Best Bad Credit Loans of July 2022

How to get approved for a bad-credit loan

Check your credit report. Is a credit reporting error keeping your credit score low? You can review your credit report for any incorrectly reported delinquencies or accounts that aren’t yours. Remedying these kinds of issues before you apply can improve your chances of qualifying.

Add a co-signer or co-borrower. Adding someone with better credit may boost your chances of qualifying since the lender will consider both applicants’ credit and income to make a decision. Keep in mind that whoever you add is on the hook for the loan if you fail to make payments.

Add collateral. You may be approved more easily or get a lower rate with a secured loan. Online lenders like OneMain and Oportun let borrowers secure a loan with collateral — typically a vehicle — while credit unions and some banks offer loans secured with savings or CD accounts. If you can’t repay the loan, though, the lender can take the collateral.

How to choose a bad-credit loan

Here are five things to look for when comparing bad-credit loans:

  1. Affordable rates: Look for a lender that caps rates at 36%, which is the maximum that consumer advocates consider to be affordable. There are online lenders that offer no-credit-check loans at rates above 36%, but we recommend you consider these only as a last resort, after you’ve ruled out alternatives. (See our list of alternatives below.)

  2. Credit reporting: Find a lender that reports your payments to at least one of the three major credit bureaus. Ideally, a lender will report to all three, ensuring that on-time payments help you build credit and qualify for lower rates in the future.

  3. Fast funding: If you need money quickly, an online loan may be your best option. Online lenders can often fund a loan the day after you’re approved, if not the same day. Some banks and credit unions may also fund a loan quickly if you’re already a customer.

  4. Easy application: Online applications typically take a few minutes to complete. Pre-qualifying with an online lender can be a simple way to see your rates and loan terms without affecting your credit score.

  5. Perks: Some lenders have features that help you build your credit, like free access to your credit score. A lender may also offer free financial education on their website.

About bad-credit loans: Rates, amounts, terms

Borrowers with bad credit can expect rates at the high end of a lender’s range. Most lenders have a minimum credit score requirement, but some weigh additional factors — like your monthly cash flow or occupation — when deciding how much to lend you and what rate to charge.

Rates

Annual percentage rates on personal loans generally range from 6% to 36%; rates on bad-credit loans can be above 20%. In 2020, bad-credit borrowers who pre-qualified for a personal loan using IHowBlog received APRs between 26.7% and 32.4%. The rate you get on a loan depends on many factors, not just your credit score.

Amounts

Personal loan amounts for consumers with low credit scores typically range from $1,000 to $50,000. Few online lenders offer loan amounts below $1,000, and not everyone qualifies for the largest loans. Borrowers with consistent income and a credit history of regular on-time payments may qualify for higher loan amounts.

Terms

To repay your loan, you typically make monthly payments over a period of two to five years. In some cases, a lender may allow bi-weekly payments. A longer term gives you lower monthly payments, but you’ll pay more interest over the lifetime of the loan.

Bad-credit loan example

A $2,000 loan with a 28.7% APR repaid over 12 months would require monthly payments of $194, according to IHowBlog’s personal loan calculator. You’d pay $328 in total interest on that loan.

Alternatives to bad-credit loans

Personal loans are one option if you need fast cash, but you may have access to cheaper alternatives.

Friend or family loan: Borrowing from a friend or family member takes your credit score out of the equation. You can draw up a contract and agree to repayment terms. Try to discuss how you both can keep the relationship intact once you’ve mixed in money.

Charity or nonprofit: If you’re having a hard time covering everyday expenses like groceries, gas and housing — or if an expensive emergency comes up — a local charity may be able to help. These organizations may provide assistance with food or rent, or offer small, interest-free loans.

Credit-builder loan: If you’re trying to build credit and don’t need money right away, a credit-builder loan is a safe option. These loans are typically offered by credit unions and community banks and require you to have an income that supports monthly payments.

Side gig: There are legitimate ways to make extra cash, no matter how quickly you need it. From babysitting and selling your gently used clothes to becoming an influencer and creating for Etsy, you may be able to find another way to bring in extra money.

Lending circles: You can form a lending circle with a group of people you trust. Everyone contributes some amount of money, which is then pooled and distributed to one circle member every month or so. In some cases, contributions are reported to help build credit. It isn’t the fastest option, but it’s one way friends or family can help each other.

How to choose between bad-credit loan companies

Each lender offers something unique, so if you qualify for a similar rate with multiple companies, compare them to decide which loan you’ll get the most out of.

Here’s who each bad-credit lender is best for:

Upgrade is best for borrowers who:

  • Have fair or bad credit (689 or lower FICO).

  • Want to secure the loan or add a co-borrower to their application.

  • Are consolidating credit cards and other unsecured debts.

  • Need help building credit.

  • Have at least a 580 FICO score and strong earning potential.

  • Value fast funding and the ability to change the payment due date.

  • Don’t need to manage their loan from a mobile app.

  • Have fair credit (FICO of 630 to 689).

  • Want help building credit and managing their budget.

  • Want to consolidate other debts.

  • Have fair or bad credit (689 or lower FICO score).

  • Can add collateral or a co-borrower to the application, which can help lower your rate.

  • Have limited or no credit history, but not bad credit.

  • Want to add a co-signer, co-borrower or secure the loan with a vehicle.

  • Live in one of the states where loans are available.

  • Have bad credit (629 or lower FICO) and a high debt-to-income ratio.

  • Are consolidating other high-interest debts.

  • Don’t want to add a co-signer or secure the loan with a vehicle.

  • Don’t mind choosing a three- or five-year repayment term.

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