5 best loans for bad credit (February 2024)
Gaining access to financing no longer requires a perfect credit score.
With the rise of online lenders over the past decade-plus, consumers now enjoy many options beyond their local bank where lending standards tend to be somewhat stringent.
But not all loans for those with bad credit are the same. Terms such as the annual percentage rate (APR), loan limits, and duration vary significantly, so the last thing you want to do is choose a bad credit loan by throwing darts at a board.
Better to shop around and find a loan that best suits your needs. You might be pleasantly surprised by how many lenders specialize in personal loans for bad credit.
Here's what you have to know about personal loans for bad credit
Bad credit is kind of like having a bad cold—when you've got it, it can keep you from living your best life. Creditors view damaged credit as a risk that the loan will not be repaid. But there are some lenders willing to take that risk.
Lenders rely heavily on a potential borrower’s FICO score, provided by the major credit bureaus TransUnion, Equifax, and Experian, to determine if the borrower is a good credit risk.
A FICO score below 670 is generally considered poor and therefore a risky bet. But the lenders that made the cut on the following list work with borrowers whose credit scores range from as low as 300 to above 600.
If approved, a borrower's FICO score influences the interest rate on a bad credit loan. And besides credit scores, lenders consider income and the amount of the loan when determining the rate.
So it's the combination of a person's credit score, income, payment history, and loan size that determines the interest rate and other loan terms. Lenders who made this list offer interest rates that range from just under 8% to almost 36%.
Borrowers might have to settle for a higher than average APR in exchange for the risk the lender takes, but personal loans for those with bad credit do exist in amounts ranging from $1,000 to $50,000.
And the good news is that consistently making payments on a personal loan and eventually paying it off will work toward improving a borrower's credit score so that next time around they will qualify for better terms.
Upgrade offers online loans for bad credit in amounts up to $50,000. APRs range from a competitive 8.49% to 35.99% on the high side. Borrowers can expect to pay a loan origination fee that is between 1.85% to 9.99% of the loan proceeds.
Upgrade's loan terms range from 24-84 months. After entering some personal information, borrowers are presented with loan offers in minutes.
The nice thing about this loan for bad credit is that it doesn’t discriminate based on the intended use for the loan proceeds. Borrowers can direct the funds toward debt consolidation (in which case Upgrade pays off a borrower’s existing debt directly), home improvement, or a big ticket item purchase.
And there’s no penalty for paying off this loan early. Upgrade loans require autopay so that borrowers don't ever miss a payment. They might also require collateral in the form of a vehicle to secure the loan, for which there may be a transfer fee.
LendingPoint is a high-tech online lender offering a wide range of personal loans between $2,000 and $36,500. Loan terms range from 24-72 months. Borrowers can apply with no impact to their credit score and have the option to choose among terms presented to them.
Upon approval, the funds could be in the borrower’s bank account in as quickly as 24 hours.
LendingPoint has minimum loan amounts in some states, including Georgia, Colorado, and Hawaii of $3,500, $3,001, and $2,000, respectively.
In addition to having a credit score of at least 600, borrowers must earn income of $35,000 or more, either from a job, retirement, or another income source. They must also have a verifiable bank account in their name.
LendingPoint’s loans for bad credit are not open to residents of Nevada and West Virginia.
LendingPoint uses its tech-based algorithms to determine an applicant’s eligibility, including their debt-to-income and payment-to-income ratios.
Borrowers should be prepared to pay a loan origination fee of up to 10% of the loan proceeds, depending on the state in which they live.
Upstart is another high-tech provider of online loans for bad credit, including FICO scores as low as 300. The company issues personal loans ranging from $1,000-$50,000. Borrowers can choose terms of three or five years with a fixed rate in the range of 6.4%-35.99% APR attached.
Borrowers can receive a decision on an application in as fast as five minutes and may get funded in as soon as one business day from signing on the dotted line.
Upstart allows flexibility in how the loan proceeds are used, whether it’s for debt consolidation, medical bills, home improvement costs, a wedding, vacation, or education. And there’s no penalty for paying off the loan early. Borrowers are charged a loan origination fee of as much as 8% of the loan amount.
Universal Credit is another online provider of loans for bad credit, including FICO scores below the 600 level. This lender offers loans of up to $50,000 with rates that range from 11.69% to 35.99%.
Borrowers can have the funds in their account as soon as 24 hours after clearing user verifications. Universal Credit charges a loan origination fee of between 5.25% and 9.99% of the loan amount.
Loan terms range from 36-60 months. The lender boasts a simple online application process and mobile access plus free credit monitoring so borrowers are engaged in the process of rebuilding their credit.
Avant offers online loans for bad credit in the range of $2,000-$35,000. Most borrowers must have a credit score in the 600-700 range, which is a bit high compared with other loans for bad credit.
Avant offers a great deal of flexibility on how the loan proceeds can be used, including medical bills, home improvement projects, or an unexpected expense. Upon approval, funds are deposited into the borrower’s account within a day.
Avant charges a fixed rate of between 9.95% and 35.99%. Despite the high rate on the far side of the spectrum, fixed rates give borrowers predictability with payments. Loan terms range between 12 and 60 months.
Depending on the state, Avant may charge an administration fee that will be deducted from the loan proceeds.