You can get a loan with a low credit score, but you’ll pay significantly more for it and need to be selective about where you borrow. Personal loans for borrowers with credit scores below 630 carry average interest rates around 21.65%, compared to single-digit rates for borrowers with excellent credit. That cost gap makes it critical to choose the right loan type, shop aggressively, and avoid predatory lenders that target people in your situation.
What Lenders Look at Beyond Your Score
Your credit score matters, but it’s not the only factor. Lenders also weigh your income, your debt-to-income ratio (how much of your monthly income already goes toward debt payments), and your employment stability. If your score is low but your income is steady and your existing debt is manageable, you have a stronger case than your score alone suggests.
Most lenders want your total monthly debt payments, including the new loan, to stay below 36% to 45% of your gross monthly income. So if you earn $4,000 a month before taxes, a lender typically wants your total debt payments to stay under roughly $1,440 to $1,800. You can improve your chances by paying down existing balances before applying, which lowers that ratio even if your credit score hasn’t budged yet.
Loan Types That Work for Low Credit
Secured Personal Loans
A secured loan requires you to pledge something valuable, usually a car title or a savings account, as collateral. Because the lender can seize that asset if you default, they’re more willing to approve borrowers with low scores and often offer lower interest rates than unsecured options. The tradeoff is real risk: if you can’t repay, you lose whatever you pledged.
Unsecured Bad-Credit Loans
Several online lenders specialize in unsecured loans for borrowers with scores in the 550 to 620 range. Some, like Upstart, don’t set a minimum credit score at all and instead evaluate factors like your education and job history. Universal Credit accepts scores as low as 560. Loan amounts typically range from $1,000 to $50,000, with repayment terms of two to seven years. Expect interest rates well above 20% at the lower end of the credit spectrum, and read the fine print carefully for origination fees, which can eat into the money you actually receive.
Credit Union Loans
Your local credit union is one of the best places to apply if your credit is poor. Credit unions are nonprofit and member-owned, which means they often approve members in good standing even with low scores, and their rates tend to be lower than online subprime lenders. If you’ve banked with a credit union for a while and have a history of keeping your account in good shape, that relationship carries weight.
Federal credit unions also offer Payday Alternative Loans (PALs), which are small, short-term loans designed to keep you away from payday lenders. PALs range from $200 to $1,000 with repayment terms of one to six months and a maximum APR of 28%. You need to have been a member for at least one month to qualify, and the application fee is capped at $20. You can take out up to three PALs in a six-month period, as long as they don’t overlap.
Co-Signed or Joint Loans
Adding a co-signer with better credit can dramatically improve your approval odds and your interest rate. The co-signer agrees to repay the loan if you don’t, which reduces the lender’s risk. This is a serious ask: if you miss payments, your co-signer’s credit takes the hit and the lender can come after them for the full balance. Only go this route if you’re confident you can make every payment on time.
How to Strengthen Your Application
Before you apply anywhere, pull your credit reports from all three bureaus through AnnualCreditReport.com (it’s free). Look for errors like accounts that aren’t yours, incorrect balances, or late payments that were actually on time. Disputing and correcting even one error can bump your score enough to qualify for better terms.
Pre-qualifying with multiple lenders is the single most valuable step you can take. Many online lenders let you check your estimated rate with a soft credit inquiry, which doesn’t affect your score. Compare at least three or four offers before committing. The difference between a 22% and a 30% APR on a $5,000 loan repaid over three years is roughly $700 in extra interest.
If your need isn’t urgent, spending a few months improving your score before applying can save you hundreds or thousands of dollars. Paying down credit card balances below 30% of their limits, making every payment on time, and avoiding new credit applications are the fastest levers you can pull. Even a 20 to 30 point increase can move you into a tier with meaningfully better rates.
What a Low-Credit Loan Actually Costs
Interest rates get the most attention, but fees add up fast. Many bad-credit lenders charge origination fees of 1% to 10% of the loan amount, deducted from your disbursement. On a $5,000 loan with a 6% origination fee, you receive $4,700 but owe payments on the full $5,000. Late payment fees, returned payment fees, and prepayment penalties (charged if you pay the loan off early) vary by lender. Ask about all of these before signing.
To put the interest cost in perspective: a $5,000 loan at 21.65% APR repaid over three years costs roughly $1,850 in total interest, bringing your total repayment to nearly $6,850. The same loan at 10% would cost about $810 in interest. That difference is the price of borrowing with a low score, and it’s why shopping around and negotiating matters so much.
Spotting Predatory Lenders
Borrowers with low credit scores are prime targets for predatory lending. Be cautious of any lender that guarantees approval regardless of credit, pressures you to sign quickly, or charges fees before you’ve received any money. Legitimate lenders never ask for upfront payments before disbursing a loan.
Watch for these specific red flags: fees that change between your initial estimate and closing, prepayment penalties buried deep in the contract, encouragement to misrepresent your income on the application, or vague cost estimates with ranges so wide they’re meaningless. If a lender alters information you provided on your application or switches terms at the last minute, walk away. Always verify that any lender you work with is licensed to operate in your state, which you can check through your state’s banking or financial regulation department.
Alternatives Worth Considering
Before taking on a high-interest loan, explore whether you have other options. If you have a 401(k) through your employer, many plans allow you to borrow against your own balance at low interest rates, with no credit check involved. You repay yourself, though there are tax consequences if you leave your job before the loan is repaid.
Payment plans directly with whoever you owe (a medical provider, a utility company, a mechanic) often come with no interest at all. Many hospitals and doctors’ offices have financial assistance programs or will set up zero-interest installment plans if you ask. Nonprofit credit counseling agencies can also help you negotiate with creditors and set up a debt management plan, sometimes at reduced interest rates.
If you only need a few hundred dollars to cover an emergency, a PAL from a credit union or even borrowing from family is almost always cheaper than a subprime personal loan, which typically starts at $1,000 and locks you into years of high-interest payments for a relatively small amount of money.