Key Takeaways

  • Most lenders require good credit scores for personal loans, especially unsecured loans
  • To increase your chances of approval, consider using collateral, such as a vehicle
  • Co-signed and joint personal loans are also viable options if someone will go on the loan
  • Many personal loans for bad credit have high interest rates, making them unaffordable
  • Watch out for bad credit loan scams, as there are many scams for people with bad credit

Personal loans are lump sum loans that you can use for any purpose. They usually aren’t tied to any specific collateral and have higher interest rates to compensate for the risk they pose. Many lenders require good credit for personal loan approval, but there are also personal loans for bad credit.

The key to choosing the right personal loan is understanding what’s at stake, how much it will cost, and what the repayment terms require. Never borrow more than you need; as long as the loan doesn’t have a prepayment penalty, pay off the loan early whenever possible.

What are Bad Credit Loans?

Bad credit loans are loans for borrowers with credit scores below what most lenders consider good. Every lender requires a different minimum credit score. Most lenders pull your credit to look at your credit history, but whether you have bad credit or not may vary by the type of loan or lender you choose.

If a lender determines you have a bad credit score, they may still approve your loan request but require higher interest rates or provide more complicated repayment terms.

Options for Personal Loans for Bad Credit

Here are the most common options if you’re looking for personal loans for bad credit.

Secured Loans

A secured loan uses collateral as a qualifying factor. Vehicles and bank accounts are commonly used for collateral on secured loans, but lenders may accept other forms of collateral if you don’t want to risk your bank account. Using collateral on your loan decreases a lender’s risk of default. It may also increase your chances of loan approval even with a low credit score.

Unsecured Loans

An unsecured loan is more challenging to get if you have bad credit. As the name suggests, these loans don’t have collateral. Instead, the lender relies on your credit history and ability to meet the repayment terms to qualify. Not many lenders offer unsecured loans for bad credit because of the risk they pose.

Co-Signed Personal Loans

Co-signed personal loans require someone to sign the loan agreement with you, promising to cover the loan payments if you stop making them. A co-signer can improve your chances of loan approval because it puts another layer of responsibility on the borrowers and less risk on the lender.

Co-signers should understand they are responsible for the debt if you don’t pay it, but they don’t have access to the funds from the personal loan. A co-signer’s credit score is at risk if you default on the loan payments and they don’t make them up.

Joint Personal Loans

Joint personal loans can be secured or unsecured loans and have two applicants. Unlike a co-signed loan, both people on the joint personal loan can access the funds. In addition, both parties have equal responsibility for paying the loan. Like co-signers, both parties’ credit scores are at risk if you miss multiple monthly payments.

Car Title Loans

Car title loans are common bad credit loans because title loan lenders don’t focus on your credit scores. While they do a credit check, they usually don’t have a minimum credit score requirement. Instead, title loan lenders require you to use your vehicle as collateral. You give up possession of your car’s title to secure the funds.

Car title loans have high interest rates and fees because they accept bad credit scores. The advantage is that they often fund within one to two business days and sometimes on the same day of loan approval.

Cash Advance Loans

Cash advance loans are often known as payday loans. These short-term loans provide funds needed between paydays. They usually have a limit of $500 (often much less), and borrowers must repay it by their next payday, which is usually within a couple of weeks.

Like title loans, payday loans have high interest rates and fees. Plus, if you don’t repay the loan in full as agreed, you’ll accrue more interest and fees, making it hard to get out of the debt.

Credit Card Cash Advance

You may qualify for a cash advance if you have a credit card or can apply for one. This technically isn’t a personal loan because it’s on a revolving debt, but it can be a last resort if all other options aren’t feasible.

Before using this option, read the fine print on your credit card agreement. Cash advances from a credit card issuer usually incur much higher interest rates than the annual percentage rate for purchases. They may also charge a percentage of the amount advanced in fees.

Pros and Cons of Personal Loans for Bad Credit

Bad credit loans can help you in a financial emergency or help you achieve other financial goals, but they have advantages and disadvantages to consider.


  • Easy to get cash: Many bad credit loans fund within a day or two of loan approval, as long as you provide everything the lender requires. This can be beneficial in a financial emergency.
  • Options for lower interest rates: Even with a bad credit you may have options for a co-signer, joint applicant, or secured loan to keep the interest rates affordable.
  • Fixed monthly payments: Most personal loans have fixed interest rates, which means your payment stays the same for the entire loan term, which is easier to budget because your payment doesn’t change.
  • May help you improve your credit: If you make your personal loan payments on time, it may increase your credit score because your payment history is a big part of your credit score.


  • May require collateral: A poor credit score tells lenders you are a risky borrower. They may require collateral to make up for the risk. This gives them something to fall back on if you don’t pay.
  • High interest rates: Most bad credit loans have high interest rates because of the risk they pose. Lenders make up for your low credit score with higher APRs, which make the loans hard to afford.
  • Not everyone will qualify: Every lender has different credit score requirements, and even if you meet them, your other requirements may not qualify you for the loan.

Comparing Personal Loans for Bad Credit

It is important to compare personal loans for bad credit before applying for one. No two loans are identical, and you should look at the big picture when choosing a loan to ensure it is right for you.

Here are the top factors to consider.

Qualifying Requirements

Knowing a lender’s minimum credit score isn’t enough to apply for a loan. Look at the other factors they require, including:

  • Income amount or type: Some personal loan lenders have a minimum income requirement. They may also require you to have a specific type of income, such as only allowing employment income.
  • Debt-to-income ratio: You must show lenders you can afford your current debt plus the new debt from the bad credit loan. Most lenders want to see that you still have ‘free money’ after satisfying your loan obligations.
  • Collateral requirements: If you’re applying for a secured loan, understand the collateral requirements and what you stand to lose. Compare your secured and unsecured loan options to see which is best.

Annual Percentage Rate

Compare the loan’s APR (annual percentage rate) to determine its total cost. The APR includes the interest rate lenders charge plus the origination fee. Many states have a usury law prohibiting lenders from charging more than 36% on a personal loan, but it doesn’t apply to all states.

Loan Terms

Consider the loan terms and how they affect your finances. For example, does the loan have fixed monthly payments or does the interest rate change? Also consider whether the loan has a balloon feature. This means you make monthly payments for a fixed term but then owe the remaining balance at once upon maturity. This can cause more financial issues if you don’t have the funds to repay it.

Lender Reviews

Don’t forget to research the lender offering the personal loan. Even if the loan terms are great, if the loan servicer isn’t customer-friendly, it can be challenging to deal with them. If you have problems with your loan, have questions, or need assistance, it can be frustrating if the lender isn’t helpful. Check the Better Business Bureau and TrustPilot for reviews of most lenders.

Signs of Bad Credit Loan Scams

Personal installment loans may seem impossible if you have bad credit, so it’s easy to jump at the chance when a lender offers one. Before you do, be sure you know how to recognize what a bad credit loan scam looks like to avoid it.

  1. Demands upfront fees: It’s normal to pay origination fees on bad credit personal loans, but no lender should expect payment upfront. If a lender states they won’t process your application without you paying a fee, look elsewhere.
  2. Lender solicits you: You may think it’s a stroke of luck if a lender contacts you about a bad credit personal loan, but that’s not normal. Lenders don’t contact potential borrowers. If you didn’t initiate the connection, don’t provide any information.
  3. No secure website: Always check online lenders’ websites and ensure they are secure. A secure website should have https versus http. This extra layer of protection ensures any information you share on the website is encrypted.
  4. No physical location or phone number: Lenders should have a physical location, even if they are online lenders. Run a check on Google and Google Maps to ensure the address provided is legitimate. Without a physical address, it’s hard to trace a business.
  5. Lender pushes you to sign: Lenders can encourage you to apply for a personal loan, but they shouldn’t seem pushy. If they are overly eager for you to sign the loan documents, chances are it’s a scam, and it should be avoided.
  6. Lender not registered in your state: The FTC requires all lenders to be registered in the state where they do business. Check your state’s attorney general website to determine if the lender is registered in your state before doing business.

Where to Find Bad Credit Loans

If you’re in the market for bad credit loans, you may wonder where to find them. The best personal loans for you will come from the type of lender that offers what you need. Here are the most common places to find bad credit loans:

  • Banks: You may not find bad credit loans at your local bank, but online banks may offer them. Each bank caters to a different type of audience, so do a Google search on banks that offer bad credit loans.
  • Credit Unions: You can often find less stringent qualifying requirements at credit unions versus banks. If you belong to a credit union already, check their requirements for loans with bad credit; you may get better rates and terms there.
  • Online lenders: There are many types of online lenders that offer the opportunity to get a loan with bad credit. Peer-to-peer and subprime lenders are good if you have poor credit.
  • Title loan companies: Car title loan companies offer bad credit loans to borrowers who own a car without any liens. They do a credit check but don’t base your approval on your credit score, making it easier to get funds quickly.


Can I Borrow Money With A 500 Credit Score?

It can be challenging to borrow money from a traditional bank with poor credit. A 500 credit score is considered poor, which may limit your options to borrow money. Typically, your best bet when you have a low credit score is a secured loan, like a car title loan.

How Can I Borrow $500 Quickly?

If you are experiencing a financial emergency, you may need to find a way to borrow $500 fast. Traditional bank loans usually aren’t an option for those with challenging credit, and they often take longer to fund than alternative loans like payday loans, credit card cash advances, and auto title loans.

What Is The Easiest Loan To Get Approved For?

Every lender has different qualifying requirements, but secured loans are typically easier to qualify for than unsecured loans. Secured loans have collateral tied to them, such as a car or house. If you don’t make your payments, the lender can repossess the collateral and sell it to recoup the funds. Because of this, they may have more lenient requirements.

How Can You Get Approved For A Personal Loan Without a Cosigner?

To qualify for a personal loan without a cosigner, you’ll need stable income and collateral for the loan. If you have a low credit score, you’ll need compensating factors that reassures the lender you can repay the loan or that they have an asset they can claim if you stop making payments altogether.

Can I Get A $5,000 Personal Loan With Bad Credit?

The amount each lender offers depends on many factors, including your credit history. Almost every lender will pull your credit report, but you may qualify for a personal loan with bad credit if you have other qualifying factors, especially if you have collateral to use. 

Final Thoughts

Finding the best personal loans for bad credit requires extensive research. First, consider average personal loan rates in your area for your credit score. Next, compare your options from multiple lenders, including unsecured and secured loans.

Weigh the pros and cons of each loan option and determine which loan will cost the least amount of interest over the loan term. You may have many options but you shouldn’t jump at the first loan offered until you are sure it makes the most sense for your financial need. If you have questions, you can reach us at 1-888-700-8900.

Written by Samantha Hawrylack

Written by

Samantha Hawrylack

Samantha Hawrylack writes for our company and is an expert in personal finance. Sam received her Bachelors of Science in Finance and her Masters in Business Administration from West Chester University of Pennsylvania. She began her career in the financial services industry and shifted to an entrepreneurial role where she could directly impact clients. Sam has an impressive background in personal finance and business management.