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Personal Loans for Bad Credit
Personal loans are typically unsecured and are repaid over a fixed repayment period with a fixed interest rate. Because unsecured loans don’t require collateral, the lender assumes more risk in lending to you. For that reason, personal loans with competitive rates are reserved for good credit borrowers.
The good news is that some lenders and loan marketplaces are willing to offer personal loans for bad credit. Although you’ll see higher rates, they may be competitive compared with alternatives, such as a payday loan or credit card. To help you find the best loans for bad credit for you, check out the table below comparing a few options:
5 loan companies for bad credit
|Avant||9.95% - 35.99%||$2,000-$35,000||24-60 months|
|LendingClub||8.05% - 35.89%||$1,000-$40,000||36 or 60 months|
|OneMain Financial||18.00% - 35.99%||$1,500-$20,000||24-60 months|
|Peerform||5.99% - 29.99%||$4,000-$25,000 ($10,000-$35,000 for debt consolidation loans)||36 months (36-60 for debt consolidation loans)|
|Upstart||6.46% - 35.99%||$1,000-$50,000||36 or 60 months|
- Loan amount:$2,000 - $35,000
- APR: 9.95% - 35.99%
- Term: 2 to 5 years
- Funding Time: 1+ days
At Avant, most borrowers have a FICO Score between 600 to 700, which makes this online loan company a potential source for borrowers with fair or worse credit. The lender also offers secured loans in about 40 states that may allow you to borrow against the value of a car or other vehicle if you can’t snag an unsecured personal loan.
Avant usually charges an administrative fee of up to 4.75%, as well as fees for late or dishonored payments. Borrowers get up to 10 days after payment is due before they’re charged a $25 late fee. Like many lenders, Avant only does a soft credit check that won’t hurt your credit history if you’re checking to see what kind of loan terms you might be offered.
|Funds deposited as soon as next business day||APRs may be as high as 35.99%|
|Offers secured loans up to $25,000||Fees charged for administrative costs, also late and dishonored payments|
|Fast approval||Loans not offered in Colorado, Iowa or West Virginia|
- Loan amount: $1,000 - $40,000
- APR: 8.05% - 35.89%
- Term: 3 or 5 years
- Funding Time: 6 days on average or sooner
LendingClub is an online loan marketplace where your loan will be funded by one or more investors rather than a traditional bank, credit union or online lender. Although LendingClub does not disclose a minimum credit requirement, peer-to-peer lending marketplaces can be forgiving of lower-credit borrowers. Plus, you have the option of getting a secured loan.
Aside from Upstart, LendingClub boasts high maximum borrowing amounts. Borrowers also have a 15-day grace period to catch up on payments without paying a late fee. You also have the option of applying for a joint loan, such as with your spouse. A co-borrower is someone who has equal responsibility in making payments on the debt, similar to a cosigner. Their credit is taken into consideration when you apply for a loan.
|Offers joint application loans||Origination fee is 3% to 6% of the loan amount|
|Up to $40,000 in funding||Might take 3 days or more to receive funds|
|15-day grace period for late payments||Iowa residents do not qualify|
- Loan amount: $1,500 - $20,000
- APR: 18.00% - 35.99%
- Term: 2 to 5 years
- Funding Time: 1+ days
OneMain Financial charges a higher minimum APR than any loan company or marketplace on this list, but they might be an option if you have poor to fair credit. When making loan decisions, OneMain Financial looks at a host of factors, like your financial history, state of residence, income and expenses, the purpose of the loan and how much collateral might be available. If you don’t qualify for an unsecured personal loan from OneMain Financial, they may extend you a secured loan that will require collateral like a car, RV or boat.
OneMain Financial caps its loans at $20,000, which is less than the other lenders on this list. Larger loans amounts need to be secured by an insured motor vehicle no more than 10 years old. Expect common fees such as for late payments and insufficient funds. Depending on the state where you live, you may also have to pay an origination fee or processing fee that’s up to 10% of your loan amount.
It’s possible to prequalify for a loan online at OneMain Financial, but the lender requires you to visit a local branch to complete your application. OneMain Financial has more than 1,500 branches in 44 states, but this is a unique and inconvenient requirement.
|Secured loan options available||Extensive fees, like a loan origination fee up to 10% of the loan amount|
|Considers many criteria when looking at a borrower’s eligibility||Minimum and maximum loan amounts depend on state of residence|
|Funds can arrive as quickly as the same day as loan approval||Branches not available in Alaska, Arkansas, Connecticut, Massachusetts, Rhode Island or Vermont|
- Loan amount: $4,000 - $25,000 ($10,000 - $35,000 for consolidation loans)
- APR: 5.99% - 29.99%
- Term: 3 years (3 or 5 years for consolidation loans)
- Funding Time: 2-14 days
Peerform is a peer-to-peer loan marketplace rather than a lender. Instead of issuing loans itself, it operates online and connects borrowers with investors. To qualify for a loan, you’ll need meet requirements such as:
• 600 or higher FICO credit score
• 40% or lower debt-to-income (DTI) ratio
• Credit history without any current delinquencies or recent bankruptcies
• Have at least one open bank account
• Previously held at least one line of credit (like a credit card) in the past
If your loan is approved, expect to pay an origination fee of 1% to 5%. Peerform also charges $15 for every loan payment that can’t be processed, possibly because of insufficient funds; a $15 fee for every payment made by check; and a late payment fee that’s either 5% of a borrower’s monthly payment or $15 (whichever is greater).
|Competitive interest rates||Limited loan terms|
|No prepayment penalties||Extensive fees and fee schedule|
|Minimum credit score of 600||Not available in North Dakota, Vermont, Connecticut, Wyoming or West Virginia|
- Loan amount: $1,000 - $50,000
- APR: 6.46% - 35.99%
- Term: 3 or 5 years
- Funding Time: 1+ days
At Upstart, borrowers need to have a minimum credit score of 600, but this lending platform will also consider candidates whose credit history is insufficient to produce a score.
Upstart’s loans top out at $50,000, so bad-credit borrowers may qualify for larger loans than with the other lenders on this list. Rates vary by state, as do minimum loan amounts. Once you accept the terms of your loan, you may receive your funds as soon as the next business day.
|Larger loans for bad credit than other lenders||Secured loans not available|
|Available in most states||Fees that may include an origination fee up to 8%|
|Funds possibly available next business day||Minimum borrowing amounts in some states|
|Fast online application process||Not available in Iowa or West Virginia|
Cost of bad credit personal loan
In general, the lower your credit score, the higher the APR that’s likely to come with your loan. A higher APR means your loan will come with higher borrowing costs, as you’ll see in the table below. It shows that a borrower with a FICO fair credit score of 640 might have to pay $1,467 more in interest for a 3-year, $8,000 loan than a borrower with a very good score of 740.
The cost of a $8,000 loan over 3 years
|Total cost of loan||$11,451||$9,9844|
How to build your credit before applying
Trying to boost your credit score before applying for a personal loan takes time, but in the end you may qualify for far better loan terms, like a lower interest rate. Here are three ways you might be able to improve your score:
- Make payments on time. Your payment history is responsible for the largest chunk of your FICO Score (35%), so making timely payments is key to improving your credit profile.
- Improve your credit utilization by paying down credit debt. The amount you owe on credit cards and other lines of credit determines about a third of your FICO Score. Make sure that both the total amount of your credit debt — as well as what you owe on individual cards — isn’t more than 30% of your credit limit.
- Dispute errors on your credit report. You can request a free credit report every week from the three major credit bureaus —TransUnion, Experian or Equifax — at AnnualCreditReport.com, a federal website. Pay attention to the transactions listed on your report, and challenge any inaccuracies you find as they might be needlessly dragging down your credit score.
Other options for a personal loan when you have bad credit
Consider a cosigned or secured personal loan
To help lenders see you as a less risky borrower — and possibly also qualify for better loan terms — consider applying for a loan with a cosigner. This is someone who would be equally responsible for the debt. If you fail to make payments, your cosigner’s credit will be impacted along with your own. On the flip side, their credit will be considered when you apply for the loan, allowing you to potentially access better terms.
Taking on a loan that’s secured with collateral is another way to up your borrowing appeal with lenders. Collateral reduces the lender’s risk. If you fail to make payments, the lender can seize your collateral to offset any losses.
In the table below, you’ll see lenders that allow for personal loans with a cosigner, as well as those that offer secured loans for bad credit:
Lender options for bad-credit borrowers
|Navy Federal Credit Union||Yes||Yes, CD or savings account|
|OneMain Financial||No||Yes, insured vehicle like a car or motorcycle|
Apply through a credit union
If traditional lenders have turned you down for a loan because of poor credit, you may have better luck with a credit union that’s affiliated with your line of work, profession, employer or an association membership. A credit union is more likely to consider other factors — like your employment status, income, banking relationships and educational background — in addition to your credit history.
It’s often possible to get a smaller loan amount at a credit union, and many offer loans secured by a savings or CD account. Another benefit: Interest rates at most federal credit unions are capped at 18%.That means your overall borrowing costs might be far less than with a traditional bank or online lender.