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A personal loan may be more expensive when you have bad credit. Shopping around could help you get the best possible deal. (iStock)

Bad credit can make it harder to get a personal loan. And you’ll almost certainly pay more for it than someone with an excellent credit score would. 

Still, if you need cash urgently, a personal loan can be a good idea for someone with bad credit because it’s likely to cost less than other options you might consider, like a payday loan or title loan. And repaying your personal loan could actually help improve your credit, since payment history directly affects credit scores.

Here’s what you need to know about personal loans for bad credit, where to find them, and how they work.

Lenders to consider for best personal loans for bad credit

It’s probably safe to say that most lenders prefer borrowers with higher credit scores because they expect those borrowers to be more likely to repay their loans as agreed. To ensure they attract these borrowers, some personal loan lenders set their minimum credit score requirements fairly high. Or, they may have minimum loan amounts that far exceed what you need.

Whether you’re looking for a personal loan for debt consolidation, to cover an unexpected expense, or to make a big-ticket purchase, the following Credible partner lenders offer loans to people with credit scores that fall below what’s considered a “good” FICO score —  670 to739.

Avant

With a very low minimum score requirement, Avant may be a good choice for many borrowers with poor credit.

Minimum score: 550

Loan term: Two to five years

Loan amount: $2,000 to $35,000

Good for: People with significant credit issues

Best Egg

About half of people who borrow from Best Egg have money in their bank account by the next day.

Minimum score: 600

Loan term: Three to five years

Loan amount: $2,000 to $35,000

Good for: People who need funds quickly

You can compare personal loan rates and learn more about multiple lenders through Credible.

Discover 

Discover allows you to return the amount you borrow within 30 days and pay no interest — making it great if you aren’t sure you need a loan or will get a windfall soon.

Minimum score: 660

Loan term: Three, four, five, six, or seven years

Loan amount: $2,500 to $35,000

Good for: Borrowers who aren’t certain they need to borrow or can pay back quickly

FreedomPlus

FreedomPlus offers lower rates for people who use the majority of their loan to pay off their current debts.

Minimum score: Not disclosed

Loan term: Two to five years

Loan amount: Up to $35,000

Good for: People who are paying off debt

LendingClub

Depending on your financial circumstances, you might get multiple rate and term offers from LendingClub’s investors.

Minimum score: 600

Loan term: Three or five years

Loan amount: Up to $40,000

Good for: Borrowers who want flexibility in monthly payments

LendingPoint

Once you submit your application, LendingPoint will give you a decision in seconds on whether you’ll get a loan.

Minimum score: 580

Loan term: Two to five years

Loan amount: $2,000 to $36,500

Good for: Borrowers who need a quick decision

LightStream

With loans of up to $100,000, LightStream can be a great option if you need a larger loan and more time to pay it back.

Minimum score: 660

Loan term: Two to 12 years

Loan amount: $5,000 to $100,000

Good for: Borrowers who need more time to pay back their loan

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Marcus by Goldman Sachs

With a Marcus loan, you can earn the ability to defer a month’s payment after 12 on-time payments, which can really help if you’re in a pinch one month (note that you’ll still pay interest during this month). 

Minimum score: 660

Loan term: Three to six years

Loan amount: $3,500 to $40,000

Good for: Borrowers who would like to defer a payment once a year

OneMain Financial

With no set minimum credit score required, OneMain could be a good option if you’re looking to establish a credit history.

Minimum score: None

Loan term: Two, three, four, or five years

Loan amount: $1,500 to $20,000

Good for: Borrowers with poor or no credit

Payoff

Payoff focuses primarily on helping you pay down credit card debt, and offers experts to talk you through the process.

Minimum score: 640

Loan term: Two to five years

Loan amount: $5,000 to $40,000

Good for: People paying off credit card debt

PenFed

PenFed’s minimum personal loan of $600 is one of the lowest on the market.

Minimum score: 670

Loan term: One to five years

Loan amount: $600 to $35,000

Good for: Borrowers who need a small loan

Prosper

Prosper is a peer-to-peer lending platform where investors can choose individual loans to fund. The lender specializes in special cases like adoption loans, engagement ring financing, and green energy home improvement loans.

Minimum score: 640

Loan term: Three or five years

Loan amount: $2,000 to $40,000

Good for: People with a specific financial need

SoFi

If you lose your job, SoFi may offer you forbearance on your personal loan until you get back on your feet — and even help you get a new job.

Minimum score: Not disclosed

Loan term: Two to seven years

Loan amount: $5,000 to $100,000

Good for: Borrowers who need large loans

Upgrade

With a minimum of $1,000, people who need a relatively small loan may choose Upgrade.

Minimum score: 580

Loan term: Two to seven years

Loan amount: $1,000 to $50,000

Good for: Borrowers who need relatively small loans

Upstart

When making loan decisions, Upstart looks at your education and job history as well — not just your credit score.

Minimum score: 580

Loan term: Three or five years

Loan amount: $1,000 to $50,000

Good for: Borrowers with a non-traditional credit history

The following lender is not a Credible partner lender, but may be worth considering for a personal loan with bad credit.

Peerform

Peerform is a marketplace lending platform, and could be a good option if you meet debt-to-income ratio requirements, at least one open bank account and meet other requirements.

Minimum score: 600

Loan term: Three or five years

Loan amount: $4,000 to $25,000

Good for: People with a solid income

Methodology

Credible evaluates personal loan lenders based on minimum fixed rate, term length, fees, discounts, customer experience, time to fund, maximum loan amount and other factors, including — for this article —  minimum required credit scores.

What is a bad credit personal loan?

Personal loans are fixed-rate loans available from a wide variety of lenders that you can use for things like unexpected expenses, home repairs, or to consolidate credit card debt. A bad credit personal loan is simply a personal loan tailored to someone with a poor credit score. It might have higher rates than other loans on the market, but it can still be a valuable financial tool.

Personal loans are usually unsecured, meaning you don’t risk losing your home or car when you take out a personal loan. There are also secured personal loans that use collateral such as a savings account, stocks, or a vehicle to secure the loan. Because they’re secured, these loans may have lower annual percentage rates, or allow larger loan amounts. But if you aren’t able to repay the loan, you risk losing your collateral.

What’s a bad credit score?

Your credit score can range from 300 to 850, with higher scores being better. Good credit generally refers to a score of 700 or higher, with scores above 750 being excellent. A bad credit score is one of around 640 or below.

When determining your credit score, credit ratings agencies will look at:

  • How reliable you are in paying bills on time
  • Your total debt
  • How many financial accounts you have and what type
  • How long your accounts have been open
  • Applications for new loans
  • Any bankruptcies, foreclosures, or debt sent to collection

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Why is a credit score important?

The interest rate and loan terms you’re offered generally depend on your credit score — the better your score, the better the interest rate you’ll be able to get. Some lenders set a limit on the minimum credit score a person can have and be approved for a loan. That’s because lenders use credit scores to judge how likely it is that someone will pay back their loan.

But you’re not out of luck with a bad credit score. There are plenty of bad credit personal loans on the market geared toward people with poor credit scores.

To see personal loan lenders and their minimum credit score requirements, visit Credible.

How much will a personal loan for bad credit cost?

Lenders make money on personal loans through the interest rates and fees they charge. The best personal loans for people with good or excellent credit will have low interest rates and no fees. Personal loans for bad credit will typically have much higher interest rates and can have significant fees. 

Bad credit personal loan rates

Most personal loan lenders will quote a range of APRs for their loans, with people with the best credit scores qualifying for the lowest rates, and those on the lower end of the credit spectrum getting the higher rates. These different rates can translate into wildly different costs over the life of the loan. 

Here’s an example of two scenarios, possibly even from the same lender. The rates used in the example are drawn from Credible’s average minimum rates for different credit bands.

Good credit personal loan

Loan amount: $15,000

Loan term: 5 years

APR: 14%

Monthly payment: $349

Total interest charges: $5,941

Total repayment amount: $20,941

Bad credit personal loan

Loan amount: $15,000

Loan term: 5 years

APR: 27%

Monthly payment: $458

Total interest charges: $12,481

Total repayment amount: $27,481

Even though they’re borrowing the same amount and have the same amount of time to repay the loan, the person with poor credit will pay more than twice the total interest than the one with good credit will pay.

Bad credit personal loan fees

Many personal loans come with fees, though you’ll find some lenders who advertise that they don’t charge them. Some lenders will waive some fees for borrowers with good credit, meaning that only people with bad credit will pay the fees.

The most common fees you’ll see with a personal loan include:

  • Application fees: This is a fee charged to apply for a loan, regardless of whether you accept it.
  • Late payment fee: This fee is assessed if a monthly payment is made past the deadline and any grace period.
  • Origination fee: These are generally charged as a percentage of the loan amount, as much as 8% or more. It’s often deducted from the amount you receive from the loan.
  • Prepayment penalty: This is a fee for paying off your loan early, or paying more than the standard payment.

The pros and cons of personal loans for bad credit

Just like any financial product, personal loans come with advantages and disadvantages. This is especially true for personal loans for bad credit. As you’re shopping around for a personal loan, it’s important to weigh the costs and benefits before committing to a loan.

Pros of personal loans for bad credit

  • Single, fixed monthly payment: Personal loans typically have fixed interest rates, meaning your monthly payment will remain the same for as long as you have the loan. You can also use a personal loan to pay off credit cards and other high-interest debt, leaving you with a single payment.
  • Lower interest rates: When compared with credit cards, payday loans, or some other loans you might consider, a personal loan often has a lower interest rate.
  • Lower risk: Unsecured personal loans don’t put your home or other collateral at risk if you have trouble making payments. Other loans, like home equity loans or a home equity line of credit, do come with the risk of foreclosure if you fall behind on your payments.

Cons of personal loans for bad credit

  • Hard to qualify for: It can be harder to find a lender who will offer a personal loan to someone with bad credit. Fewer options can mean higher costs.
  • Higher interest costs: Personal loans tend to have higher interest rates than secured loans, like home equity loans or HELOCs. Plus, you’ll pay even higher rates if you have bad credit.
  • High fees: Personal loans for bad credit tend to come with higher fees than loans for people with good credit. This can eat into the amount of money you actually receive on your loan.

How to compare bad credit personal loans and lenders

Different lenders can offer very different loan terms, and you might even get different offers from the same lender. When comparing personal loan offers, be sure to keep these points in mind.

  • APR: Also known as the annual percentage rate, this number includes the interest rate and any fees charged on the loan. The APR gives you a better idea of just how much a loan costs. Using it, rather than the interest rate, makes it easier to do an apples-to-apples comparison of two different loans.
  • Fees: Pay close attention to see if the lender charges an origination fee, which is often deducted from the total loan amount you receive. Also ask about other fees, like late charges.
  • Repayment terms: These can be as short as one year and as long as 12. Longer terms mean smaller monthly payments, but you’ll pay more interest long term.

How can I get a bad credit personal loan?

If you’ve weighed the options and think a personal loan is right for you, here’s how to get one.

  • Check your credit score: Knowing your score ahead of time can help you understand the costs you’re likely to face, and give you time to correct any errors on your credit report before applying for a new loan. Under the law, you’re owed a free copy of your credit report every year from each of the major credit bureaus. You can use a site like AnnualCreditReport.com to get a copy of your reports.
  • Shop around: Many lenders have basic information on their websites about the rates and terms they offer and who may qualify.
  • Prequalify: When you’ve found a few lenders that might be a good fit, go ahead and request a rate quote. You’ll give the lender a little bit of information about yourself, including your Social Security number. Most lenders will allow you to prequalify and check the rates you’d be offered using only a soft pull on your credit, meaning your credit score won’t be affected.
  • Apply: Once you’ve found the quote that works best for you, it’s time to formally apply for the loan. You’ll need to submit more information to the lender, which they’ll use to make a final decision on your loan.
  • Accept your loan: If approved for the loan, you may be able to access the money within a day or two. The money can often be deposited directly into your bank account.

Alternatives to personal loans for bad credit

Personal loans aren’t the only option if you find yourself needing cash fast. Here are a few others you might consider.

  • Borrowing from family or friends: They won’t usually charge you fees, but failing to pay back a friend or family member can strain your relationships.
  • Peer-to-peer lending: With peer-to-peer lending sites, people looking to borrow money are matched up with investors willing to help crowdfund loans. Their criteria may vary and be different from a standard personal loan lender.
  • Balance transfer cards: These cards usually have a 0% or low interest rate for a certain period of time. But it may be difficult to qualify for one with a poor credit score.
  • Home equity loan: If you own your home, you may qualify for these loans. They allow you to borrow against the equity in your property, or the difference between what you owe on your mortgage and what the home is worth. Their interest rates are lower, but be aware, they do involve the risk of foreclosure if you fail to make your payment.

There are other options you should avoid. These include payday loans, which are short-term cash advances with extremely high interest rates that can easily drive you deeper and deeper into debt.

You can see your prequalified rates in two minutes and check rates from multiple lenders at Credible.

Working on your credit to get a better personal loan deal

A good credit score can make it easier to get a personal loan with a good rate and terms. Improving your score before applying for a personal loan could save you money in the long run.

Start by requesting your credit report, and then scour it to make sure all the information is accurate. Sometimes, incorrect account information can be listed on your report, drawing down your score. You can contest incorrect information, and the credit bureau will need to investigate the matter. 

Other strategies for improving your credit score include:

  • Paying down credit card debt
  • Paying all your bills on time, every time
  • Avoiding taking on new debt

Prequalifying for a personal loan can help you get a feel for what interest rate you qualify for and how big a loan you’re likely to get. If you’re denied for a loan, the lender may be able to give you areas of your finances you can improve before applying again.