Best Bad Credit Loans of January 2025

6 Best Personal Loans for Bad Credit of 2024

---

What Are Bad Credit Loans?

Personal loans for bad credit are loans designed for individuals who have poor credit or no credit profile at all and are unable to obtain approval for traditional personal loans. These types of loans are typically found with online lenders. Individuals with bad credit tend to be a higher risk for lenders, so bad credit loans may include higher interest rates, smaller loan amounts and shorter repayment periods.

What Is Bad Credit?

Based on a FICO credit score model, a bad credit score is anything under 580, but even having fair credit (a FICO score between 580 and 669) can mean having to get a bad credit personal loan. Factors, such as late payments, defaulting on loans and other debt or having excessive amounts of debt can lead to bad credit.

How To Get A Bad Credit Loan

Obtaining a bad credit loan is similar to getting a traditional personal loan, except that you’ll likely need to search a bit harder to find lenders willing to offer funding and to secure the most favorable terms for your situation.

1. Check your credit report. Before applying for any type of loan, check your credit report to get an idea of what lenders will see. When reviewing your report, check for errors and report any incorrect information to the credit reporting agency.
2. Check your credit score. It’s also a good idea to check your credit score so you know where you stand. Experian offers a free FICO score and many banks and credit card issuers also provide free access to credit scores to customers or cardholders.
3. Research and compare lenders. When shopping for a bad credit loan, it’s important to take the time to explore the full landscape of potential lenders in order to fully understand what your options are. You might also read customer reviews of lenders as you’re doing your research or check their rating with the Better Business Bureau, if available.
4. Get prequalified. Once you’ve found a handful of lenders that you’re interested in working with, get prequalified. Taking this step won’t impact your credit score and it will allow you to view specific loan offers and terms.
5. Find a co-signer. If the loan offers you receive during the pre-qualification process are expensive, or if you can’t qualify for a loan at all, consider applying for a personal loan with a co-signer. This should be someone you have a good relationship with who has better credit.
6. Apply. Once you’ve settled on the loan offer you’d like to proceed with, it’s time to submit your formal application. This will typically involve submitting more documentation regarding your personal financial picture, employment and expenses.

Types of Bad Credit Loans

There are many different types of bad credit loans. Some come with steeper interest rates, while others may have shorter repayment timelines. Some may even be considered predatory lending. To avoid getting in over your head, be sure you fully understand the type of loan you’re signing on for.

Secured Personal Loan

A secured loan is backed by collateral that the lender can seize should you fail to repay the loan. Because collateral is required to obtain a secured loan, the interest rate associated with this form of borrowing tends to be lower than other types of loans.

Who is it best for? Because these loans rely on a collateral asset, qualification requirements may be less strict, making secured loans a potential option for people with a less-than-ideal credit profile.

Pros: Secured loans may have lower interest rates than other types of borrowing and can be easier to qualify for.

Cons: The major drawback of a secured loan is the risk that you’ll lose your collateral should you default on the loan.

Unsecured Personal Loan

In contrast to a secured personal loan, an unsecured loan doesn’t require any collateral to back the loan. Since lenders take on more risk by offering unsecured loans, these loans may not be easy to find if you have bad credit and will likely have higher interest rates compared to secured loans.

Who is this best for? Unsecured loans are a good choice for individuals who do not have collateral to back a loan or who do not want to put collateral on the line.

Pros: You are not risking any personal property or assets when using an unsecured loan.

Cons: You’ll pay a higher interest rate on unsecured loans because there is no collateral backing the loan that a lender can seize should you default.

Joint Personal Loan

A joint personal loan is a loan that is held by two co-borrowers. Both people are on the loan and therefore are equally responsible for repaying the debt.

Who is this best for? This type of loan is best for individuals who have trouble obtaining a loan on their own. Joint loans can also be a good choice for married individuals or partners who want to share the debt obligation. Plus this type of loan can be a good choice for someone who needs help obtaining a more competitive interest rate.

Pros: Joint personal loans can allow for obtaining a more competitive interest rate, particularly if one of the borrowers has a poor credit score.

Cons: Signing on to a loan with someone else can increase your overall debt level and make it harder for you to obtain additional loans or lines of credit during the course of the joint loan.

Bank Agreements

A bank agreement is typically a short-term loan for a small sum. You may be able to obtain this type of loan if you have a long-term or particularly strong relationship with a bank.

Who is this best for? Applicants who have a well-established relationship with a particular bank.

Pros: Can provide a convenient form of borrowing

Cons: Typically only small amounts of money are available with this form of borrowing.

HELOC Loans for Bad Credit

A home equity line of credit (HELOC) for bad credit is similar to a regular HELOC in terms of how it functions. It’s a line of credit borrowed against your home’s equity. But homeowners with bad credit will likely need to have higher income or less total debt than other applicants.

Who is this best for? This can be a good choice for homeowners who have high interest debt and who may be able to obtain a lower interest rate through a HELOC.

Pros: The money can be used for any purpose. And as with any HELOC, the benefit of this form of borrowing is the ability to use only what you need. And once you’ve paid back what you’ve used, you can borrow money again and again.

Cons: Your house is collateral for this loan. If you fail to repay, you’re putting your home on the line.

Bad Credit Home Equity Loans

Home equity loans for bad credit are similar to HELOCs for bad credit. They provide funding against the available equity in your home, but instead of a line of credit, you get a lump sum of cash. But with poor credit, you’ll likely have to meet higher income requirements and have minimal debt.

Who is this best for? Similar to HELOCs, this type of borrowing can be a good choice for those who have high interest debt, such as personal loans or credit cards, if the home equity loan offers a lower interest rate.

Pros: Funds can typically be accessed quickly. Rates may be better than personal loans and credit cards. You may also be able to access larger sums of money than you would through a personal loan.

Cons: Your home is the collateral for this loan, which means you’re putting your home on the line should anything go wrong or your circumstances change.

Student loans for bad credit

Student loans for bad credit are loans from private lenders. Though you’ll have a harder time finding a lender willing to extend a student loan when you have a spotty credit history, there are some lenders who consider factors when reviewing applications. In such cases, you may also need to enlist the help of a co-signer.

Who is this best for? Individuals who have poor credit and need more money than federal student loans can provide may need to look into personal loans to use for student expenses.

Pros: Private student loans, even people with bad credit, may sometimes offer more funding than is available through federal student loans.

Cons: Steep interest rates and you won’t get the benefits associated with federal student loans such as deferment or income-driven repayment.

Cash advances

A cash advance typically involves borrowing from your credit card’s credit limit. Instead of using your card to pay for a purchase, you pull cash from your credit card.

Who is this best for? This type of borrowing is expensive and should be reserved for people experiencing an emergency who have no other access to funding.

Pros: Cash advances can be convenient. It simply requires finding an ATM or bank.

Cons: Cash advance fees can be steep and you may pay a higher APR on cash advances.

Payday loan

A payday loan is a short-term, unsecured loan for a small amount of money. Often, these loans are for $500 or less. The interest on payday loans is often excessive and the funds must typically be repaid on your next pay period.

Who is this best for? Payday loans are typically a loan of last resort because the fees are so excessive. Often these loans are used by individuals who are unable to obtain funds anywhere else.

Pros: The biggest benefit of payday loans is they are convenient. People with bad credit can often receive fast funds.

Cons: These loans come with steep interest rates and typically short repayment terms, sometimes as little as one week.

How to Spot Bad Credit Loan Scams

There are bad actors in nearly every industry and loans are no exception. There are a number of ways you can spot a bad credit loan scam.

1. The lender guarantees approval. Reputable lenders use a specific set of criteria to make lending decisions and not everyone will get approved for a loan.
2. You’re required to pay money upfront. Legitimate lenders may charge origination fees but you’ll pay that from your loan proceeds or on an ongoing basis through repayment. You should never pay anything prior to being approved for a loan.
3. You’re rushed through the deal. Legitimate lenders give you plenty of time to evaluate loan offers.
4. The lender’s website looks unprofessional. Check the URL to ensure you see a lock symbol or “https” before the lender’s website address, which can show that the site is secure.

Personal Loans Rate and Terms Disclosure From Credible: Rates for personal loans provided by lenders on the Credible platform range between 6.94% - 35.99% APR with terms from 12 to 120 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 12%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 10.43%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32, assuming your lender deducts the origination fee from the offered loan amount. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 3, 2022, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties.