borrowers.
• Prosper: Best for peer-to-peer lending.
• Oportun: Best for small loans.
• Avant: Best for customer support.
• Upstart: Best for thin credit.

Our top picks for bad credit loans in 2024

Compare the best bad credit loans

^{All rates include discounts as applicable where noted by the lender and are accurate as of September 4, 2024.}

What is bad credit?

The phrase “bad credit” generally refers to having either a poor or fair credit score. A fair FICO credit score falls between 580 and 669, while a poor credit score is below 580.

Your FICO credit score is based on the information in your credit report — such as payment history, credit utilization and credit mix. Lenders look at this score to determine how much of a risk it is to lend to you.

Having a bad credit score can be the result of poor repayment practices and inability to meet financial obligations — for example, missing payments, defaulting on loans, carrying high credit card balances or filing for bankruptcy can lead to a bad credit score. Because of this, lenders will likely view someone with bad credit as a high-risk borrower.

How does bad credit affect your loan?

Because lenders generally look at borrowers with bad credit as high-risk investments, it can be hard to qualify for a loan with a poor or fair credit score. While there are bad credit loans available, they tend to have higher interest rates and more fees compared to good credit loans as a way for lenders to offset the risk.

Tip: There are many strategies that can help you fix and repair bad credit. For example, if you pay all of your bills on time, reduce credit card debt and refrain from opening new credit accounts unnecessarily, you could see an improvement in your credit over time.

Types of bad credit loans

There are several types of bad credit loans, including secured and unsecured options. Some options include:

• Secured personal loans: With a secured loan, the borrower must provide an asset to act as collateral for the loan, such as a car. Because there’s less risk for the lender, it can be easier to qualify for a secured loan, and you might get a lower interest rate. Just remember that the lender can seize your property if you fail to repay the loan.
• Unsecured personal loans: These loans don’t require any collateral and are instead approved based solely on the borrower’s financial profile. Unsecured personal loans are riskier for lenders, and so they typically have stricter requirements and higher interest rates compared to secured loans.
• Secured credit card: With a secured credit card, you’ll make a deposit that will act as collateral. The amount of your deposit will be the same as your credit limit. Some card issuers will let you convert to a traditional credit card after you’ve made a series of on-time payments, after which you’ll get your deposit back.
• Credit-builder loan: This kind of loan is designed to help borrowers with bad or no credit build a positive credit history. Unlike a typical loan, a credit-builder loan deposits your funds into a dedicated account. As you make on-time payments, they’ll be reported to at least one of the three major credit bureaus, which can help boost your credit over time. After all of your payments have been made, you’ll receive the funds minus any interest and fees.
• Cash advances: If you have a credit card, you might be able to access funds through a cash advance — essentially, you’re borrowing against your credit limit. You’ll usually pay a cash advance fee as well as a higher annual percentage rate (APR) on these balances.
• Payday loans: These loans are short-term loans designed to be repaid by the borrower’s next paycheck. Payday loans are often predatory in nature and can come with extremely high interest rates and excessive fees.
• Pawn shop loan: This type of short-term loan lets you take out a loan from a pawn shop using a personal item as collateral. Similar to payday loans, pawn shop loans can have high APRs of up to 240%. Plus, you run the risk of losing your property if you don’t pay back the loan.
• Car title loan: This kind of loan uses your vehicle’s title as collateral. Like payday and pawn shop loans, title loans can have extremely high APRs — possibly up to 300%. What’s worse, if you can’t keep up with your payments, you’ll lose your car.

Be careful! Alternatives to traditional personal loans like payday loans, pawn shop loans and car title loans can be tempting because they often accept poor credit or don’t require a credit check at all. But they’re also often predatory in nature and can come with astronomically high rates and fees. Plus, if you’re unable to pay off the loan within the short repayment term, you could find yourself stuck in a cycle of debt while amassing continual fees. Because of these major risks, these kinds of short-term loans should be treated as a last resort.

How to get a personal loan with bad credit

To apply for a personal loan with bad credit, follow these steps:

1. Check your credit. Lenders will look at your credit report to determine if you qualify and what your interest rate will be. So before you apply, review your credit report and check your credit score to see where you stand. If you find any errors, dispute them with the appropriate credit bureau to potentially help your credit score.
2. Determine what you can afford. It’s critical to only borrow what you can comfortably afford to repay. Evaluate your budget and consider how much you can reasonably manage to pay each month. You can use our personal loan calculator to see what your payments could look like with different rates and terms.
3. Compare lenders and pick a lender. Be sure to shop around and compare as many personal loan lenders as possible to find the right loan for you. Consider important factors like interest rates, fees, repayment terms and lender reputation. Many lenders let you get pre-qualified with only a soft credit check that won’t hurt your credit check — this can help you better see your options. Afterward, pick the lender you like best.
4. Apply for the loan. Once you’ve picked a loan option, you’ll need to fill out a full loan application and submit any required documentation, such as proof of income, employment verification and identification.
5. Get your funds. If you’re approved, the lender will have you sign a loan agreement before disbursing the funds. Take the time to thoroughly review the loan terms before accepting. Afterward, you can typically expect to get your funds within a week — though some lenders offer faster funding.

Tip: If you’re struggling to get a personal loan on your own, you might consider applying with a creditworthy co-signer or co-borrower to increase your chances of approval. You could also think about getting a secured personal loan or secured credit card; while these require collateral (such as a vehicle or deposit), they can be easier to qualify for compared to a traditional loan. Just remember that if you don’t keep up with your payments, you could lose your property.

Pros and cons of bad credit loans

A bad credit loan can be a lifeline if you need quick access to funds but have less-than-stellar credit. However, while they can help you get the financing you need, they also have some disadvantages to keep in mind.

Pros

• More flexible qualifications: While most personal loan lenders require good to excellent credit, bad credit lenders are more lenient with their qualification criteria.
• Lower interest rates than other options: Personal loans for bad credit tend to have higher interest rates and more fees than good credit loans. However, these rates and fees are still usually lower than those of other short-term financing options like payday loans, which can have APRs of up to 400%. You could also get a lower rate on a personal loan compared to a credit card for bad credit.
• Secured and unsecured loans available: Most bad credit personal loans are unsecured, which means you don’t have to provide any collateral to qualify. Some lenders also offer secured loans that can be easier to qualify for and can also have lower rates. But opting for a secured loan means you risk losing your property if you default.
• Can help to improve your credit: If you make all of your loan payments on time, you could see an improvement in your credit score over time. Getting an installment loan like a personal loan can also help to diversify your credit mix and boost your score.

Cons

• Higher costs: Lenders generally view bad credit loans as more of a risk. Because of this, these loans often come with higher interest rates and more fees than good credit loans.
• Potentially lower amounts and shorter terms: The highest loan amounts and longest repayment terms are generally reserved for borrowers with good credit. Bad credit loans, on the other hand, tend to have lower amounts and shorter term limits — another way for lenders to offset the risk.
• Might require collateral: In some cases, you might be offered a bad credit loan that requires collateral. While a secured loan can be easier to qualify for and might come with a lower rate, you run the risk of losing your property if you can’t make your payments.
• Potential negative impact on credit score: While a bad credit loan can help your credit in the long run, it can also severely damage your credit score if you don’t make timely payments or default.

Comparing the best loans for bad credit

Shopping around and comparing your options with multiple lenders can help you find a loan suited to your needs. Here are some key factors to consider when comparing personal loans for bad credit:

• Interest rates: Your interest rate has a big impact on how much you’ll pay for a loan over time. If you have bad credit, you’ll likely receive a higher rate. However, comparing your options to see which lenders offer you the best rates possible can help keep your costs as low as possible.
• Loan amounts: Different lenders offer varying loan amounts — so consider how much you need so you can work with an optimal lender. Make sure not to borrow more than necessary, as doing so will increase your monthly payment and interest accrual over the life of the loan.
• Repayment terms: Terms on personal loans usually range from one to seven years, depending on the lender. Remember that you might not qualify for a long-term loan, depending on your credit. But this isn’t necessarily a bad thing, as picking the shortest term you can afford can help keep your interest costs lower. Loans with shorter terms also tend to come with lower rates compared to long-term loans.
• Eligibility requirements: Review each lender’s criteria for approval, including not only minimum credit score qualifications but also requirements for income and debt-to-income (DTI) ratio.
• Fees: Some lenders charge fees on bad credit loans — such as origination fees or late fees — that can add to your borrowing costs.
• Lender reputation: Before working with a lender, do your due diligence to make sure it’s a legitimate business. Some ways to do this include verifying with your state’s agency whether the lender can work with you and checking customer reviews through sites like the Better Business Bureau (BBB) and Trustpilot. This way, you can avoid predatory lenders and loan scams.

Be wary of scammers

Unfortunately, there are plenty of scammers looking to take advantage of people — especially borrowers with bad credit who are desperate to get approved for a loan. Some warning signs to watch out for include:

• Guaranteeing that you’ll be approved.
• Not requiring a credit check.
• Using high-pressure sales tactics to get you to act immediately.
• Demanding upfront payment in return for approving your loan.
• Requesting payment through cash, a gift card or other untraceable means.
• Not having legitimate, trustworthy information — for example, not having a physical address, not having a secure website or not being registered to lend in your state.

Ultimately, if something feels too good to be true, it probably is. Trust your gut — if the situation seems off, don’t proceed.

Frequently asked questions (FAQs)