Can You Get a Personal Loan With Bad Credit? What To Know
Yes, you can get a personal loan with bad credit, but it can be challenging to find a lender who'll work with you. It's also more likely that your loan amount will be low and your interest rates will be high. That's because people with low credit scores are considered risky borrowers and less likely to repay what they owe.
Read on to learn more about how you can get a personal loan with bad credit.
MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms and fees from different lenders and choose the best offer for you.
Key Takeaways
Yes, you can get a personal loan with bad credit, but expect tougher terms. Loan amounts run smaller, annual percentage rates (APRs) climb toward 36% and origination fees are common.
Lenders weigh your credit score, income and debt-to-income (DTI) ratio together. Those three factors decide whether you qualify, how much you can borrow and the rate you'll pay.
A co-signer or collateral can improve your odds but carries real risk. A co-signer shares repayment responsibility, and pledged collateral can be seized if you default.
Lowering your DTI below 36% strengthens future applications. Pay every bill on time and reduce existing balances to build your score over time.
Summary generated by AI, verified by MoneyLion editors
What Counts as Bad Credit for a Personal Loan?
A FICO score between 669 and 580 is considered fair, and a score under 579 is considered poor. Once your score dips into the poor range, approval gets harder and rates climb.
Score Range | FICO Rating |
|---|---|
800 or higher | Exceptional |
740 to 799 | Very good |
670 to 739 | Good |
580 to 669 | |
579 or lower | Poor |
What Do Lenders Look at When You Apply for a Loan?
When lenders evaluate whether to extend credit to you, here’s what they review:
Factor | Why It Matters | What Lenders Want to See |
|---|---|---|
Credit score | Shows how reliable you are in terms of your credit | Ideally a credit score above 670 |
Payment history | Shows how timely you are with payments | Lenders don’t want to see recent missed payments or delinquencies |
Income | Having reliable cash flow to cover bills | Steady income to prove you can pay the loan back |
Utilization | Demonstrates how much credit you're relying on | A credit utilization rate below 30% |
Employment status | Signals income stability | Full-time employment preferred |
Credit history length | Longer history shows consistency | Older accounts help lenders see your record |
Recent credit inquiries | Multiple inquiries may signal financial distress | Lenders want to see limited inquiries |
Bankruptcy | Shows inability to manage finances | Lenders will only extend credit after one to two years post-discharge |
How To Give Yourself the Best Shot at Getting Approved
The stronger your application, the better your chances of approval. Here's how you can improve your odds before applying.
Apply With a Co-Signer If
Your credit score isn't strong enough to qualify on your own.
You understand missed payments can affect both your credit and your co-signer's credit.
Use Collateral for a Secured Loan If
You want to improve your approval odds or qualify for a lower APR.
You own an eligible asset, such as a vehicle or savings account.
You understand the lender can seize your collateral if you default.
Lower Your Debt-to-Income Ratio If
You can increase your income through side gigs or extra hours at your job.
You have additional time to raise funds.
Borrow a Small Amount If
You can supplement the additional funds you need some other way.
You want to improve the odds of being approved.
Prequalify First If
You’re not sure which lenders will give you the best rate.
You want to see the terms before hard inquiries on your credit.
What To Expect When Applying With Bad Credit
Knowing what to expect can help you compare loan offers more confidently. The table below highlights some common differences for borrowers with bad credit.
Factor | What To Expect With Bad Credit |
|---|---|
APR | Typically 20% to 36% |
Loan amount | Often $5,000 to $10,000 for unsecured loans |
Fees | Origination fees of up to 10% may apply |
Repayment terms | Often 12 to 48 months |
Approval timeline | Often same day to several business days |
Watch Out for Predatory Lenders
Not every lender has your best interests in mind. Watch for these warning signs before accepting a loan offer.
Warning Sign | What It May Mean |
|---|---|
Aggressive sales tactics | You are required to sign the loan without having time to read the terms |
Prepayment penalties | Paying the loan early results in lender fees |
Easy to get approved | Be wary of loans that require no credit check, income verification or other terms too good to be true |
Consumer complaints | If a lender has several complaints at the Better Business Bureau (BBB) or Consumer Financial Protection Bureau (CFPB), it may be a sign of a predatory lender |
Unexpected changes to loan terms | The lender attempts to change your agreement after you've signed or pressures you into accepting different terms |
Balloon payments | You make small payments and then are hit with an exorbitantly high payment at the end of the loan |
Alternatives If a Personal Loan Isn't the Right Move
Before taking out a bad credit personal loan, consider whether one of these alternatives better fits your situation.
Option | How It Works | Best For |
|---|---|---|
Member-owned institutions that typically offer lower rates and more flexible underwriting than banks | Borrowers who have damaged credit who qualify for membership | |
• Backed by collateral that the lender can claim if you default • Lower rate than unsecured bad credit loans | Borrowers with collateral who want better approval odds | |
Provides small cash advances, typically between $50 and $500, that are repaid from your next paycheck | Covering a small, short-term cash shortage | |
Borrowing from family or friends | You request money from friends and family | Borrowers with a trusted friend or family member |
Local assistance programs | Government agencies, charities and nonprofits may help cover essential expenses such as rent, utilities or medical bills | Borrowers facing a specific financial hardship |
How To Apply for a Personal Loan With Bad Credit
Applying for a personal loan with bad credit is straightforward. Follow these steps to get started.
Check your credit report and score: Review your credit reports for errors and understand where your score stands before applying.
Determine how much you need to borrow: Borrow only what you need to avoid unnecessary interest costs.
Set an APR ceiling: Avoid loans with APRs above 36%, which may indicate predatory lending.
Compare lenders: Focus on lenders that work with borrowers who have bad credit.
Prequalify with at least three lenders: Compare APRs, terms and monthly payments using soft credit checks.
Look at your total cost: Consider interest, origination fees and other borrowing costs.
Watch for additional fees: Look for late fees, application fees and prepayment penalties.
Choose the shortest term you can afford: Assess your budget and pick the shortest term that works with your entire financial picture.
Gather your documentation: Have your ID, proof of income, bank statements and any other required documents ready.
Submit your application: Apply with the lender that offers the best overall terms.
Review the loan agreement before accepting: Make sure you understand the full terms and fees before signing.
Documents You'll Need to Apply
Before you apply, make sure you have the following documents on hand.
A government-issued photo ID
Recent pay stubs or proof of income
Recent bank statements
A copy of your credit report
How To Rebuild Your Credit After Taking Out a Loan
Building your credit takes time, but small, consistent habits can make a meaningful difference. Here's a simple 90-day plan to help you get started.
Pull your credit report to determine your credit score.
Check for any errors and report those to the credit bureaus.
Continue to make all your payments on time.
Avoid new hard credit inquiries.
Keep your debt utilization low — aim for a rate under 30%.
Bad-Credit Personal Loan FAQs
Can you get a personal loan with bad credit?
You can get a personal loan with bad credit, but you may have a higher APR and short repayment terms.
What credit score do you need for a personal loan?
There isn't a universal minimum credit score for a personal loan. Each lender sets its own requirements, but borrowers with higher credit scores generally qualify for lower interest rates and better loan terms.
Why are personal loans more expensive with bad credit?
Lenders are taking a risk when they extend a loan to you. If you have bad credit, lenders want to offset that risk because there is a higher likelihood of missed payments or default.
Does applying for a personal loan hurt your credit score?
Prequalifying won’t hurt your credit score, but once you apply a hard inquiry will cause your credit score to drop.
Can a co-signer help me get approved for a personal loan?
A co-signer may improve your chances of securing better terms because their credit is considered alongside yours. Just keep in mind it does not guarantee that funds will be approved or disbursed.
How do I know if a bad credit lender is legit?
Check to see if they are licensed and whether you can verify their address. Also, make sure they don’t require any upfront fees.
Key Terms
Personal loan: An installment loan from a bank, credit union or online lender repaid in fixed monthly payments. It may be secured by collateral or unsecured, meaning no collateral is required.
Bad credit: A FICO score below 580, which most lenders classify as poor. Scores from 580 to 669 are considered fair.
FICO score: A widely used credit scoring model that runs from 300 to 850 and helps lenders assess how likely a borrower is to repay a debt on time.
DTI ratio: All your monthly debt payments divided by your gross monthly income, expressed as a percentage. Lenders often prefer a DTI below 36%.
Co-signer: A person who signs a loan application alongside the primary borrower and agrees to share repayment responsibility. Their credit is factored into the lender's approval decision.
Collateral: An asset — such as a car or home — pledged to secure a loan. If you default, the lender can claim that asset to recover what it's owed.
Origination fee: A one-time upfront charge a lender applies to process a new loan, typically calculated as a percentage of the loan amount and deducted from your funds before disbursement.
Unsecured loan: A loan not backed by collateral, approved based on creditworthiness alone. Unsecured personal loans typically carry higher interest rates than secured alternatives.
Summary generated by AI, verified by MoneyLion editors
Sources
myFICO. "What is a Credit Score?"
CFPB. 2023. "What Is a Debt-to-Income Ratio?"
CFPB. 2024. "What Is a Prepayment Penalty?"
Photo Credit: Twin Sails / Shutterstock.com
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