How to Get a Loan with Bad Credit

If you have bad credit and need a loan, your options can feel limited. Whether you’re using a loan to help pay off credit card debt or cover an unplanned expense, you might need a helping hand, financially speaking.

The good news is that you can get a loan with bad credit. There’s no catch here, but there is going to be some work involved. You’ll need to do some research and choose where you apply wisely. Start by following these steps for how to get a loan with bad credit:

1. Gather your personal information
2. Talk with your bank or credit union
3. Improve your credit score
4. Prove you can pay the loan back
5. Shop around for lenders and loan types
6. Beware of scams

1. Gather Your Personal Information

Before you dive into personal loan applications and possible rejections, you need to have an idea of where you stand from the perspective of your potential lender.

Review Your Credit Score and Your Credit Report

Understanding your credit score and report can show you what your lender will see when they review your loan application. To see where your credit currently stands, check your credit score for free on Don’t worry: checking your own credit score won’t affect your credit. Our Credit Report Card outlines what areas are negatively affecting your credit (which will come in handy in step 2!).

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Keep in mind that credit scores vary depending on the model you’re looking at. Creditors typically consider a good credit score somewhere between 700 and 850. A fair score falls between 620 and 679, and bad credit scores are typically anything under 580.

You’ll also want to take a good look at your credit report. Regularly checking and monitoring your credit report from the credit bureaus is the best way to track changes or catch instances of suspicious activity in your credit history. If you see something wrong, report and challenge it quickly.

Checking your credit reports also gives you a good indication of where you would stand with a creditor and may offer insight on what you need to do to begin repairing and rebuilding your credit score before you apply for any type of personal loan.

Gather Other Financial Details

In addition to your credit score, a lender will want information on your annual income and your debt-to-income ratio. Gather information on your monthly income and expenses, as well as your employment history. Looking through these documents will help you get a better sense of what you can afford and will make the process faster once you are ready to apply.

2. Talk with Your Bank or Credit Union

After reviewing your credit score and report, research the minimum credit score requirements that lenders look for. A good place to start is with the bank or credit union you currently use, as they already have an understanding of your financial profile.

Credit unions may have more flexible lending standards than banks and may be willing to offer you a small personal loan. If you have been at the same bank for years, consider asking the bank’s loan department how to get a loan. You may also want to inquire about their standard approval criteria to see if your credit score would qualify you for a personal loan.

At this point, you’re only doing research. You don’t want to start the loan application process yet—we still have four more steps to get through first.

3. Improve Your Credit Score

Now that you know your own credit score and what your bank or credit union considers necessary for a personal loan, you have an even better idea of where you stand.

You don’t need an 850 credit score to get a loan, but your score will impact the terms and conditions you qualify for, such as loan amounts and interest rates. For example, a bad credit loan will likely come with a higher interest rate and may be issued for a lower amount.

If your credit score is looking lackluster, you may want to improve it before applying for a loan. Some of the best ways to improve a bad credit score include paying down debts on time, reviewing your credit reports for errors, challenging any errors you find and limiting the number of hard credit inquiries on your credit history until your score improves.

Each loan application you submit triggers an inquiry into your credit, and racking up a series of hard inquiries can lower your score. When you decide to start applying, do your research and don’t apply for every loan you come across.

Improving your credit score takes time. There’s really no quick fix for a bad credit score. Do what you can now to start improving—but if you’re in a rush for a loan, you may not have time to wait for your labor to reflect in your score.

4. Prove You Can Pay the Loan Back

Lenders want to know that you can repay the amount extended in full, including any interest accrued. You also want to make sure a loan will fit into your budget. Thus, the amount they extend to you often depends on your ability to repay them. Knowing you are able to repay the loan can give you both the confidence to move forward with a loan request.

Offering proof of income or having a cosigner can make a difference in approval or denial, depending on the lenders approval criteria. A cosigner is a person that is guaranteeing the debt will be paid back. If the borrower fails to make the payments, then the creditor turns to the cosigner to collect the money owed on the account. Cosigners should have a good credit score and history, and if you need to have a cosigner to get approved, they may need to provide the creditor with proof of income as well.

5. Shop Around for Lenders and Consider Loan Types

It’s a good idea to only apply for loans from a lender you trust and that has lending standards you feel confident you can meet. Remember, loans for people with bad credit might have higher interest rates or be capped at a lower amount, because lenders are more cautious with these loans. But that doesn’t mean you need to do business with a less-reputable lender.

Personal Loans

Personal loans are installment loans given by a bank or other financial institution that are usually paid back in monthly installments. These loans can either be secured or unsecured.

Secured Personal Loans

Secured personal loans are generally used for a car or mortgage. When you borrow money via a secured personal loan, you secure the amount borrowed with one or more of your assets. Your asset then becomes collateral for the loan if you are unable to pay as agreed. Some people avoid these loans because the creditor or lender can take whatever you have secured the loan with if you fail to make payments.

You can also get a savings-secured loan or offer up some other means of collateral for a secured personal loan.

Unsecured Personal Loans

Unsecured personal loans aren’t backed by any form of collateral or security. That creates a greater risk on the part of the lender, which means they may be less likely to approve this type of loan for those with poor credit.

Payday Loans

Payday loans offer a lower amount of money at a higher interest rate than other personal loans. These short-term loans are to be paid back when the borrower receives their next paycheck and have high APRs. Payday loans can be tempting when you have bad credit, but these loans have high interest rates that make them hard to pay off and get out of. In fact, Pew Research calculates that the average interest rate on payday loans is 391%—about ten times more than most credit card or loan APRs.

Peer-to-Peer Lending

Peer-to-peer lending is another method of debt financing that doesn’t have a financial institution as the middleman. Peer-to-peer loans are sometimes known as a form of crowdfunding because money is raised by several people who offer unsecured funds to underserved populations.

Online Loans

Online options like OppLoans and Earnin can help you through a financial tight spot without the high rates and predatory practices of payday loans—or the same level of risk for denial as traditional loans. OppLoans, for example, doesn’t even look at your credit score. Instead, it considers your financial history, employment, and income details to determine approval.

Not every loan company on the internet is trustworthy, so if you decide to go this route make sure you do your research into the company and its lending practices before signing anything.

Home Equity Loans

You may be able to qualify for a home equity loan if you have a poor credit score. Home equity loans use the amount of equity in your home as security, so your credit score is less of a factor. Still, you’ll likely need a score of around 620 or above to qualify.

Can you get a personal loan with a credit score of 550?

The loan may have a high APR, and large amounts are not typically extended to people with poor credit. However, it’s possible to get a personal loan with a score under 550. There are a few loan companies that offer the best options for people with bad credit.

Which loan company is best for bad credit?

Avant and LendingClub may be right for debtors looking for a loan with bad credit. Avant’s low-end APR is higher than LendingClub’s, but its installment loans are a good option for those with scores below 599. LendingClub is, in fact, a peer-to-peer lending company, which is a popular option for debtors with low FICO or credit scores.

6. Beware of Scams

There are plenty of online lenders promising loans with no credit checks to people who have bad credit. While this option might sound ideal, be cautious. These websites may be nothing more than advance-fee loan scams. According to the Federal Trade Commission, a lender not seeming interested in your credit history is a big red flag and could indicate a fraudulent website.

When you see these sites, consider contacting your state’s Department of Banking or Department of Financial Regulation to see if a lender is registered to do business within the state. The Better Business Bureau can also tell you if any customers have filed complaints against specific lenders.

One of the biggest consequences of having bad credit is being more susceptible to scams and other fraudulent behavior. Just remember, every legitimate lender will want some proof telling them that you will be able to pay back the loan.

Another red flag is if a lender asks for advance payment before you’re given the loan. Be careful not to provide any sensitive information, like Social Security numbers or bank account information, without first obtaining legal documentation of the loan.

The Bottom Line: Time to Apply

Do your research before applying for any kind of personal loan when you are faced with bad credit. While a personal loan can help you get your finances under control, it’s important to note that a loan may not be the answer to all your financial problems. By improving your score and setting long-term financial goals, you can achieve future financial health and freedom.

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