Best Personal Loans For Bad Credit

How to Choose the Best Personal Loans for Bad Credit

Before we get into our top picks, here’s a closer look at the main factors to consider when analyzing and comparing loan companies for bad credit.

• Loan features: First, it’s important to look at the basic components of the loan. How much can you borrow? Often, lenders provide a range of loan amounts and approve you for up to a certain amount based on your credit and income. They’ll also offer a specific amount of time to pay the money back such as 12, 24, or 60 months. Keep in mind that longer loan terms mean lower monthly payments but higher overall costs. Some loans may also come with limitations on how you can use the funds so make sure to check on any restrictions.
• Interest rates and fees - You’ll also want to look at the annual percentage rates (APRs) available as well as the rate they’ll offer you. Additionally, take note of any fees to get the loan such as application or origination fees. It’s also smart to think ahead and look at any fees you may encounter down the line such as prepayment fees, late fees, or returned payment fees. Unfortunately, low interest loans for bad credit aren’t typically a thing.
• Application process - Next, consider the ease and convenience of the application process. Can you apply online from the comfort of home? Do you need to send lots of documentation? Do they require a hard credit check for a quote? Many lenders perform a soft credit pull to provide you with a loan quote without hurting your credit score, but others will require the hard inquiry. Also, think about how long it takes to get a decision and get the funds.
• Eligibility requirements - You can save some time by understanding the eligibility requirements of a lender before you apply. Some will require a minimum credit score, residency in certain states, or a certain level of income. If you’re looking to get a loan from a credit union, you’ll likely need to become a member. Further, some lenders will allow you to apply with a cosigner to get better rates while others won’t.
• Customer support - You don’t want to find out that a lender’s customer service is bad once you have a problem and need them. Instead, look into the quality of service ahead of time. Find out if they have multiple support channels such as phone lines, email inboxes, and live chats.
• Online user reviews - Reading online reviews from past customers can also help you understand if a lender is a company you want to go ahead with. Trustpilot is a good place to look for reviews. You can find out about red flags like surprise fees and bad customer service before you’re dealing with them first hand.
• Perks and bonuses - Lastly, don’t forget to look at unique offerings that set a lender apart from the rest. Perhaps, it’s a program that lets you gradually borrow more money. Or, maybe it’s a unique way that the lender analyzes the risk level you present, without relying so heavily on your credit score. On the other hand, it could be payment flexibility if you come upon hard times. Look for the perks and bonuses that might work to your advantage.

Best Personal Loans for Bad Credit for 2022 - Full Overview

Now that you know what to look for when comparing options, which loan company is best for bad credit? We compared over 30 lenders, analyzing their loan amounts, terms, rates, fees, and more. The result? Here are our top six picks for the best personal loans for bad credit in 2022.

Best Personal Loans for Bad Credit - Feature Comparison

What is Considered a Bad Credit Score?

According to myFICO, a credit score that’s lower than 580 is considered poo. If your score is between 580 and 669, it is considered fair but not yet good. Any score below 670 is below the average score of U.S. consumers so will mean it’s riskier to lend to that borrower.

What Affects Your Credit Score?

The biggest factor in your credit score is your payment history. If you have any late or missed payments, your score will drop. Additionally, credit utilization, or the amount of credit you’ve used in comparison to how much you have available, is another big factor. The less credit you’ve used, the better.

Other factors include your credit mix, the average age of your accounts, and your recent credit inquiries. It’s best to have a mix of revolving and installment accounts, keep your accounts open as long as possible, and avoid too many hard credit inquiries.

What Are the Types of Loans for Bad Credit?

There are various types of loans you may be able to get with bad credit, including:

• Personal loans: Personal loans are lump-sum term loans that you repay over a set period of time. Loans from finance companies for bad credit will typically range from $1,000 to $50,000, have terms from 24 to 84 months, and APRs up to 36%. Personal loans are a good choice because they can help you get a lump sum of money that can be repaid over several years. The downside is, that you will still have to qualify and undergo a credit check to get funding.
• Payday loans: Payday loans are typically small, short-term, high-cost loans that are repaid out of the borrower’s upcoming paycheck. Qualification is often income-based so they are accessible for borrowers with bad credit. Because of the high costs and short terms, these have been called predatory and are prohibited in several states.
• Car title loans: Car title loans are secured loans that give you a lump sum loan that is secured by your vehicle’s title. You usually have to own your vehicle free-and-clear to use it as collateral. These loans often come with high APRs and short terms which can make repayments more difficult. If you default, the lender can take ownership of your vehicle.

How to Get a Loan with Bad Credit

To get a loan with bad credit, you’ll first need to figure out which of the bad credit loan companies you’ll likely qualify with. Most post their eligibility requirements online or you can find them in reviews like this one. Make a shortlist of lenders that look to be a good fit. While each will have a slightly different application process, here are the common steps you’ll encounter:

• Visit each lender’s website: Visit the websites of the lenders from your shortlist.
• Click apply: Most lenders want you to apply so they have a button right on their home page to check your rate, get a quote, or something similar.
• Complete the application: From there, you’ll complete the application which often involves providing your personal, income, and expense information, and undergoing a soft credit check.
• Review your offer: Once the lenders receive your application, they’ll let you know if you’re approved or not. If you are approved, you’ll be able to see how much you can borrow, along with the fees, APR, and terms. Take note of all of your offers.
• Compare offers: Compare all of your offers side by side to see which is the best.
• Accept the loan: When you find a loan that fits your budget and needs, follow the steps provided by the lender to accept the offer. You may have to verify your income by sending bank statements or connecting your bank account. Then, you’ll usually need to e-sign documents.
• Receive the funds: Lastly, the lender will send you the funds. Often, they’ll direct deposit them into your bank account within one to two business days.

Where Can I Get a Personal Loan with Bad Credit?

You can get a personal loan with bad credit from select banks, credit unions, and online lenders. In most cases, the best bad credit loans are going to be available through online lenders. Several specialize in lending to bad credit borrowers, have lower overhead costs, and have more lenient qualification requirements. Being so, browsing the six lenders above can help you get some of the best offers available right now for borrowers with bad credit.

Alternatives to Bad Credit Loans

Even the best bad credit loans can be on the expensive side. If you would rather not use them, you could try one of these alternatives:

• Borrow from friends and family: Lenders don’t know you personally so can only look at your financial records and history to assess the level of risk you present. Friends and family members, on the other hand, do know you which can work to your advantage. If you are in need of a loan but need better terms than you can get with a lender, consider asking someone you know who trusts you.
• Credit cards: Some lending companies also offer credit cards to people with bad credit. In some cases, you need to put down a security deposit but then can earn an unsecured credit line. While credit cards typically have high APRs, you can cut your borrowing costs by paying off the balance as quickly as possible.
• Work on your credit: Another option, if the financial need is not an emergency, is to work on your credit and wait. You could get a secured credit card to establish a positive credit line and make all your payments on time. From there, within a few months, you may qualify for better rates and terms.

Bad Credit Loans Rates, Amounts, and Terms

The best bad credit loans can offer a far better borrowing solution than payday or car title lenders. You can often get thousands of dollars which can be repaid over several years with APRs below 36% (in most cases). While the loan amounts may be lower than personal loans for good credit, they are often higher than payday loans and car title loans. Additionally, the APRs will usually be on the high end of the ranges lenders provide to account for the risk you present, but will be much lower than the APRs you’ll face with payday loans and car title loans. Overall, bad credit personal loans are worth considering. They aren’t the worst but aren’t the best. That said, they can work as a stepping stone to help you improve your credit, prove you’ll meet your payment obligations, and earn better loans in the future.

How to Avoid Personal Loan Scams

Unfortunately, there are people out there that might try to scam you using personal loans. The best way to avoid a scam is to go to a reputable lender’s website, ensure it’s the correct URL, and apply there. A few red flags that could warn you of a potential scammer include:

• Incorrect URL: Scammers will sometimes create websites that look very similar to a legitimate lender’s website in an attempt to steal your information. Be sure you go directly to the actual lender’s website and check the URL carefully to be sure.
• Personal email address: If you receive an email from someone on behalf of a lender that is using a personal email address, be wary. Representatives will use email addresses that end with the company’s name (e.g. name@avant.com)
• No credit check: Lenders need to run a credit check, even if it’s just a soft inquiry, to verify your identity. If a lender does not require any credit check whatsoever, stay away.
• Upfront payments: Most personal loans today don’t come with any kind of upfront application fee. They may have an origination fee but often that can be deducted from your loan proceeds, rather than being paid upfront. If a lender is trying to get you to pay something before you can get the loan proceeds, that’s a big red flag.

While there are scammers out there, there is also a wide selection of legitimate lenders, like those that made our list above. By opting for well-known, reputable lending companies, and going directly to their websites, you can greatly reduce any risk of being scammed.

Conclusion

If you currently have bad credit and need a loan, there’s a whole lineup of lenders that will consider lending to you — no matter your score. Above are six of the best loans for bad credit currently on the market. Applying is simple. You can get an answer within minutes without leaving your couch. The downside is that it’s likely going to be a smaller loan amount with higher rates than you would get if you had fair or better credit. However, in some cases, the high cost is worth it. Plus, if you pay it on time, you’ll add a positive credit line to your account. That can help you improve your score and put yourself in a better position for your future borrowing needs.