You can get a loan with bad credit, but you’ll pay significantly more for it. Borrowers with credit scores below 600 routinely receive personal loan offers with APRs above 30%, compared to single-digit rates for those with excellent credit. The key is knowing which loan types are realistic for your situation, which lenders actually work with lower scores, and how to avoid the predatory corners of the market that target people in exactly your position.
What “Bad Credit” Means to Lenders
Most lenders consider a FICO score below 580 to be poor credit, and scores between 580 and 669 fall into the “fair” range. Both categories limit your options, but they don’t eliminate them. What changes is the cost of borrowing. A borrower with a 750 score might qualify for a personal loan at 8% APR, while someone at 550 could see rates of 30% to 36%. On a $5,000 loan repaid over three years, that difference adds up to thousands of dollars in extra interest.
Lenders also look beyond your credit score. Your income, employment stability, existing debts, and the type of loan you’re applying for all factor into the decision. Some lenders use alternative data like rent payments, utility bills, and education history to assess risk, which can work in your favor if your score doesn’t reflect your full financial picture.
Online Personal Loans for Bad Credit
Several online lenders specialize in loans for borrowers with lower credit scores. Their APRs typically max out around 36%, and minimum credit score requirements vary widely. Some lenders set their floor at 600, while at least one major platform accepts scores as low as 300. Loan amounts generally start below $3,500, making these accessible for smaller borrowing needs, though many lenders offer up to $35,000 or more for qualified applicants.
When comparing online lenders, focus on the APR rather than the monthly payment. Some lenders stretch out repayment terms to make the monthly number look manageable, but you end up paying far more in total interest. Also check for origination fees, which are typically deducted from your loan proceeds before you receive them. A $5,000 loan with a 6% origination fee means you’ll only get $4,700 in hand but owe interest on the full $5,000.
The application process is usually fast. Most online lenders let you check your rate with a soft credit pull (which doesn’t affect your score), then do a hard pull only if you accept the offer. Funds often arrive within one to three business days after approval.
Secured Loans Lower the Bar
A secured loan requires you to pledge something you own as collateral, like a car, savings account, or certificate of deposit. If you stop making payments, the lender can seize that asset to recover their money. Because this reduces the lender’s risk, secured loans typically carry lower interest rates than unsecured options, and approval is easier to get with a weak credit history.
The most common types of secured loans for bad-credit borrowers include auto title loans from banks or credit unions (not to be confused with predatory title lenders), savings-secured loans where your bank account balance backs the loan, and share-secured loans at credit unions that use your deposited shares as collateral. With a savings-secured loan, your deposit stays in the account earning interest while you borrow against it, and you regain full access once the loan is repaid.
The obvious risk: if you can’t repay, you lose whatever you pledged. Only borrow against assets you can afford to put at stake.
Credit Union Payday Alternative Loans
If you need a small amount of cash quickly, federal credit unions offer Payday Alternative Loans (PALs) that are dramatically cheaper than payday lenders. PALs range from $200 to $1,000, with repayment terms of one to six months. The interest rate is capped at 28% APR, and the only fee a credit union can charge is up to $20 to cover application processing costs.
To qualify, you need to have been a credit union member for at least one month. You can take out up to three PALs in a six-month period, but you can’t roll one into another or have overlapping loans. Compare that to a typical payday loan, where fees can translate to APRs of 400% or more, and the rollover cycle is designed to keep you in debt.
If you’re not already a credit union member, joining one is usually straightforward. Many credit unions are open to anyone who lives, works, or worships in a specific area, and some have membership requirements as simple as opening a savings account with $5 or $25.
Adding a Cosigner or Co-Applicant
Bringing someone with strong credit into your loan application can significantly improve your chances of approval and lower your interest rate. Lenders typically base the loan terms on the stronger borrower’s credit profile, so a cosigner with a 780 score could help you qualify for rates you’d never see on your own.
There’s an important distinction between a cosigner and a co-applicant. A cosigner agrees to repay the loan if you default, but they don’t have access to the loan funds. They’re essentially a safety net for the lender. A co-applicant, on the other hand, shares equal rights and responsibilities. Both people can access the funds, and both are on the hook for repayment from day one.
Either arrangement affects the other person’s credit. Late payments show up on both credit reports, and the loan balance counts toward both people’s debt loads. This is a significant ask, and the relationship risk is real. Make sure both parties understand exactly what they’re agreeing to before signing.
Other Options Worth Exploring
Beyond traditional personal loans, a few other paths can work for borrowers with damaged credit:
- 401(k) loans: If your employer’s plan allows it, you can borrow from your own retirement savings without a credit check. You’re borrowing from yourself and repaying with interest that goes back into your account. The risk is that unpaid balances become taxable distributions with penalties if you leave your job.
- Home equity: If you own a home with equity, a home equity loan or line of credit may be available even with lower scores, since the property secures the debt. Rates are typically much lower than unsecured personal loans.
- Borrowing from family or friends: No credit check required, but put the terms in writing. A simple loan agreement that spells out the amount, interest (if any), repayment schedule, and what happens if payments are late protects both sides.
- Nonprofit and community lending: Some community development financial institutions (CDFIs) and nonprofit organizations offer small personal loans to borrowers that traditional lenders won’t serve, often with financial counseling built in.
Spotting Predatory Lenders
Bad credit makes you a target for lenders who profit from keeping you in debt. Watch for these red flags: lenders who guarantee approval without checking your credit, fees that seem excessive or aren’t clearly explained (“junk fees” padded onto your loan), high-pressure sales tactics pushing you to sign immediately, and encouragement to refinance repeatedly so the lender can collect new fees each time.
Be especially cautious of loan structures designed to trap you. Interest-only payments that never reduce your balance, balloon payments requiring a large lump sum at the end of the loan term, and prepayment penalties that charge you for paying off the loan early are all hallmarks of predatory lending. Adjustable interest rates that can spike your monthly payment without warning are another common tactic.
A legitimate bad-credit lender will clearly disclose the APR, all fees, and the total cost of the loan before you sign. If a lender won’t give you these numbers in writing, walk away.
Building Credit While You Borrow
Whatever loan you take, making on-time payments builds your credit history and gradually improves your score. This is the longer game: a bad-credit loan at 30% APR today, repaid responsibly, positions you to refinance or borrow at 15% or less in a year or two. Some lenders will even review your account after several months of on-time payments and offer a rate reduction.
If your score is below 500 and you’re getting denied everywhere, consider starting with a credit-builder loan from a credit union or community bank. These small loans hold the borrowed amount in a savings account while you make payments. Once you’ve paid it off, you get the money and a track record of on-time payments on your credit report. It’s a slower path, but it works.