How to Get a Personal Loan with Bad Credit

Credit Score Requirements by Lender

Credit score requirements for personal loans vary significantly across lenders. Understanding where you stand relative to each lender's minimum threshold is the first step in identifying which lenders are worth applying to. Excellent credit (740+) qualifies you for the lowest rates from lenders like LightStream, SoFi, and PenFed Credit Union, where APRs can start as low as 6% to 8%. Good credit (680–739) opens up most mainstream lenders, including Marcus by Goldman Sachs, Discover, and Wells Fargo, with APRs typically ranging from 8% to 18%. Fair credit (620–679) is where options begin to narrow. Lenders like LendingClub, Avant, and Upstart work with borrowers in this range, offering APRs from about 10% to 36%. Poor credit (580–619) still has options, particularly through lenders like Avant, OneMain Financial, and OppLoans, though APRs are on the higher end. Very poor credit (below 580) is the most challenging category. Options are limited primarily to secured loans, credit union loans, and lenders like OppLoans that offer small-dollar amounts. It is important to note that credit score is not the only factor lenders consider. Your debt-to-income ratio (DTI), employment history, and income level also play significant roles. Some lenders, like Upstart, use AI to evaluate alternative data points such as your education and job title. Before applying anywhere, check your credit score through a free service like Credit Karma, AnnualCreditReport.com, or your credit card issuer. Knowing your actual score — and reviewing your credit report for errors — can save you from applying to lenders that will likely reject you and help you focus on those that accept your credit tier.

Best Lenders for Bad Credit

Several reputable lenders specialize in personal loans for borrowers with bad credit. Each has different requirements, fee structures, and loan features. Upstart is one of the most accessible lenders for bad-credit borrowers because its underwriting model evaluates over 1,000 data points beyond just your credit score. Upstart considers your education, field of study, job history, and even the area where you live. This can result in approval for borrowers with scores as low as 580 in some cases. Loan amounts range from $1,000 to $50,000 with APRs from about 7% to 36%. Upstart charges an origination fee of up to 8%. Avant accepts credit scores as low as 550 and offers loans from $2,000 to $35,000 with APRs from about 9% to 36%. Avant charges an administration fee of up to 4.75%, and funding is typically available the next business day. OneMain Financial offers both secured and unsecured loans from $1,500 to $20,000 with APRs from about 18% to 36%. OneMain has over 1,000 physical branches, which can be helpful if you prefer in-person service. They accept co-signers and co-borrowers, which can help you qualify for a lower rate. OppLoans targets borrowers with very poor credit or no credit history, offering loans from $500 to $4,000 with APRs up to 36%. OppLoans reports to all three credit bureaus, so making on-time payments can help you build credit. Credit unions are often the best option for bad-credit borrowers. Many credit unions offer payday alternative loans (PALs) with APRs capped at 28%, and they frequently have more flexible underwriting than banks or online lenders. Credit union membership is typically open to anyone who lives in a certain geographic area or belongs to a qualifying organization. Each of these lenders has distinct strengths, and the best choice depends on your specific financial situation, the loan amount you need, and your ability to afford the monthly payments.

Secured Personal Loans

Secured personal loans require you to pledge collateral — such as a car, savings account, certificate of deposit, or home equity — to back the loan. Because the lender has a way to recover its money if you default, secured loans carry less risk for the lender, which translates into lower interest rates and higher approval rates for borrowers with bad credit. For example, a secured personal loan from a credit union might offer an APR of 10% to 18%, compared to 25% to 36% for an unsecured loan from a bad-credit lender. The most common types of secured personal loans include savings-secured loans, where you borrow against the money in your savings account; CD-secured loans, where you use a certificate of deposit as collateral; vehicle-secured loans, where you pledge your car title; and home equity loans or lines of credit, which use your home as collateral. The main risk of a secured loan is losing your collateral if you fail to make payments. With a car-secured loan, you could lose your vehicle. With a home equity loan, you could face foreclosure. For this reason, it is essential to be confident in your ability to repay before taking out a secured loan. The loan amount for a secured loan is typically limited to the value of the collateral — for example, you might be able to borrow up to 100% of the amount in your savings account or up to 80% of your car's value. Secured loans can be an excellent tool for rebuilding credit, as consistent on-time payments are reported to credit bureaus and can boost your score over time. However, the risk of losing your asset means you should only pursue this option if you have a stable income and a solid repayment plan.

Adding a Co-Signer

A co-signer is a person with good or excellent credit who agrees to take joint responsibility for repaying the loan. Adding a co-signer to your personal loan application can significantly improve your chances of approval and help you secure a lower interest rate. The co-signer's credit score, income, and debt-to-income ratio are factored into the lender's decision alongside your own information, effectively offsetting the risk posed by your bad credit. Co-signers are typically family members or close friends. Before asking someone to co-sign, make sure they understand the full extent of their obligation. If you miss a payment or default on the loan, the co-signer is legally responsible for the entire remaining balance. Late payments and defaults will also appear on the co-signer's credit report, potentially damaging their credit score. Some lenders allow co-signers to be released from the loan after you have made a certain number of on-time payments — typically 12 to 24 consecutive months. This feature can be valuable for both you and your co-signer, as it gives you time to build your credit and eventually assume full responsibility for the debt. Not all lenders allow co-signers, so check before applying. Lenders that do accept co-signers include OneMain Financial, SoFi, and some credit unions. If you do not have someone willing to co-sign, consider a secured loan or a lender that specializes in bad-credit borrowers instead. Co-signing is a significant ask, so be respectful of the person's decision if they decline, and be diligent about making payments on time to protect their credit and your relationship.

How to Improve Approval Chances

Even with bad credit, there are several steps you can take to improve your chances of getting approved for a personal loan. Check your credit report for errors before you apply. According to a Federal Trade Commission study, one in five consumers has an error on at least one of their credit reports. Disputing inaccurate information — such as a paid-off collection account that still shows as unpaid — can raise your score by several points. Reduce your debt-to-income ratio by paying down existing debt or increasing your income. Lenders prefer a DTI ratio below 40%, and lower is better. Even paying off a small credit card balance can help. Increase your income by taking on a side job, working overtime, or including spousal income on your application. Lenders look at your total household income when evaluating ability to repay. Save for a larger down payment if you are considering a secured loan. A larger down payment means you need to borrow less, which reduces the lender's risk. Consider a smaller loan amount. Asking for $3,000 instead of $10,000 makes the loan less risky for the lender and increases approval odds. Apply with a co-signer if possible. Choose a lender that prequalifies with a soft credit pull, which does not affect your credit score. This allows you to shop around and see which lenders are likely to approve you without damaging your credit further. Build your credit score before applying if you can wait. Make all payments on time, keep credit utilization below 30%, and avoid opening new credit accounts unnecessarily. Even a 20- to 30-point improvement can move you into a better rate tier. Finally, be honest on your application. Misrepresenting your income or employment can lead to immediate rejection and possible fraud consequences.

Interest Rates for Bad Credit Loans

Interest rates for personal loans when you have bad credit are significantly higher than rates for borrowers with good or excellent credit. The APR range for bad-credit personal loans in 2026 typically falls between 18% and 36%, with some lenders charging the maximum 36% APR that is considered the upper limit of affordable credit by many consumer advocacy groups. Several factors determine the specific rate you receive. Your credit score is the primary factor, but lenders also consider your income level, debt-to-income ratio, loan amount, and loan term. Shorter loan terms generally come with lower interest rates, but they also come with higher monthly payments. A $5,000 loan at 25% APR over 36 months would have a monthly payment of about $199 and total interest of about $2,163. The same loan over 60 months would have a lower monthly payment of about $147 but total interest of about $3,805. This trade-off between affordability and total cost is important to consider. Some states have usury laws that cap interest rates. For example, New York caps personal loan rates at 16% for loans under $50,000, while Texas has a 10% cap plus permitted fees. If you live in a state with strict usury laws, you may not be able to get a loan from a lender that charges rates above the legal limit. Online lenders may be based in states with looser lending laws, so check the APR carefully. If possible, try to find a loan with an APR below 36%, which is widely considered the threshold for affordable credit. Loans above this rate are often predatory and should be avoided.

Avoiding Predatory Lenders

Predatory lenders target borrowers with bad credit who are desperate for funds, charging exorbitant interest rates, hidden fees, and using aggressive collection tactics. Recognizing and avoiding these lenders is critical to protecting your financial health. Payday loans are among the most predatory products, with APRs that can exceed 400%. A typical payday loan charges $15 to $30 per $100 borrowed for a two-week period, which translates to an APR of 391% to 782%. These loans are designed to trap borrowers in a cycle of debt. Auto title loans use your car as collateral and charge APRs of 100% to 300%. If you default, the lender can repossess your vehicle. Installment loans with triple-digit APRs are another predatory product. Some online lenders charge APRs above 100% despite advertising low monthly payments. Advance-fee loans require you to pay a fee upfront before receiving the loan funds. Legitimate lenders deduct fees from the loan proceeds; they never ask for payment before disbursing funds. Loan flipping occurs when a lender encourages you to refinance your loan repeatedly, charging new fees each time without providing any benefit. Signs of a predatory lender include: pressuring you to borrow more than you need, requiring a single balloon payment, failing to disclose the APR, charging prepayment penalties, using high-pressure sales tactics, and not checking your ability to repay. To avoid predatory lenders, always work with lenders that are licensed in your state, check their Better Business Bureau rating, read customer reviews on trusted platforms, and verify that they report payments to credit bureaus. If an offer sounds too good to be true, it probably is. When in doubt, consult a nonprofit credit counselor at an organization like the National Foundation for Credit Counseling (NFCC).

Common Bad Credit Mistakes

Borrowers with bad credit often make mistakes that worsen their financial situation. Applying for too many loans at once is a common error. Each application that results in a hard credit inquiry can lower your credit score by a few points. Multiple inquiries in a short period signal to lenders that you are desperate for credit. Instead, use prequalification tools that perform soft pulls and only formally apply with one or two lenders. Accepting the first offer you receive without shopping around can cost you significantly. Even a 5% difference in APR on a $5,000 loan over three years amounts to hundreds of dollars. Borrowing more than you can afford is another trap. Bad-credit lenders may approve you for an amount higher than you need, but the monthly payment could strain your budget and lead to default. Ignoring the APR in favor of the monthly payment leads borrowers to choose longer terms that cost more in total interest. Not reading the loan contract carefully can result in surprises like prepayment penalties, hidden fees, or mandatory arbitration clauses. Falling for guaranteed approval offers is dangerous. No legitimate lender guarantees approval without checking your credit and income. Guaranteed approval is a hallmark of predatory lenders. Using a personal loan to pay for discretionary expenses like vacations or shopping puts you deeper in debt without improving your financial situation. Not having a plan to rebuild credit after getting the loan is a missed opportunity. Use the loan as a tool to build positive payment history. Set up autopay, make all payments on time, and check your credit report regularly to track your progress. Finally, giving up if one lender rejects you is a mistake. Different lenders have different criteria, and a rejection from one does not mean all will reject you. Learn from rejection feedback, address any issues you can, and try another lender.

FAQs

Can I get a personal loan with a 500 credit score?

Yes, but options are very limited. Lenders like OppLoans and some credit unions may work with scores as low as 500. Expect high APRs and low loan amounts. A secured loan or a loan with a co-signer will improve your chances.

Do bad-credit personal loans hurt my credit further?

They can help or hurt your credit depending on how you manage them. Making on-time payments can improve your credit score over time. Missing payments or defaulting will damage your credit further. The hard inquiry from applying may temporarily lower your score by a few points.

What is the maximum APR for a bad-credit personal loan?

Most reputable lenders cap their APRs at 36%, which is considered the maximum affordable rate by consumer advocates. Some lenders charge APRs up to 36% legally. Anything above 36% is generally considered predatory.

Can I get a personal loan with bad credit and no co-signer?

Yes. Lenders like Avant, Upstart, and OneMain Financial offer unsecured loans to bad-credit borrowers without requiring a co-signer. Be prepared for higher interest rates and fees compared to borrowers with good credit.

How long does it take to rebuild credit with a personal loan?

Most lenders report to credit bureaus monthly. You may see a noticeable improvement in your credit score after 6 to 12 months of on-time payments. The impact depends on your overall credit profile and other factors.