Best Loans for Bad Credit in February 2025

We found the best loans for bad credit come from Universal Credit, based on a comparison of more than 30 lenders. APRs top out at 36% and you could be eligible with a FICO score as low as 560. OneMain Financial and Upstart are also top contenders, plus neither has a minimum credit score requirement. You might consider OppLoans if you're struggling to qualify with any traditional personal loan lender.

Choosing the wrong loan with bad credit can be devastating. You could pay hundreds or thousands of dollars more than you need and end up doing further damage to your credit score. To avoid that, take a few minutes (or more) to compare the types of bad credit loans available to you, their terms, and interest rates.

Best loans for bad credit

Try to prequalify for a personal loan first to see what APRs, loan amounts, and repayment terms you might be approved for, or if you're likely to be approved at all. Even if you can't qualify for a personal loan, reputable lenders and lending platforms will direct you to emergency lenders that are more willing to work with bad credit.

(Prequalification won't hurt your credit and takes only a few minutes. But it's not an offer of credit. When you apply for a loan, most lenders will run a hard credit check, which could ding your score up to 10 points.

Methodology

Credible evaluated the best bad credit personal loans and lenders across 899 data points, covering minimum and maximum fixed APRs, credit score requirements, income requirements, minimum and maximum loan amounts, available repayment terms, funding time, lender reputation and customer experience, origination fees, available discounts, whether secured loans are available, whether cosigners are considered, and more.

Each data point was verified by a senior editor to make sure it was accurate and up to date. We used the following metrics and weightings to assign star ratings:

• 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%

Learn more about how Credible rates lenders by exploring our personal loans lender rating methodology.

Types of bad credit loans

There are a few different types of bad credit loans available. Most have high fees and/or interest rates and short repayment terms. Though they typically don't check your credit, we generally don't recommend payday loans, cash advance apps, title loans, and pawnshop loans.

We do recommend personal loans, which report to credit bureaus and can improve your credit score.

Recommended

• Personal loans for bad credit: Personal loans have the longest repayment terms and the highest available loan amounts of all bad credit loan types. For example, Universal Credit offers bad credit loans starting at $1,000 with years-long repayment terms, and APRs up to 36%. What you'll qualify for depends on your credit and income, but monthly payments can be much lower than on other lower types. You can use personal loans for almost any legal purpose.
• "Buy now, pay later" (BNPL): BNPL can be easier and quicker to get than a personal loan, with better rates and terms than other bad credit loan types. You may need to allow a soft credit check and will have to use the money for a specific purchase. BNPL is available through many retailers, as well as through online platforms such as PayPal, Affirm and Klarna, and could be an option if you need to make an emergency purchase.
• Payday alternative loans (PALs): PALs are available through federal credit unions as an alternative to predatory payday loans. There are two types of PALs, I and II. Depending on which type or types your credit union offers, you could borrow up to $1,000 with a PALs I or $2,000 with a PALs II. PALs I have repayment terms up to 6 months, while PALs II give you up to a year to pay back the money. You'll need to have been a credit union member to be eligible for a PAL I, but could be eligible for a PAL II immediately upon joining. Interest rates are capped at 28%.
• Small bank loans: Some banks offer small loans (less than $1,000) to existing customers with low fees or interest rates that are payable over a few months. For example, Bank of America's Balance Assist can lend up to $500 to eligible customers, while U.S. Bank can lend up to $1,000. Both are paid back in 3 monthly payments.

Not recommended

• Payday loans: Typically due in two weeks (on your next payday), payday loans can have very high fees that equate to triple-digit APRs. For instance, the APR on a $255 payday loan in California averaged 460%, according to the Center for Responsible Lending.
• Cash advance apps: Through apps like EarnIn, Dave, and Klover you can borrow up to $500 or more due with your next paycheck. They're potentially cheaper than payday loans but often charge fees for same-day money transfers and optional tips, which can make them nearly as pricey. The Center for Responsible Lending found that average APRs for cash advance apps were 367%.
• Title loans: If you own your car outright, you could borrow money from a title loan company based on a percentage of its value (such as up to 50%). Most loans are due within 30 days, but some states have minimum repayment terms, such as 120 days. If you default on the loan, the lender can take your car to pay off the loan
• Pawnshop loans: Pawnshop loan APRs can exceed 200%, depending on your state and the size of your loan. However, unlike other loan types, you don't risk your credit if you default on a pawnshop loan. In most cases, the shop owner simply takes your collateral. Pawnshop loans tend to be due in one or more months, with interest due each month.

How do personal loans work?

Personal loans are a type of installment loan. They usually have fixed interest rates and fixed monthly payments. You receive a lump sum upfront, typically deposited into your bank account (but could also have it sent to your creditors within one to three business days once your loan is approved.

Most personal loans have the following features:

• APRs up to 36%
• Fees (origination fees, late fees, non-sufficient funds fees)
• 2- to 5-year repayment terms
• $1,000 to $50,000 loan amounts
• Versatile loan use
• Fixed monthly payments

Origination fees

With bad credit, you're more likely to be charged an origination fee. This fee is deducted upfront from the loan amount, which means you receive less than the amount you actually borrowed. Fortunately, origination fees are figured into the loans APR, or annual percentage rate. The APR accounts for both interest rates and upfront fees, which makes it a very good way to compare bad credit loans. Origination fees can range up to 12% of the loan amount.

For example, if you borrow $5,000 with a 10% origination fee deducted upfront, you'd receive $4,500.

Personal loan interest rates

While personal loan APRs generally range from around 7% on the low end to 36% on the high end, you're more likely to pay an APR over 30% with bad credit. Take a look at the following average personal loan rates from Credible for three- and five-year loans for bad credit and better credit.

Secured vs. unsecured personal loans

While most personal loans are unsecured, some can be secured by collateral, such as your car or a bank account. Pledging collateral on a loan means the lender can take it to repay the debt if you default on the loan. It also means you're more likely to qualify or could get a lower rate.

If you get an unsecured loan, you don't risk collateral if you default. However, in either case, the default (and missed payments) will be noted on your credit report and could be sent to collections.

Compare: Secured vs. Unsecured Personal Loans

Cosigners vs. co-borrowers

If you can't qualify for a personal loan on your own, you might be able to qualify with a cosigner or with a co-borrower. They're not the same thing, but can serve a similar purpose.

When you apply for a personal loan, the lender considers your credit score, income, current debt, and other factors. When you add someone else to your application, the lender also considers their information. If they have good credit, low debt, and a decent income, they could help you qualify.

The catch is that they're equally responsible for the loan. It's added to their credit report and they're on the hook if you stop making payments. Even if you make late payments, it could bring down their score.

A co-borrower is someone who takes the loan out with you — they share in the loan proceeds. A cosigner, on the other hand, simply guarantees the loan. They don't receive any money. Both are responsible for repayment.

How to get a personal loan with bad credit

Lenders look at the following when deciding whether to approve your application and what rate you'll get. If you have one or more factors that can offset a bad credit score, like a high income or low debt, it could help you qualify for a loan.

Borrower criteria

• Income: Lenders consider whether your income is sufficient and reliable enough to afford monthly payments on a new loan. Some lenders have minimum income requirements, such as Upstart, which requires that you earn at least $12,000 annually.
• Debt: Since debt and monthly debt payments are factors that eat away at your income, lenders consider how much of it you have. In particular, they look at your debt-to-income ratio (DTI), which is a measure of your minimum monthly debt payments relative to your gross monthly income. Most personal loan lenders prefer that it's less than 36% but some lenders consider higher DTIs.
• Credit score: Even if you meet a lender's minimum credit score requirement, most still consider your credit score when determining eligibility and setting your rate.
• Credit history: Delinquent accounts, late payments, public records, or any bankruptcies also play into lender credit decisions. The older any negative marks, the better, especially if you can show a pattern of timely repayment and responsible debt management.

Loan details: How much, what for, and how long

It's not just you that lenders want to know about. They also consider what you intend to use the money for, how much you want, and how long you'd like to pay it back when setting your rate or approving your application.

• Loan amount: It can be harder to qualify for a large loan with bad credit. In part, this is because a high loan amount paired with a high APR means high monthly payments. Lenders generally won't loan you money if they don't think you can afford to pay it back.
• Loan purpose: It may be easier to get approved for a loan if you plan to use the money to pay off credit cards or other debt. According to Credible personal loans data, loans used to pay off debt were more likely to be approved than any other loan type (for borrowers with bad credit and in general).
• Repayment term: The repayment term can impact the APR you're approved for as well. In general, shorter repayment terms carry lower APRs.

How to get approved for a loan with bad credit

Some strategies include:

• Apply with a cosigner or co-borrower
• Look for lenders with low minimum credit score requirements
• Ask for a lower loan amount
• Apply for a secured loan
• Lower your DTI
• Improve your credit score

How to improve your credit score (fast)

Generally speaking, on-time payments are the most impactful way to improve your credit score long-term. This is because payment history makes up 35% of your FICO score. It could take months of a positive payment history to see credit score changes. But you might be able to speed up the process. Here's how.

If you have a good friend or family member willing to add you as an authorized user on one or more of their credit cards, you could swiftly increase your available credit, which can swiftly increase your score. The amount of credit available to you is represented by your credit utilization ratio. This ratio factors into another major component of your FICO score, the amounts owed category, which makes up 30% of your overall score.

Since those accounts would be added to your credit report, they'd also contribute to your available credit, even if you don't use the cards. (You probably shouldn't use the cards.) And since credit card companies report monthly to the credit bureaus, you could see your score improve within a matter of weeks.

Just be sure the good Samaritan maintains a low credit utilization and good credit.

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. Compare lenders: Look for personal loan lenders that work with bad-credit borrowers (like the ones listed above). Then, prequalify before you formally apply. Prequalification can provide loan quotes, which list the APR, loan amount, and repayment terms you might receive, as well as the amount of any origination fees.
2. Compare quotes and lenders: Once you've prequalified, you should have a list of potential lenders. Compare terms and APRs between them to find which best suits your needs. Consider whether any lenders offer discounts, such as autopay. Some will also discount your rate if you're getting a loan for debt consolidation or credit card refinancing.
3. Complete the application: Apply for a personal loan on the lender's website or through a personal loan marketplace. At this point, the lender will run a hard credit check, which typically causes your credit score to drop 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. Review the offer: If you receive a loan offer, review it before signing. Are the APR, repayment term, monthly payment, and upfront fees what you expect and are comfortable with? If so, sign the documents and supply any additional information, such as your account information, to receive funds.

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.