Getting a loan with a low credit score is possible, but you’ll pay more for it and have fewer lenders to choose from. The average APR for borrowers with credit scores between 300 and 629 is around 21.65%, compared to single-digit rates for borrowers with excellent credit. Some lenders set their minimum credit score at 550 or 560, and at least one major online lender has no minimum score requirement at all. The key is knowing where to apply, what to expect, and how to strengthen your application before you submit it.
Where to Apply With a Low Score
Traditional banks tend to reject applicants with credit scores below 620, so your best options are online lenders and credit unions. Online lenders like Avant (minimum score of 550), Prosper (minimum 560), and Upstart (no minimum score) specialize in working with borrowers who have imperfect credit. Upstart is notable because it uses factors beyond your credit score, such as education and employment history, to evaluate your application.
Credit unions are another strong option. Because they’re member-owned nonprofits, they often take a more personal approach to lending. If you’re a member in good standing at a credit union, you may qualify for a personal loan even with a low score. Credit unions also tend to cap their interest rates lower than online lenders do. If you’re not already a member of one, many credit unions have simple eligibility requirements tied to where you live or work.
Scores below 500 make qualification unlikely with most lenders, even those that advertise bad-credit loans. If your score is in that range, you’ll want to focus on the strategies below to either improve your score first or offset it with other factors.
What You’ll Pay in Interest
Personal loan APRs generally range from 6% to 36%. With a low credit score, expect to land in the upper half of that range. On a $5,000 loan at 22% APR with a three-year term, you’d pay roughly $1,900 in total interest. That same loan at 10% APR would cost about $800 in interest. The difference is real money, so it’s worth taking steps to get the lowest rate you can.
Be cautious about lenders offering APRs above 36%. That’s the threshold many consumer advocates and state regulators consider the boundary of responsible lending. Reputable comparison tools typically exclude lenders that charge above 36%, and for good reason. If you’re seeing rates higher than that, you’re likely looking at a predatory product.
Secured Loans Can Lower Your Rate
A secured loan requires you to pledge something you own as collateral. If you stop making payments, the lender can take that asset to recover the money. Common forms of collateral include a car, a savings account or certificate of deposit, or other personal property. Because the lender’s risk drops when collateral is involved, you’ll typically qualify more easily and receive a lower interest rate than you would on an unsecured loan.
The tradeoff is straightforward: you get better terms, but you’re putting an asset on the line. A secured loan makes sense when you’re confident you can keep up with payments and you want to avoid the steep rates that come with unsecured bad-credit loans. If you have a savings account you can set aside, some banks and credit unions offer “share-secured” loans where your deposit serves as collateral. These are especially useful for rebuilding credit because the lender reports your on-time payments to the credit bureaus.
Add a Cosigner or Co-Borrower
Bringing someone with good credit onto your application can significantly improve your approval odds and lower your rate. There are two ways to do this, and they work differently.
A cosigner acts as a backup. They agree to repay the loan if you default, but they aren’t expected to make monthly payments alongside you. Their strong credit reassures the lender, which can help you secure a lower interest rate. The cosigner doesn’t have any ownership of the loan funds or any asset purchased with them.
A co-borrower shares repayment responsibility from the start. Both of you are on the hook for payments, and both of you may share ownership of whatever the loan finances. Lenders may offer better rates and higher loan amounts when both applicants have solid credit. If the person helping you also has good credit and wants equal involvement in the loan, co-borrowing can unlock the best terms.
In both cases, the other person’s credit is at risk if payments are missed. This is a serious commitment, so make sure everyone involved understands what they’re agreeing to.
Improve Your Application Before You Apply
Even a small credit score increase can move you into a better tier with some lenders. A few steps can make a meaningful difference in weeks rather than months.
- Pay down credit card balances. Your credit utilization ratio, the percentage of your available credit you’re using, is one of the fastest-moving parts of your score. Getting below 30% of your limit helps. Getting below 10% helps more.
- Check your credit reports for errors. Mistakes happen more often than you’d think. Dispute any inaccurate late payments, wrong balances, or accounts that aren’t yours through the credit bureau that’s reporting the error. Corrections can boost your score quickly.
- Avoid new credit applications in the weeks before you apply. Each hard inquiry can shave a few points off your score. If you’re close to a lender’s minimum, those points matter.
- Show stable income. Lenders weigh your ability to repay alongside your credit score. Having consistent employment and a low debt-to-income ratio (meaning your monthly debt payments are small relative to your monthly income) can help compensate for a weaker score.
Pre-Qualify Without Hurting Your Score
Most online lenders let you pre-qualify with a soft credit check, which doesn’t affect your score. This lets you compare estimated rates and loan amounts from multiple lenders before committing. Only after you choose a lender and formally apply does a hard inquiry hit your credit report.
Pre-qualifying with three or four lenders takes about 15 minutes and gives you a realistic picture of what you can get. If every lender is quoting you rates near 36%, it may be worth spending a few months improving your score before borrowing. Even moving from a 550 to a 620 can drop your rate by several percentage points, saving you hundreds or thousands of dollars over the life of the loan.
Alternatives Worth Considering
If personal loan rates are too high or you can’t get approved, a few other options may work depending on your situation. Payment plans offered directly by medical providers, utility companies, or service providers often come with no interest and no credit check. If you need a small amount, borrowing from a family member with a written repayment agreement keeps costs at zero while preserving the relationship through clear terms.
Some nonprofit organizations and community development financial institutions offer small-dollar loans specifically designed for people with poor credit, often at rates well below what online lenders charge. These programs vary by location but are worth searching for, especially if you need less than $2,000.
Payday loans and auto title loans should be a last resort. They carry APRs that can exceed 400% and create debt cycles that are difficult to escape. Nearly any other borrowing option, including a high-rate personal loan, will cost less.