Bad Credit Loans: Compare Top Lenders of 2022 – NerdWallet

NerdWallet’s guide to choosing the best bad-credit personal loan

A bad credit score (629 or lower FICO) may not prevent you from getting a personal loan. In fact, you may receive loan offers from multiple lenders despite having a low credit score. The best bad-credit loan is usually the one with the lowest annual percentage rate, but there are other factors to consider when applying.

This guide will help you decide which personal loan is right for you and walk you through the steps to get one.

Why trust NerdWallet? NerdWallet has rated and reviewed personal loans from more than 35 financial institutions. We collect over 45 data points from each lender, interview company representatives and compare the lenders with each other. We do not receive compensation for our ratings. Read more about our personal loan star ratings methodology and our editorial guidelines.

What is a bad-credit personal loan?

A bad-credit personal loan is for borrowers with low credit scores or thin credit histories. These loans are offered by lenders that may accept borrowers with good or excellent credit scores but have underwriting that’s flexible enough to accept those with low credit scores, too.

Like all personal loans, bad-credit loans have fixed rates and are repaid in fixed monthly installments over a period of two to seven years. Loan amounts range from about $1,000 to $50,000. These loans typically aren’t backed by collateral — they’re unsecured.

Though you may qualify for a personal loan with bad credit, your rate is likely to be on the high end of a lender’s range, and your approved loan amount may be smaller than what you request.

What is a bad credit score?

A bad credit score is from 300 to 629 on the FICO scale, but individual lenders may define bad credit differently. A bad credit score can prevent you from getting the loan you want, and it often means you pay a higher interest rate on credit products than someone with fair or good credit.

What makes up a bad credit score?

The credit scoring company FICO groups your credit information into five categories, and each category has a different impact on your score. Here are the five FICO categories and how much each contributes to your credit score.

  • Payment history: 35%.

  • Amounts owed: 30%.

  • Length of credit history: 15%.

  • Credit mix: 10%.

  • New credit: 10%.

The most important category is your payment history, which tells creditors how often you’ve made on-time payments to other creditors. Missed credit card or loan payments can have a negative impact on your credit score and may cause lenders to offer a higher APR or decline your loan application altogether.

How to choose the best bad-credit loan company

Qualification requirements and cost are the most important features to consider when choosing a bad-credit personal loan. Here are some tips to compare bad-credit loans.

Check the lender’s borrowing requirements. Bad-credit lenders consider many factors on a loan application, including:

  • Credit score: If a lender has a minimum credit score requirement, you’ll need at least that score, but ideally a higher one, to qualify.

  • Debt-to-income ratio: This is the percentage of your monthly income that goes to debt repayment. Lenders typically like to see DTI below 40%.

  • Cash flow: Many lenders want to see that you have at least enough money to afford the new loan payments after all your other bills are paid.

  • Co-applicant and collateral: If the lender offers a co-signed or secured loan, the person or item you add to the application becomes a factor in deciding whether you qualify.

Review the annual percentage rate. A loan’s APR consists of the interest rate plus any fees a lender charges. Many bad-credit online lenders charge an origination fee — a percentage of the loan the lender takes out before giving it to you — and it should be included in the APR. The highest APR an affordable loan should have is 36%, according to most consumer advocates.

Calculate the monthly payments. Review your budget to determine what an affordable monthly payment would be. Then, use a personal loan calculator to see what rate and repayment term you’d need to get that monthly payment.

Compare other loan features. If you have two or more competitive offers, compare loan features like funding time, whether the lender provides credit-building assistance and if you’re allowed to change the payment date.

Compare bad-credit lenders

Lender

Best for

Minimum credit score

Full APR range

Minimum loan amount

Maximum loan amount

Upgrade

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into trương mục factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.

Overall bad-credit loans.

560.

6.95% – 35.97%.

$1,000.

$50,000.

Upstart

4.5

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into trương mục factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.

Borrowers with limited credit history.

None.

5.42% – 35.99%.

$1,000.

$50,000.

LendingClub

5.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into trương mục factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.

Credit card consolidation.

600.

6.34% – 35.89%.

$1,000.

$40,000.

OneMain

4.0

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into trương mục factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.

Secured and joint loans.

None.

18.00% – 35.99%.

$1,500.

$20,000.

Universal Credit

4.5

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into trương mục factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.

Credit-building tools.

560.

11.69% – 35.93%.

$1,000.

$50,000.

SeedFi

4.5

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into trương mục factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.

Help building savings.

520.

7.42% – 29.99%.

$1,200.

$7,000.

Oportun

4.5

NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into trương mục factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.

Small loans.

None.

27.74% – 35.95%.

$300.

$10,000.

Pre-qualify to compare offers

Many lenders let you pre-qualify for a personal loan online to check your potential loan amount, rate and repayment term. The process doesn’t require a hard credit check, so pre-qualifying won’t hurt your credit score.

You can pre-qualify with multiple lenders, including bad-credit lenders, on NerdWallet. It takes a few minutes and requires you to enter some personal information and answer questions about the loan you want.

Where can I get a personal loan with bad credit?

Online: Some online lenders offer personal loans specifically for bad-credit borrowers. These lenders often consider information beyond your credit and income to qualify you, though those are still major factors in a loan decision.

At a credit union: Credit unions rely more on traditional information like credit and income but may also consider your standing as a member. A member who has a good relationship with the credit union may qualify for a personal loan despite a low credit score.

At a bank: Banks also base loan decisions primarily on your credit score, history and income. Major banks are less flexible on qualification requirements, but having a good relationship with a local bank may help you qualify.

Even if your bank or credit union doesn’t have pre-qualification, you can bring in a pre-qualified offer and ask if it will beat that offer.

6 types of bad-credit loans

The most common type of personal loan is unsecured with fixed rates and payments. Other loans are available to bad-credit borrowers, such as joint and “buy now, pay later” loans. Compare loan types to find the right one for your situation.

Unsecured personal loans

An unsecured loan doesn’t require collateral. Instead, a lender determines whether you qualify based on factors like your credit score, income and cash flow.

It may be difficult for bad-credit borrowers to qualify for an unsecured loan because many banks, credit unions and online lenders weigh credit scores heavily when approving this type of loan.

Secured personal loans

Credit standards are typically lower for secured personal loans, which require collateral, so it may be easier to qualify if you have bad credit.

Adding collateral to an application lowers the lender’s risk because it has something valuable to take if you don’t repay the loan. Banks and credit unions usually accept a savings or investment trương mục as collateral, while online lenders often accept a vehicle.

Though it may be easier to qualify or get a lower rate on a secured loan, weigh the importance of getting the loan against the risk of losing your collateral.

Co-signed personal loans

A co-signer with better credit and higher income may improve your chances of qualifying for a loan or get you a lower rate. Having a co-signer tells the lender that if you don’t make the loan payments, someone else likely will.

A co-signer doesn’t have access to the loan funds or information about your payments. If you fail to make a payment, both of your credit scores will be affected.

Joint personal loans

A joint personal loan is one that you borrow with another person. It works similarly to a co-signed loan: The lender usually considers both borrowers’ credit and income on an application.

Once approved, both borrowers are equally responsible for repayment, and both borrowers have access to the loan funds and payment information.

Buy now, pay later

Buy now, pay later companies like Affirm and Afterpay let consumers split a purchase into smaller installments.

These companies don’t do a hard credit pull, so consumers with bad credit can often qualify. BNPL can help you cover an urgent purchase, but it’s best to wait until you’ve paid off one purchase before using it on another.

Cash advance apps

A cash advance app lets you borrow a few hundred dollars from your next paycheck before you receive it. These apps typically don’t consider your credit score when you request an advance. Instead, they review deposits and expenses in your bank trương mục to determine whether you qualify for an advance.

They often withdraw repayment on your following payday. These apps may charge fees for things like subscriptions or fast funding, and some ask you to tip them for the service.

Next steps: Apply for a bad-credit loan

Here are the steps to get a bad-credit personal loan:

  • Check your credit. Review your credit reports from the three major credit bureaus to ensure the information is accurate and up to date. Fixing errors on your report before applying may improve your chances of qualifying. Many financial companies, including NerdWallet, provide free access to credit scores.

  • Pre-qualify to compare offers. No two lenders have the same borrowing requirements, so it pays to pre-qualify with multiple lenders and compare rates, terms, monthly payments and loan features.

  • Consider adding a co-signer or collateral. If you don’t get a good offer by pre-qualifying, consider strengthening the application with collateral or a co-signer. Some lenders won’t offer these options unless you fail to pre-qualify for an unsecured loan.

  • Submit an application. Once you’ve found the right lender, gather documents, including proof of income and employment, a government-issued ID and bank statements. Most lenders have online personal loan applications, but your local bank or credit union may require an in-person application. The lender will do a hard credit check when you submit an application, causing your score to temporarily drop. Expect a decision within a few days.

  • Add the new loan payment to your budget. On-time loan payments can build your credit. Add loan payments to your monthly budget and set up autopay to avoid missing any.

NerdWallet’s personal loan rating methodology

NerdWallet writers and editors conduct a full fact check of our personal loan ratings and reviews annually, but also make updates throughout the year as necessary.

Our star ratings award points to lenders that offer consumer-friendly features, including soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus, and financial education. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.

This methodology applies only to lenders that cap interest rates at 36%, the maximum rate most financial experts and consumer advocates agree is the acceptable limit for a loan to be affordable.