Can You Get a Personal Loan With Bad Credit?

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.

Key things to know about personal loans when you have bad credit:

• They’ll often cost more due to higher interest.

• You might only be able to borrow less than what you're expecting.

• Having a co-signer can help.

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Key Takeaways

• Yes, you can get a personal loan with bad credit, but expect a harder approval process — loan amounts may be smaller, interest rates will likely be higher and additional fees are common compared to what borrowers with stronger credit typically receive.

• Lenders consider your credit score, income and debt-to-income ratio together when reviewing an application, and those factors determine whether you qualify, how much you can borrow and what rate you'll pay.

• Adding a co-signer or pledging collateral can improve your chances of approval and may help you secure better terms — though a co-signer can help you qualify, it doesn't guarantee the funds will be disbursed.

• A shorter loan term reduces what you pay in interest overall, so opting for a shorter repayment period may save you money even if the monthly payment is higher.

• To strengthen your application over time, focus on lowering your DTI to below 36% and building your credit score by paying every bill on time and reducing your existing balances.

Summary generated by AI, verified by MoneyLion editors

What's Considered Bad Credit?

A FICO® score between 669 and 580 is considered fair, and a score under 579 is considered poor or bad. Once your score is under 600, you'll start to have trouble getting approved for financing.

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.

What Do Lenders Look at When You Apply for a Loan?

Lenders don't publish their official requirements to get approved for a loan, but they're usually looking at a combination of:

• Your monthly income

• Your DTI (debt-to-income ratio), or how much of your income you have to put toward your debt each month

• Your credit score and credit history

These factors will determine if your loan application gets approved, how much money you can borrow, how flexible your repayment terms are and how much interest you pay.

Have these documents ready when you apply:

• A government-issued ID

• Pay stubs

• Bank statements

• A copy of your credit report

What To Consider When Getting a Loan With Bad Credit

Getting a Favorable Interest Rate

Low interest rates are usually around 7%. You're more likely to have higher interest rates if you choose an unsecured loan over a secured loan.

Loan Amount

The largest loans are reserved for borrowers with high incomes and good credit histories. You might have trouble getting approved for larger loan amounts, often above a few thousand dollars.

Fees

Lenders more likely to work with borrowers with bad credit may charge additional fees. You might see origination fees, prepayment fees and non-sufficient funds (NSF) fees — all examples of the different types of administration fees.

Repayment Terms

The longer your loan term, the more you'll pay in interest. Conversely, a shorter loan term means you'll pay less in interest.

It's best to avoid paying more than you need to, so a shorter loan term may be better in the long run.

How To Make It Easier To Get a Personal Loan With Bad Credit

In order to get better terms, you can:

• Get a co-signer or co-applicant. This combines your credit scores with the other people on the application. If they have a better score, you can get better terms. Remember that a co-signer can help you qualify, though it doesn't guarantee you'll receive the funds. A co-borrower is the one who will actually assist with payments.

• Put up collateral. Collateral is an asset of value, such as a car or a house, that the lender can claim if you can't pay back your loan. This can help you get approved and may even get you lower interest rates.

• Improve your DTI. Although this can take longer, lowering your debt-to-income ratio to below 36% can help you secure better loan terms. You can do this by not taking on more debt, paying down the debt you have or increasing your monthly income.

Alternatives to a Personal Loan if You Have Bad Credit

If getting a loan isn't possible or too expensive, consider:

• Selling your assets for extra cash

• Getting a side job

• Filling out paid surveys

In the meantime, work on improving your credit score. You can do that by paying all of your bills on time and paying down your debt. Over time, you'll start to see your credit score get higher.

Ultimately, yes, it's certainly possible to get a loan with bad credit, though be mindful of how much extra it could cost. It's good to shop around so you can see all of your options.

Personal Loans With Bad Credit FAQs

Can you get a personal loan with bad credit?

Yes, it’s possible to get a personal loan with bad credit, but approval can be harder to get, and the loan may come with a smaller amount and higher interest costs than borrowers with stronger credit typically receive.

What credit score is considered bad credit for a personal loan?

On FICO’s scale, a score from 580 to 669 is considered fair, and anything below 579 is considered poor, or bad credit. Once your score drops below 600, getting approved for financing can become more difficult.

Why are personal loans more expensive with bad credit?

Lenders generally view lower credit scores as a sign of greater risk, which is why borrowers with bad credit are more likely to face higher interest rates and additional fees. Unsecured loans may come with higher rates than secured loans.

How much can you borrow with bad credit?

Loan size depends on factors such as your income, debt-to-income ratio and credit profile, but borrowers with bad credit may have trouble qualifying for larger amounts, especially for loans above a few thousand dollars.

What do lenders look at when you apply?

Lenders usually consider your monthly income, your debt-to-income ratio, and your credit score and history. These factors can affect whether you’re approved, how much you can borrow, your repayment terms and the interest you’ll pay.

Can a co-signer help you qualify for a personal loan?

A co-signer or co--applicant may improve your chances of securing better terms because their credit is considered alongside yours. A co-signer can help you qualify, but it does not guarantee that funds will be approved or disbursed.

Can collateral improve your chances of approval?

Yes, offering collateral, such as a car or house, can help you get approved and may even help you secure a lower interest rate because the lender can claim that asset if you don’t repay the loan.

How can you improve your chances of getting better loan terms?

Lowering your debt-to-income ratio (ideally below 36%), avoiding additional debt, paying down existing balances, increasing income, or applying with a co-signer or collateral can strengthen your application.

What if a personal loan with bad credit isn’t the right fit?

If borrowing isn’t possible or the costs are too high, consider alternatives such as selling assets, taking on a side job, or completing paid surveys while you work on improving your credit by paying bills on time and reducing debt.

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 579, which most lenders classify as poor; scores from 580 to 669 are considered fair. Either range can make loan approval harder and more expensive.

• 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.

• Debt-to-income ratio (DTI): 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.

Sources:

• myFICO: Credit Score Ranges

• CFPB: What Is a Debt-to-Income Ratio?

• CFPB: What Is a Prepayment Penalty?

• CFPB: What Is a Personal Loan?

Summary generated by AI, verified by MoneyLion editors

Jasmin Baron, CCC™, contributed to editing this article.

Photo Credit: Twin Sails / Shutterstock.com