Best Bad Credit Loans: Top 6 Personal Loan Lenders for Poor Credit

If you have bad credit, finding a personal loan with reasonable interest rates and flexible payment terms can feel almost impossible. But don’t fret! In this guide, we’ve going to review the top personal loan companies for bad credit borrowers.

We analyzed over 20 different personal loan companies that offer bad credit loans. We reviewed each bad credit lender on a variety of factors including credit score requirements, loan amounts, interest rates, funding speed, company reputation, and fees.

Whether you’re looking to consolidate debt, fund a family vacation, or have an emergency repair, here are the best loans for bad credit borrowers.

The Best Loans for Bad Credit 2022

• OneMain Financial : Best direct lender
• Upstart : Best for borrowers with little credit history
• LendYou : Best for small loans under $2,500
• Upgrade : Best loans for fair credit
• BadCreditLoans : Best online loan marketplace
• Prosper : Best bad credit loans for debt consolidation

#1. OneMain Financial: Best Personal Loans for Bad Credit Overall

For over 100 years, OneMain Financial has been a storied financial institution and reputable online lender catering to bad credit borrowers. The company (a direct lender) has served over 10.3 million customers since 2010 with an 88% average satisfaction rating. Borrowers can apply for a secured or unsecured loan for a variety of uses, including:

• Home improvements

• Vacations

• Medical bills

• Credit card consolidation

• Auto loans

• Emergency expenses

• Wedding expenses

• Moving or relocation expenses

• Funeral and burial expenses

Secured loans require collateral, such as your car or home, but make it easier for people with poor credit to receive approval. Unsecured loans do not require collateral, but people with low credit scores may not qualify. In addition, this top-rated loan company offers installment loans, which are an excellent way for people to rebuild their credit scores, as long as they can make payments on time.

Loan Amounts and APRs

OneMain Financial offers a pretty good range of loan options for people who need to borrow money. Applicants can ask for a loan amount between $1,500 and $20,000. Unfortunately, OneMain Financial’s loans for bad credit come with unusually high interest rates, which range between 18% and 35.99%.

Repayment Terms

OneMain Financial offers several repayment terms: 24, 36, 48, or 60 months. For a more accurate idea of your estimated monthly payments and APR, use the free personal loan calculator on the OneMain Financial website. Here’s a quick example: If you borrowed $6,000 for a 60-month term at an interest rate of 24.99%, your monthly payments would be $176.07.

In addition, OneMain Financial charges customers an origination fee, which will be either a percentage of your loan amount or a flat rate, depending on where you live. The flat-rate origination fee ranges between $25 and $500, and the percentage-based origination fee will be between 1% to 10% of your total loan amount.

Credit Score and Eligibility Requirements

Like many other direct lenders offering personal loans, OneMain Financial has eligibility requirements for borrowers. While the company website doesn’t disclose a minimum credit score for applicants, the average score for accepted borrowers is between 600 and 650.

Additionally, there are no minimum annual income requirements, but the average hovers around $45,000. Before you can apply for a personal loan through OneMain Financial, you’ll need to provide:

• Proof of residence

• Proof of your income

• Your social security card

• A valid, government-issued I.D.

Key Features

OneMain Financial is one of the best lenders for bad credit personal loans and has served millions of customers in the last century. While its services provide an ideal solution for many people with bad credit, keep in mind that its APRs are high and you’ll have to pay an origination fee to use its services.

On the plus side, borrowers get to choose their monthly payment date, which is a convenient feature that makes it easier to stay on track with scheduled payments. Plus, OneMain Financial offers two credit cards for qualified applicants: BrightWay and BrightWay+. BrightWay is ideal for customers rebuilding their credit rating and financial history, and BrightWay+ is best for those with a longer, more established credit report.

Click Here to Check Rates or to Apply Online With OneMain Financial

#2. Upstart: Best Lender for People With Little Credit History

For borrowers with little to no credit rating but a promising future, Upstart is an excellent choice for an unsecured personal loan. The company has helped over two million people get the finances they need to buy a new car, pay for unexpected expenses, fund their business, or consolidate debt.

Even if your credit history is so new that it’s not yet enough to produce a FICO credit score, you still have a good chance of receiving approval for a personal loan from Upstart’s partner banks.

Another bonus? Upstart has an ultra-fast application process. Apply online to check your rate in just minutes. After verifying their information, most borrowers receive instant approval. Then, 99% of those approved borrowers get their loan proceeds just one business day after signing.

Loan Amounts and APRs

Upstart and its partner banks offer minimum loan amounts of $1,000, with a maximum of $50,000. Your interest rate will fall between 5.42% and 35.99%. Actually, 5.42% is relatively low considering Upstart works primarily with people who have poor credit.

Repayment Terms

Upstart only offers two choices for repayment terms: three or five years. However, the top-rated loan company stands out for its flexible payment options: You get to choose your payment date or change it an unlimited number of times using Upstart’s online portal. You also have multiple payment options. You can set up autopay or pay manually online, via check, or over the phone.

Credit Score and Eligibility Requirements

Upstart doesn’t have a minimum credit score requirement, making it ideal for young borrowers with limited credit histories. However, you must have a minimum gross income of $12,000. Applicants must be at least 18 and have a:

• Full-time job or job offer starting within six months, or a part-time job with an additional income source

• Primary residence in the U.S.

• Valid email tài khoản and contact information

• Bank tài khoản with a U.S. routing number

Key Features

Upstart is a lending marketplace featuring a network of personal loan providers that cater to borrowers with no credit score or a limited financial history. One of Upstart’s best features is how fast you’ll get your loan funds after approval. You can apply online to check the specific bad credit loan rates you qualify for in about five minutes. After you receive approval and sign the agreement, your loan funds should be in your tài khoản within one business day.

Upstart offers direct payments to creditors, which is a convenient feature for people who want to consolidate debt. Plus, the personal loan lenders in Upstart’s network don’t just look at your credit score when determining your approval status. Instead, the lenders use alternative data, such as your college major, work history, and ability to repay. Even better, there are no prepayment penalties!

Click Here to Check Rates or to Apply Online With Upstart

#3. LendYou: Best for Small Personal Loans

LendYou is another free lending marketplace that connects borrowers who have poor credit to online lenders specializing in short-term personal loans and payday loans. Borrowers with all different credit scores can apply, even those with poor or very bad credit. Here are the types of loans available from LendYou:

• Payday loans

• Personal loans

• Installment loans

LendYou doesn’t charge a fee to connect consumers with lenders, and you are under no obligation to accept any offers you might receive from its lending partners.

Loan Amounts and APRs

LendYou works with lenders who only offer short-term loans in small amounts, from $100 up to $2,500. Your loan offer comes in real-time, so if you accept the lender’s terms, you should have your loan proceeds as soon as the next business day. Minimum interest rates from LendYou’s network vary based on the specific type of loan:

• Payday loans:17.5% minimum APR

• Personal loans: 4.99% minimum APR

• Installment loans: 6.63% minimum APR

Your specific interest rate and maximum APR will also depend on your chosen lender. Additionally, some states have laws that limit the amount of APR a lender can charge on your loan. However, payday or cash advance loans often have astronomically high rates, sometimes up to 1,386%! Installment loan APRs range from 6.63% to 485%, and personal loan APRs range from 4.99% to 450%.

While LendYou only facilitates loans from $100 to $2,500, it may be able to connect you with other loan providers that offer higher loan amounts, including:

• Payday loans from $100 to $1,000

• Installment loans up to $5,000

• Personal loans up to $35,000

Repayment Terms

Although LendYou specializes in short-term loans for bad credit, borrowers have a decent range of terms from which to choose. The online lenders in the LendYou network offer loan terms ranging from a mere 30 days up to 60 months.

Credit Score and Eligibility Requirements

The great news about using a service like LendYou is that your credit score doesn’t have much impact on whether you’ll get approval because the loans are short-term. Plus, LendYou’s minimum credit score requirement is low: only 300. Instead, it’s your ability to repay that matters the most. In terms of eligibility criteria, applicants must:

• Be at least 18 years old

• Have a valid personal bank tài khoản (checking or savings) with direct deposit

• Must have a minimum income of $1,000 per month

• Not be a resident of

  • West Virginia

  • Arkansas

  • Vermont

  • New York

Key Features

One of the best features of LendYou is the swiftness of the application and loan approval process and its generous borrower qualifications. It’s an excellent, non-traditional option for people with very bad credit because there’s no minimum credit score you have to meet.

Instead, it’s all about your current income and ability to repay your loan that determines whether you’ll receive approval. Plus, LendYou goes above and beyond to ensure that your private information stays just that – private.

Click Here to Check Rates or to Apply Online with LendYou

#4. Upgrade: Best Online Lender for Big Loans

Upgrade is another company offering some of the best personal loans for bad credit. You can borrow money from Upgrade to use for a variety of financial issues, including:

• Credit card refinancing

• Debt consolidation loans

• Major purchases

• Home improvement loans

Conversely, Upgrade’s loan funds are not eligible for certain uses, including:

• Gambling

• College expenses

• Investing

Upgrade has an excellent reputation as a bad credit loan company. Since its inception, it has loaned over $15 billion to more than one million customers and maintains a near-perfect rating on Trustpilot.

If you’re still shopping around for the best rates, you can opt for prequalification with only a soft credit check (with no impact on your credit score) even if you don’t receive pre-approval. Borrowers can apply for both unsecured and secured personal loans from Upgrade. However, a secured loan offers a better chance of getting a lower interest rate.

Loan Amounts and APRs

Upgrade offers bad credit borrowers a lot of flexibility regarding loan amounts, which range from $1,000 up to $50,000. However, you can expect to see high APRs, from 6.55% up to 35.97%.

All borrowers are subject to an origination fee between 2.9% and 8%, although your chosen lender will deduct the fee right from your loan funds. Borrowers who qualify for the lowest interest rates must also enroll in autopay.

Repayment Terms

Upgrade offers some of the best options for long-term online personal loans, with repayment terms ranging between 24 and 84 months.

Here’s a quick example: Let’s say you borrowed $10,000 over 36 months at an interest rate of 17.98% (including a one-time 5% origination fee and 14.32% yearly interest rate). Your loan funds would be $9,500 and monthly payments of $343.33. Over the lifetime of your loan, you would end up paying back a total of $12,359.97.

Credit Score and Eligibility Requirements

Borrowers must meet Upgrade’s minimum credit score requirement of 560 to receive approval. However, the average credit score for borrowers is around 670 to 700.

Fortunately, there’s no minimum income requirement, but you’ll need some serious cash flow to get a bad credit personal loan from Upgrade: its average income for borrowers is $78,000 annually. You’ll also need:

• A minimum of two accounts on your credit report

• A maximum debt-to-income ratio of 45% or less, including the new personal loan and your mortgage (if applicable)

Key Features

Upgrade is a wise choice for borrowers with bad credit because it offers flexible loan amounts and terms. You can also take advantage of direct payment services to creditors if you have a debt consolidation loan, and borrowers receive a 0.5% discount for setting up autopay. Upgrade also offers lines of credit ranging from $500 to $25,000.

Click Here to Check Rates or to Apply Online with Upgrade

#5. BadCreditLoans: Best for Unsecured Personal Loans

First up on our list is BadCreditLoans, an online marketplace with an extensive network of lending partners. Since 1998, BadCreditLoans has been helping people with less-than-perfect credit connect with reputable loan providers to gain the financial help they need.

You can apply online in minutes to compare offers from multiple lenders in real-time. The service is 100% free, with no obligations or cost whatsoever. BadCreditLoans offers several loan types, including:

• Personal loans

• Mortgages

• Auto loans

• Business loans

• Student loans

• Debt consolidation loans

Loan Amounts and APRs

You can apply for a loan between $500 and $10,000 through the BadCreditLoans lending marketplace. Your interest rate, or annual percentage rate (APR), is another vital consideration when applying for a loan with bad credit.

BadCreditLoans isn’t a direct lender and holds no influence over your available rate quotes. Instead, your rate depends on your credit score, financial history, and the particular lender offering you a loan. However, interest rates through the BCL marketplace range between 5.99% and 35.99%.

Repayment Terms

Again, your loan terms will depend on your chosen lending provider. Your desired loan amount and credit score will also affect the term lengths a lender offers you. However, BadCreditLoans and its lending partners specialize in short-term loans, ranging from three months to 36 months (three years).

Credit Score and Eligibility Requirements

Every online lender has different eligibility requirements for potential borrowers. BadCreditLoans offers a free service for people with low credit scores, but the company doesn’t disclose the minimum credit score that borrowers need to qualify.

Despite the lack of information regarding credit score requirements, BadCreditLoans does disclose its eligibility criteria. Here’s what you’ll need to apply for a loan with bad credit through the company’s lending marketplace:

• Contact information

• A personal bank tài khoản

• Proof that you’re over 18 years old

• Financial information and proof of income (W-2s, paystubs, etc.)

• Social Security number

• Proof of your citizenship

Key Features

We love the fact that BadCreditLoans doesn’t charge customers to connect them with its lending partners. While there’s no guarantee that you’ll receive a loan offer after applying, that doesn’t mean all hope is lost. Instead, BadCreditLoans will show you advertisements for other lenders or alternative credit-related services, such as credit repair or debt consolidation.

You can also find plenty of resources and educational information on the official website about taking out a personal loan with bad credit. For example, you can find tips for applying, how to spend your loan proceeds responsibly, and advice on budgeting your future income to pay off your loan as quickly as possible.

Click Here to Check Rates or to Apply Online With BadCreditLoans

#6. Prosper: Best Peer-to-Peer Lending Site for People With Low Credit

Prosper is a peer-to-peer online lending marketplace – the first in the United States – that has facilitated more than $21 billion in loans to over one million people since its inception in 2005.

Once you apply for a personal loan, Prosper assigns you a numerical rating using factors like your debt-to-income ratio and credit score. Then, private investors decide whether they want to fund your loan.

However, there’s a catch: If investors haven’t funded at least 70% of your loan amount within 14 days, your application will expire. Luckily, Prosper reports that most borrowers receive funding within three days.

Here are the types of online loans for bad credit available from Prosper:

• Personal loans

• Home equity lines of credit

• Investments and IRAs

• Short-term and bridge loans

• Automobile/vehicle loans

• Debt consolidation loans

• Home improvement

• Healthcare financing

• Emergency expenses

• Small business loans

Loan Amounts and APRs

The minimum loan amount on Prosper is $2,000, and the maximum is $40,000. You can expect your interest rate to range from 7.95% up to 35.99%. Due to its unique peer-to-peer lending method, borrowers may find that it takes a few days longer to receive their money than it would from direct lenders.

Repayment Terms

Unfortunately, Prosper only offers two options for repayment terms: three or five years. However, the company is a well-established and reputable bad credit lender, even if they don’t offer direct-lender connections to institutions like banks or credit unions. You’ll also have to pay an origination fee ranging from 2.41% to 5% and a late fee if you miss a monthly payment.

Credit Score and Eligibility Requirements

Although Prosper is best for people with fair credit, the minimum credit score requirement for borrowers is 600, with an average of 722. Also, there’s no minimum income qualification, but the average borrower makes $106,000 a year. Before you apply for an unsecured loan on Prosper, you must also have:

• No bankruptcies within the past year

• A maximum debt-to-income ratio of 50% (excluding your mortgage)

• Proof of age (18+)

• A Social Security number and U.S. bank tài khoản

• At least three open accounts on your credit report

• Minimum credit history of two years

Key Features

Prosper is a pioneer in the field of online lenders, and there’s no denying that the company’s peer-to-peer lending system is an innovative ode to capitalism. However, if you have bad credit, you may have trouble finding investors to fund your loan.

Once you apply, you’ll see a range of different loans for which you prequalify. Prosper reports your monthly payments to all three major credit bureaus, making it an excellent choice for people who want to rebuild their credit scores.

Click Here to Learn More About Prosper Loans

What Is a Bad Credit Personal Loan?

When you start the application process for a personal loan, lenders use several factors to determine your “creditworthiness,” or how risky it is to let you borrow money. Most personal loan providers use two primary factors to evaluate your application: your credit history and credit score from all the big credit bureaus.

Standard options for borrowers include using a direct lender, a peer-to-peer system, or an online lending platform specializing in bad credit loans. Then, most people shop around to find the best loan amount and terms for their needs, such as debt consolidation, home equity, or even a credit union loan.

Bad Credit Loans Offer an Alternative to Traditional Lenders

People with poor credit often have trouble finding loan approval through traditional avenues. When they manage to find an offer, most have sky-high APRs as compensation for the increased risk.

However, many lenders offer personal loans for bad credit to help people with little to no credit history or bad credit scores. Most people have poor credit scores because they have no credit history, delinquent accounts, maxed out credit cards, or late payments on their credit report.

Bad credit borrowers are more likely to receive approval from a company offering specialized loans for people with bad, poor, or fair credit. Most of these specialized lenders offer both secured personal loans (with collateral) and unsecured personal loans (without collateral).

Secured loans require you to use collateral against your loan as security, such as your car or home, often resulting in a lower interest rate for the borrower. Conversely, unsecured personal loans have higher interest rates.

Ultimately, people who have experienced loan rejection through traditional means such as banks or credit unions may have better luck with a lender that specializes in loans for bad credit. Also, you can expect most lenders to charge borrowers penalties or fees, including origination fees, late payment fees, and NSF fees.

How We Ranked the Best Online Loans for Bad Credit

Now that you’ve finished reading our reviews on the best bad credit loans, you’re probably curious about how we ranked the multiple lenders on our list. Keep reading as we break down the individual ranking factors used to determine the best bad credit loan companies and why they stand out in today’s competitive marketplace.

Eligibility Requirements

Every lender offering bad credit personal loans has varying eligibility requirements for borrowers. The most common factors include:

• Credit history

• Credit score

• Existing debt

• Debt-to-income ratio

• Open accounts

• Financial history (delinquencies, bankruptcies, etc.)

• Collateral (secured loans only)

• Employment

In addition, most lenders offering loans for bad credit require borrowers to:

• Be at least 18 years old

• Have a U.S. residence and bank tài khoản

• Provide valid contact information

• Show proof of employment (i.e., pay stubs, W-2s)

Loan Amounts

Another factor we used to rank the best bad credit loans was each lender’s loan amount limits. Most of the companies we reviewed had minimum loan amounts ranging from $500 to $2,000 and maximum amounts between $5,000 and $50,000.

LendYou works with short-term and payday lenders, which means its loan amount options are relatively limited: between $100 and $2,500. Plus, payday loans have insanely high interest rates, sometimes in the hundreds or thousands of percentages.

However, the other lenders in our review had much higher limits for borrowers. For example, Upgrade offers loan amounts ranging from $1,000 to $50,000 and lines of credit that start at $500 and max out at $25,000.

Term Lengths

When comparing personal loans for bad credit, several factors can impact the term lengths available to you, including your desired loan amount and credit score. The online lenders we reviewed had term lengths ranging all over the map.

For example, LendYou can connect borrowers to a lender offering a 30-day payday loan, as its lending network specializes in short-term, unsecured personal loans (but with sky-high interest rates). At the other end of the scale, Upgrade offers loan terms of up to seven years.

Remember, numerous factors affect the loan terms a lender may offer you. For example, unsecured loans and secured loans have different term lengths, and your credit score and chosen lender will also affect which offers and rates you receive.

Costs and Fees

You should always compare personal loan rates and fees before choosing a lender. If there’s one thing we hate, it’s paying exorbitant fees, and bad credit loans are no exception. Unfortunately, charging borrowers fees is perfectly in line with industry standards and normal practice for almost every lender.

Some companies that connect borrowers with multiple lenders through a partner network don’t charge any fees; instead, the company receives a commission for referring potential customers to direct lenders. However, you’ll find that most lenders do charge fees.

For example, the most common is the origination fee, which usually is either a flat rate or a percentage of the loan. In fact, the majority of lenders charge an origination fee, which comes directly from your loan amount.

In addition, many lenders charge late payment penalties and subject borrowers to NSF fees for returned checks. You may also come across annual fees, loan application fees, or prepayment penalties, where lenders charge you extra money to pay off your loan early.

Application Process

Applying for a bad credit loan when you’re in desperate need of emergency finances is already nerve-wracking. However, the ultimate annoyance is companies with a long, complex, or confusing application process.

When we evaluated the six companies in our review of the best loans for bad credit, the swiftness and ease of the application process were crucial factors. After all, who wants to spend an hour answering intricately detailed questions on the phone or computer? Even worse is the hassle of searching for those ever-elusive financial documents.

Fortunately, all six companies in our review have fast, simple applications you can complete online in minutes. First, enter your personal information to compare interest rates in real-time and see if you prequalify, then find the loan that works best for you. Plus, most of the lenders in our review offer approvals within one business day.

Tips for Comparing Bad Credit Lenders

We’ll give you some essential advice: Don’t rush into any loan agreement, especially if you’re not amenable to the terms. Instead, research and compare lenders thoroughly, whether you plan to apply over the phone, at a credit union, or via an online lending marketplace. Here are our top three tips to help you find and compare the best personal loans for bad credit:

Interest Rates

Unfortunately, people with a bad credit score or poor financial history often settle for higher-than-normal interest rates just to receive loan approval. Don’t make the same mistake by signing up for the first offer you receive!

Start your research by using sites that offer free rate comparisons that won’t negatively affect your credit score. Then, compare lenders until you find the best personal loan with the lowest possible rate. In doing so, you’ll pay less interest over the lifetime of your loan.

Prequalify First

Many providers offer potential borrowers a valuable tool: prequalification for personal loans. It’s an invaluable tool because it only uses a soft credit check, which won’t harm your credit score. It’s easy: just submit personal information like your desired loan amount and terms, monthly income, existing debt, etc., and receive your answer within minutes. It lets you safely explore available loan offers without a hard credit check and the resulting score drop.

Check for Fees

You wouldn’t sign anything without reading it first, right? The same principle applies to loans for people with bad credit. Before entering a loan agreement, check if your chosen lender charges fees, and if so, what kind.

Origination fees are basically a given in today’s lending market. As we mentioned earlier, most are either a flat dollar amount or a percentage of your total loan amount. Lenders may call origination fees something else, like “administration fees” or “processing fees,” but it’s the same thing.

Finally, don’t forget to check if your lender charges late fees for missed payments, NSF fees for returned checks, or prepayment penalties.

What’s Needed to Qualify for a Personal Loan

Every bad credit lender, from peer-to-peer companies like Prosper to direct lending providers like OneMain Financial, has unique criteria for evaluating potential borrowers. So, before you apply, check your credit score and credit report, and gather necessary documents ahead of time, like W-2s, paystubs, tax returns, valid identification, etc.

Remember, every lender is different, but most use the same general factors when determining eligibility, including your:

• Credit score

• Total credit usage

• Credit report

• Annual income

• Payment history

• Existing debt

• Field of employment

• Desired loan amount

• Monthly cash flow

However, it’s your credit score and payment history (which makes up a massive 35% of your FICO score) that have the most influence on whether you’ll receive loan approval. Finally, before you sign, ask yourself:

1. Do I really need a personal loan, or am I trying to compensate for overspending or poor budgeting?

2. Can I afford to take on another monthly payment for a personal loan on my current income?

A personal loan may not be the best option if you’re overspending or can’t afford another monthly bill. You can also increase your chances of approval by improving your credit score before applying.

Types of Loans for People with Bad Credit

As we mentioned earlier in our reviews of the best bad credit loan companies, there are numerous different loan types for borrowers with bad, poor, or fair credit. Stick with us as we discuss the four most common types of loans for people with bad credit.

Secured Loans

A secured loan is a personal loan that requires a form of collateral from the borrower, such as a house or car. If the borrower fails to meet the loan’s original terms, the lender can seize the collateral to recoup any financial losses.

Although the borrower accepts the chance of losing their collateral if they don’t repay, secured personal loans offer lower interest rates and better terms than unsecured loans. Most people who apply for secured loans use the funds to pay for a home equity loan, car, or mortgage.

Unsecured Loans

An unsecured personal loan doesn’t require any collateral from the borrower. While that may seem like a bonus, taking out an unsecured loan often results in much higher interest rates and less generous terms. You also may not receive an offer for the loan amount you originally wanted. Additionally, many lenders have a minimum credit score requirement for unsecured loans, so people with very poor credit may not even qualify.

Payday Loans

We won’t mince words: A payday loan (also known as a cash advance loan) is usually a bad idea and often counterintuitive to achieving financial health and stability. However, there are certain circumstances where borrowing from a payday lender can provide a feasible solution to your financial problems.

For example, cash advance loans are a common choice for people who need a small unsecured personal loan but don’t want to undergo a credit check or disclose their credit score. But there’s a huge catch: APRs that rise into triple and even quadruple digits, although the maximum rate depends on your state of residence. Plus, most payday loans have caveats that you must repay the loan amount in full upon receiving your next paycheck.

HELOCs for Poor Credit

HELOC, or home equity line of credit, is another type of bad credit loan with a variable interest rate similar to a standard home equity loan. However, home equity loans give you one large lump sum of cash up front, whereas HELOCs allow you to borrow as much money as you need (within your lender-approved credit limit) whenever you find yourself in dire financial straits.

While HELOCs are suitable for borrowers who only require a small loan amount, those who fail to repay could lose their homes. Plus, the HELOC application process can be long and complex, often requiring a professional home appraisal.

How to Spot Bad Credit Loan Scams

Unfortunately, people with bad credit are often the primary target of unscrupulous lenders, who have no qualms about scamming desperate people in genuine need of financial help. These unethical lenders have endless ways to scam unsuspecting people, including identity theft, fraud, misrepresentation, and flat-out larceny.

Thankfully, it’s relatively fast and easy to educate yourself on the best ways to spot a bad credit loan scam, and we’ve got all the expert tips right here to help you remain vigilant and avoid getting scammed. Read on for a list of red flags to watch out for that may indicate you’re dealing with a scammer:

• Lenders with no digital presence or website

• Door-to-door or phone solicitations

• Guaranteed approval loan offers with no credit check required

• Lenders with no official license or state registration

• Company names that are similar to other well-established lenders

• Unsecure company website (URLs with no HTTPS)

• Lenders with no physical office location

• Requests for money or wire transfers

The old saying rings true: “If it sounds too good to be true, it probably is.” That piece of advice holds especially true for people with a very poor credit score, as they’re more vulnerable to scams. A fast and easy way to prevent falling prey to a loan scam is by researching the lender before you make any commitments. Also, don’t forget to read the fine print and fee disclosures to avoid any nasty surprises down the road.

Frequently Asked Questions about Bad Credit Loans

Can You Use Personal Loans for Debt Consolidation?

Great news: if you’re struggling with high-interest credit card debt, you can easily apply for a personal loan to help you consolidate your debt by logging online. In fact, many online lenders specialize in debt consolidation loans, giving consumers with both bad credit and good credit the chance to refinance their credit card debt into a lower rate or more manageable payment plan.

Consolidating your credit card debt into one simple payment offers numerous benefits, including:

• The opportunity to rebuild your credit

• Lower interest rates

• Faster payoff

• Simpler financial budgeting

• Decreasing your credit usage ratio

How Much Money Can I Borrow With Bad Credit?

Few banks, credit unions, or online lenders let people with a bad credit score take out large personal loans, particularly without collateral. In fact, most lenders only allow people with poor credit to borrow the minimum loan amount or require them to take out a secured loan. Therefore, if you need to borrow a large sum of money, consider working to improve your credit for a few months before applying.

Can I Get a Loan with No Credit Check?

Even small or short-term loans require a soft credit inquiry before approval. For large or unsecured loans, expect to undergo a hard credit check from your lender, which may harm your credit score.

Fortunately, a soft pull doesn’t affect your credit score at all, making it an ideal option for people who are just comparing lenders and rates to find the best personal loan for their financial needs. Remember, if a lender tells you you’re guaranteed approval for a loan without even a soft check, it’s likely a scam.

What Are Bad Credit Loans Mostly Used for?

Bad credit personal loans are suitable for various financial emergencies. The most common uses for bad credit loans include:

• Debt consolidation

• Automotive repairs or vehicle purchases

• Auto refinancing

• Medical bills

• Unexpected financial obligations

• Home improvements

• Mortgage refinancing

• Moving expenses

• Vacations

While the terms and regulations of each lender vary, most lenders prohibit borrowers from spending personal loan funds on:

• Gambling

• Illegal activities

• Investments

• College expenses

• Making a home down payment

• Business expenses

What Is Considered a Bad Credit Score?

The major credit bureaus – FICO, VantageScore, Experian, TransUnion, and Equifax – all use different formulas to calculate a person’s credit score. Generally, most scores range between 300 (abysmal) and 850 (outstanding).

Each bureau uses several factors to calculate your score, such as income, payment history, total debt, credit utilization, open accounts, etc. The two most common credit-reporting agencies are FICO and VantageScore, which have different score breakdowns:

FICO

• Bad: <579

• Fair: 580-669

• Good: 670-739

• Very Good: 740-799

• Excellent: >800

VantageScore

• Very bad: 300-499

• Bad: 500-600

• Fair: 601-660

• Good: 661-780

• Excellent: 781-850

What Interest Rate Can I Expect on a Bad Credit Loan?

You can try prequalifying to get a rate comparison or using a free loan calculator on a lender’s website for a more accurate idea of how high your interest rate will be. However, it’s generally true that people with a bad credit score or poor financial history have higher interest rates on personal loans than people with good credit.

Only the most qualified and least risky applicants can access the lowest rates and best loan offers. Usually, the high end of the APR scale for personal loans is around 20% to 36%. However, adding a co-signer or putting up collateral can often result in a lower APR. Remember, your best bet is to compare rates using a prequalification tool that won’t negatively affect your credit score.

Can I Get a Loan With No Credit History?

While most lenders don’t offer loans to people with no credit or limited history, some do. For example, Upstart is one such loan company that accepts people with little credit.

Instead of just evaluating the applicant’s credit score, Upstart places the most emphasis on their ability to repay. In addition, Upstart uses more than just a person’s financial information to determine loan eligibility, including their field of employment, educational history, and college major, and annual income. So if you’re a young adult (over 18) or struggling to find a lender due to a lack of credit, Upstart is an excellent place to begin.

Final Thoughts on the Best Bad Credit Loans

Now that we’ve discussed every aspect of how to apply for a personal loan with bad credit, it’s time to wrap it up. In this post, we reviewed the best bad credit loans for 2022 from the most reputable and top-rated lenders, including BadCreditLoans, Upstart, Prosper, LendYou, OneMain Financial, and Upgrade.

All six lenders in our review provide a fast and convenient solution for people who need a loan, even if they have bad or poor credit. Be sure to take the time to compare rates and research lenders—and never sign a loan agreement without reading the fine print. However, with some hard work, smart budgeting, and discipline, you can rebuild your credit and secure a brighter, more stable financial future.