Best Loans for Bad Credit in December 2024

Whether you need to renovate your home, pay off high-interest debt, or make a large purchase, a personal loan can help. If you have bad credit, it can be hard to qualify to borrow money, but it is possible. 

In fact, average overall debt has increased significantly for bad-credit borrowers in the past few years. According to a study by Experian, consumers with FICO credit scores between 300 and 579 (defined as bad credit) had $43,584 in total average debt in 2023, compared to $36,159 in 2022 and $33,375 in 2021.

The overall best bad-credit personal loans come from Universal Credit because the lender requires a minimum credit score of 560, does not specify income requirements, and offers loans in 49 states. 

The following lenders may consider applicants with FICO scores below 580, offer secured loans, and/or let you apply with a cosigner. Just be prepared to pay higher interest rates and origination fees than someone with a good credit score.

Best loans for bad credit

Before applying for a bad-credit loan, prequalify with multiple lenders. This way, you'll know which lenders you're most likely to get approved with, which could mean fewer rejections and a better loan buying experience. 

Just know that prequalification is not an offer of credit and it won't hurt your score. Once you complete a full application, the lender will usually conduct a hard credit inquiry to determine your eligibility, which could temporarily ding your score by a few points.

Methodology

Credible evaluated the best personal loan lenders for bad credit based on factors such as minimum and maximum fixed rates, minimum and maximum loan amounts, funding time, lender reputation, loan terms, customer experience, origination fees, discounts, and whether cosigners are accepted. Credible’s team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date. To assign star ratings, we used the following metrics and weightings: 

• Rates and fees: 18%
• Loan terms: 18%
• Customer experience: 17%
• Eligibility: 14%
• Customer satisfaction: 10%
• Efficiency: 10%
• Options for poor credit and no credit: 9%
• Discounts: 4%

To select specifically the best loans for bad credit, we chose lenders that consider applicants with FICO credit scores of less than 580 or, in some cases, lenders that have higher credit score requirements than this but allow cosigners on applications or offer secured personal loans.

Credible’s team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.

Learn more about how Credible rates lenders by exploring our Personal Loans Lender Rating Methodology.

How do personal loans work?

A personal loan is a type of installment loan with a fixed interest rate and fixed monthly payments for the term of the loan. Repayment terms vary based on the lender and loan purpose but generally range from one to seven years. 

If you're approved for a loan, you’ll receive a lump sum payment to be used toward almost any purpose (which you'll specify in your application). Loan amounts are typically between $1,000 and $50,000 but may be up to $100,000.

Rates and Fees

Depending on the lender, you may pay an origination or application fee when you accept a personal loan. Origination fees can reach up to 12% of the loan amount and are usually deducted from funds upfront, reducing the amount you receive.

The APR, or annual percentage rate, of a personal loan represents how much the loan will actually cost, considering both the interest rate and upfront fees (like origination fees). APRs are much more useful for estimating total costs than interest rates alone. Some personal loan rates are as high as 35.99%.

How do secured personal loans work?

Most personal loans are unsecured, meaning you aren’t required to pledge collateral to take out a loan. But if you have bad credit, it can be easier to qualify for secured personal loans.

A secured personal loan requires you to put down collateral in order to qualify, and this serves as protection for lenders in the event you can’t repay your loan. 

You can secured these loans with an asset such as a vehicle, savings account, real estate, or valuable items like art or jewelry. Lenders take on less risk with secured personal loans because they have the right to seize or repossess the collateral if you default.

Compare: Secured vs. Unsecured Personal Loans

How to get a personal loan with bad credit

Whether or not you qualify for a personal loan — and, if you do, the personal loan rate you’re approved for — depends on your credit profile and income. More specifically, lenders typically look at the following financial factors:

• Income: Many lenders have minimum income requirements. They’ll also want to see that you can afford the payment terms of the loan you’re seeking. You might need to provide proof of employment in the form of tax statements or pay stubs when applying.
• Debts: Lenders consider your debt when you apply for new debt such as a personal loan, especially as it relates to your income. They want to make sure you have enough money after other debts are paid to afford repaying the loan. A debt-to-income ratio (DTI) less than 36% is ideal, though some lenders consider higher DTIs. Calculate your DTI by dividing your minimum monthly debt payments by your gross monthly income.
• Credit score: Most lenders prefer borrowers with a FICO score above 670, but some will consider you if you have a FICO score as low as 550 (or lower, in some cases).
• Information on your credit reports: Lenders will consider what’s in your credit report, such as whether you have delinquent accounts, late payments, public records, and/or any bankruptcies.

If you have bad credit, it’s still possible to get a personal loan, though your options are more limited compared to someone with good credit. Some strategies include:

• Apply with a cosigner: A cosigner is someone who agrees to be responsible for your loan if you don't or can’t pay it back. In most cases, this person has good credit — lenders can pursue repayment from your cosigner if you default, so they want to be confident in this person's ability to cover your debt.
• Look for lenders with low minimum credit score requirements: You can increase your chances of getting a personal loan if you work with a lender who is willing to work with those who have lower credit scores.
• Apply for a secured loan: If you’re willing to put up collateral or an asset to take out a loan, consider applying for a secured personal loan. Lenders may be willing to grant you a loan with poor or limited credit because having collateral lowers their risk.

How to get approved for a loan with bad credit

Even if you have bad credit, there are ways you can increase your odds of approval. Some best practices include:

• Lower your DTI: Your DTI is the percentage of your gross income you use toward debt. The higher your DTI, the more it appears you need to rely on debt, increasing your risk as a borrower.
• Raise your credit score: If you can wait to take out a personal loan, increasing your credit score can improve your odds. Make a point to consistently pay debts on time, don’t take on more debt, and check your credit report for errors and progress. You might also want to consider services like Experian Boost that claim to raise your score by reporting payments like rent and utilities to the bureaus — for a fee.
• Seek a lower loan amount: The more lenders lend to a borrower, the higher of a risk it tends to be for them. Lowering the amount could lower their risk and help you get your loan application approved.

How to apply for a loan with bad credit

Once you’re ready to take out a personal loan, use the following steps to guide you:

1. Shop around: Find reputable lenders willing to work with bad-credit borrowers (like the ones listed above). Then, prequalify before you formally apply. Most personal loan lenders let you prequalify — with no impact to your credit — directly on their site. This gives you a sense of what you can qualify for and which lenders offer the best terms.
2. Compare loans and lenders: Once you’ve prequalified, compare loan terms and APRs between lenders to find which best suits your needs. Personal loans typically won’t charge more than 35.99% APR. Also consider lender fees, such as origination and late fees, as well as available discounts, such as autopay and direct deposit.
3. Complete and submit application form: Apply for a personal loan on a lender’s website or via a personal loan marketplace and fill out the required information, including your name, contact details, Social Security number (often only the last four digits are required), desired loan amount, and loan purpose. At this point the lender will run a hard credit check, which tends to slightly drop your credit score temporarily. You may be required to provide additional documentation such as pay stubs, bank statements, or other proof of income. If you’re getting a secured loan, you may need to submit documentation that proves how much your collateral is worth.
4. Sign closing documents: If your application is approved, the lender will ask you to sign closing documents once you review your role and responsibilities as a borrower. You will also need to tell the lender where to send the loan proceeds. This may be your bank account, or could be directly to your creditors if you’re getting a debt consolidation loan.

Learn More: How To Apply for a Personal Loan

Read More:

• Best Personal Loans for Fair Credit
• Best Personal Loans for Good Credit
• Best Personal Loans for Excellent Credit
• Best Banks for Personal Loans
• Best Credit Unions for Personal Loans
• Best Online Personal Loans

Disclosure: Some lending partners that participate in Credible’s comparison marketplace offer loans to borrowers with scores as low as 550. Borrowers with low scores will have fewer lending options than borrowers with higher credit scores.