You can get a loan with bad credit, but you’ll pay more for it and need to be selective about where you apply. Borrowers with credit scores below 620 typically face APRs ranging from about 20% to 36% on personal loans, though some lenders go lower depending on other factors like your income and employment history. The key is knowing which lenders actually work with subprime borrowers, what you can do to strengthen your application, and which offers to avoid entirely.
Where to Apply With a Low Credit Score
Most banks set a minimum credit score of 620 or higher for personal loans. That cuts off a lot of borrowers, but several online lenders and credit unions fill the gap. Some lenders accept scores as low as 550, and a few, like Upstart, don’t require a credit score at all. Instead, they evaluate factors like your education, employment history, and bank account activity to decide whether you’re likely to repay.
Credit unions are worth a serious look. As a member in good standing, you may qualify for a personal loan even with a low score because credit unions weigh your relationship history with them, not just your FICO number. Federal credit unions also offer payday alternative loans (PALs), which let you borrow up to $2,000 with repayment terms up to 12 months. The APR on a PAL is capped at 28%, which sounds high until you compare it to payday loans that regularly charge the equivalent of 400% APR.
Online lenders like Upstart, Prosper (minimum score of 560), OneMain Financial, and Avant all serve borrowers in the subprime range. Their APRs vary widely. Upstart’s range runs from 6.20% to 35.99%, Avant from 9.95% to 35.99%, and OneMain Financial from 11.99% to 35.99%. The low end of those ranges is reserved for stronger applicants, so if your credit is poor, expect to land closer to the top. On a $5,000 loan at 30% APR over three years, you’d pay roughly $2,600 in interest alone.
What Lenders Look at Beyond Your Score
A growing number of lenders now use cash-flow underwriting, meaning they look at your bank account history to see how you actually manage money. Steady deposits, a pattern of covering bills on time, and a positive average balance can work in your favor even if your credit report tells a different story. This approach gives lenders a more detailed and timely picture of your finances than a credit score alone, and it’s especially useful for people whose low scores come from a thin credit history rather than a pattern of missed payments.
Beyond cash flow, lenders also weigh your debt-to-income ratio (how much of your monthly income goes toward existing debt payments), your employment stability, and your housing situation. If you’ve been at the same job for two or more years and your monthly obligations are manageable relative to your paycheck, those factors can offset a weak score. When you apply, be ready to provide recent pay stubs, bank statements, and proof of address.
Using Collateral or a Co-Signer
Offering collateral turns an unsecured loan into a secured one, and that shift can make a lender more willing to approve you or offer a lower rate. Collateral is simply something of value the lender can claim if you stop making payments. Common types include a car, a savings account or certificate of deposit, jewelry, or home equity. The loan amount will generally be a percentage of whatever the collateral is worth, not the full value.
A co-signer is another powerful tool. When someone with good credit agrees to co-sign, the lender evaluates both of your financial profiles. The co-signer’s stronger credit can help you qualify or get better terms. But the risk is real for them: if you miss payments, the co-signer is legally responsible for the debt, and late payments will damage their credit too. Only ask someone who fully understands that commitment.
What Bad-Credit Loans Actually Cost
Interest rates are just part of the picture. Many subprime lenders charge origination fees, which are deducted from your loan proceeds before you receive the money. Upstart charges 0% to 10% of your loan amount, and OneMain Financial charges either a flat fee (ranging from $25 to $500 depending on your state) or a percentage-based fee of 1% to 10%. On a $10,000 loan with a 5% origination fee, you’d receive $9,500 but owe $10,000 plus interest.
When comparing offers, focus on the APR rather than just the interest rate. APR folds in most fees so you can see the true annual cost of borrowing. Also compare the total amount you’ll repay over the life of the loan. A lower monthly payment stretched over five years can cost thousands more in interest than a higher payment over three years. Run the numbers before you sign.
Spotting Scams and Predatory Offers
Borrowers with bad credit are prime targets for loan scams, and the warning signs are specific. Legitimate lenders never charge upfront fees before you receive your loan. If anyone asks you to pay a “processing fee” or “insurance fee” before funds are disbursed, that’s a scam. Similarly, no real lender can guarantee approval without reviewing your finances first. An offer that promises “guaranteed approval, no credit check” is designed to collect your personal information or your money, not to give you a loan.
Watch for unsolicited offers that arrive by phone, text, or email, especially if they promise unusually large amounts or low rates. Pressure to act immediately is another red flag. A legitimate lender won’t tell you the rate goes up or the offer disappears if you don’t apply right now. Before sharing any personal information, verify the lender has a physical address (not just a P.O. Box), a secure website with “https” in the URL, and a state lending license. You can check registration through your state’s financial regulator. Never wire money or send funds through payment apps like Zelle or Venmo as a condition of receiving a loan.
Steps to Improve Your Odds Before Applying
Even a small improvement in your credit score can open up better options. Pull your free credit reports from all three bureaus and dispute any errors you find, such as accounts that aren’t yours, balances reported incorrectly, or debts listed as open when they’ve been paid. Correcting mistakes can boost your score within 30 to 45 days once the bureau processes the dispute.
If you have credit cards, pay down the balances before applying. Your credit utilization, the percentage of your available credit you’re currently using, is one of the biggest factors in your score. Dropping from 80% utilization to 30% can produce a noticeable jump. Also avoid opening new accounts or making large purchases on credit in the weeks leading up to your loan application, since new inquiries and increased balances both work against you.
Finally, borrow only what you need. A smaller loan amount is easier to get approved for and easier to repay. If you’re consolidating debt or covering an emergency, calculate the exact amount required and resist the temptation to borrow extra. Every additional dollar comes with interest attached, and with bad-credit rates, that interest adds up fast.