How to Get a Personal Loan With Bad Credit

A bad credit personal loan is a loan that is either designed for applicants with poor credit or is lenient enough to accommodate them. Each lender sets their own credit score thresholds as well as income requirements and other loan qualifications that applicants must meet in order to be approved for a personal loan through that lender.

Having bad credit can have a significantly negative effect on an application for a new personal loan. Depending on just how low your credit score is, it can be difficult to find a lender who will approve your application with bad credit. Even if you do get approved, your credit score can result in a less than favorable interest rate.

Anyone who needs quick access to funds can take out a personal loan despite their credit history. While it may be more difficult to find a lender who will approve you for a loan with bad credit, there are still plenty of options for taking out a personal loan with bad credit. You should not let the fact that you have bad credit stop you from seeking a personal loan if you need one.
On the other hand, if you know that you have been financially irresponsible in the past, it may not be a good idea to take on any more debt. Only take on a personal loan (or any other form financing) if you are positive you will be able to meet the minimum monthly payments. If your bad credit is a result of significant financial mismanagement, you may want to consider another option for getting the funds you need – such as borrowing from friends or family. Otherwise, you could be making a bad situation worse, resulting in an even lower credit score.

The short answer is that most applicants, even those with bad credit, should be able to find a loan that they qualify for somewhere. There are many online lenders, credit unions, and even banks who specialize in offering financing to those with bad credit. For example, the online lender Upgrade allows applicants with scores as low as 560 to still receive a personal loan with no minimum income requirements.
Depending on just how low your credit score is, you may need to find a lender who will allow you to apply for your loan using a cosigner. When you use a cosigner on your application, their credit score and financial situation is considered instead of yours, resulting in a more favorable loan decision and better interest rates than you could receive on your own.

There are a few different types of loans that may be marketed towards applicants with bad credit.
Secured personal loans are a common but risky option for borrowers with poor or no credit. A personal loan may be secured with an asset belonging to the applicant such as a savings account, CD, or vehicle title. In the event that the borrower fails to repay the loan, the lender will take permanent possession of this collateral. For this reason, secured personal loans should be pursued with caution. Applicants should make sure they can expect to fully repay the loan.
Payday loans are another popular loan option for consumers with bad credit. Like secured loans and car title loans, payday loans carry a significant risk of a different kind. While payday loans are not secured by any asset that can be seized, they do run a very high risk of getting the borrower stuck in a continuous cycle of borrowing that can be difficult to get out of. In fact, approximately 80% of payday loans are rolled over or reborrowed within 30 days of the loan.
Lastly, personal loans from lenders who accept applicants with bad credit are another option, and probably the best one if you can find a lender who will approve your application.

Lenders do not like to take on any more risk than they need to, even if they are willing to extend loans to applicants with poor credit. Therefore, the amount that you can borrow with a low credit score may be limited. In order to access the highest loan amounts, you’ll want to improve your credit score as much as possible or consider using a cosigner. Ultimately the amount you qualify for usually depends on a variety of factors including your income, debt-to-income ratio, credit score, and of course the lender.
For example, the online lender LightStream offers personal loans of amounts up to $100,000, but applicants are required to provide proof of an annual income of at least $50,000 and have a minimum credit score of 660 or higher. Just because you meet their credit score and minimum income requirement does not mean you will qualify for a $100,000 loan. Each applicant is evaluated on an individual basis.

On the other hand, the online lender Upgrade does not have a minimum income requirement and can approve applicants with credit scores as low as 560, but their loan amounts are capped at $50,000. Again, just because they offer loans up to $50,000 does not mean you will qualify simply because you meet their requirements.
As you can see, the amount you can expect to borrow with bad credit can vary from lender to lender, but in general you may be limited to lower loan amounts than if your credit score was higher. To determine how much you qualify for you should check offers or get pre qualified.

To receive a secured personal loan with bad credit, you will need to put down some sort of asset with the lender that can be used as collateral in the case of default. This is done to protect the lender who is taking on a risk by extending financing to a consumer with bad credit.
Examples of collateral include a savings account, CD, or vehicle title. Secured personal loans can be very risky for borrowers since your personal asset is on the line. Only consider a secured personal loan if you are very sure you can afford to repay the loan over time.

There are a few ways to get an unsecured personal loan even with bad credit.
Many applicants still have success applying for a personal loan with a lender that is known for having lenient credit score requirements, like the online lender Upgrade who can approve applicants with credit scores as low as 560. Banks and credit unions may also have specialized loans for those with poor credit, however you can expect to pay a much higher interest rate for the privilege of borrowing funds from that lender.
In addition, most lenders will allow applicants with bad credit to apply using a cosigner who will then be on the hook in the event of a default on repayment of the loan. When a borrower applies with a cosigner, the financial information and credit score of the cosigner is used instead of the original applicant. This not only increases the chances of approval, but also gives the borrower access to the best possible interest rates they would not otherwise qualify for. Most of the time, a cosigner is a friend or family member, but it can be difficult to find someone willing to sign on the dotted line for someone else’s personal loan.

There are a few risks of taking out a personal loan when you have bad credit.
One of the biggest risks you take on is overpaying in interest or falling victim to other predatory lending practices. The lower your credit score is, the higher your interest rate will be. When you are paying off a personal loan, the interest rate you receive is going to make a significant impact on the total amount you pay over the lifetime of the loan. Be sure to thoroughly review all your loan terms and shop around or get prequalified before applying for a bad credit loan. Never accept an interest rate or other terms that seem predatory or agree to pay upfront in order to access lending services.
In other cases, loans for bad credit are funded as secured loans like car title loans that are risky because you are using collateral to back up your loan. In the event of defaulting on a secured loan, the lender can take permanent possession of your asset. Use caution when applying for this type of personal loan in order to avoid negative consequences.
If your poor credit is due to mismanaged finances in the past, taking on another loan can result in the failure to repay your debts and lead to an even worse credit score. Make sure that you can truly afford to pay off your loan and that you will be able to make your minimum payments.

If you are denied a personal loan due to your credit score, there are a few things you can do.
You can try applying through a different lender who has different credit requirements and may be more likely to approve your application. Each lender has their own set of qualifications and where one lender may deny you for financing, another may be happy to give you the funds.
Alternatively, consider using a cosigner to apply again. When you use a cosigner on your application you are relying on the credit score and other qualifications of the cosigner instead of your own. Not every lender offers applicants the ability to use a cosigner, but if you can find one that does it can be a great way to receive a personal loan despite your bad credit.
If you have credit challenges or are denied a loan due to bad credit you should work on improving your credit score.

In addition to online lenders, consumers with bad credit can apply for personal loans at their local bank or credit union. In general, credit unions are known for being more lenient than traditional banks when it comes to their lending requirements and ability to approve applicants with poor credit. This is because of their status as not-for-profit organizations that are focused on their members and on the local community. They may be able to take more risks with their applicants because they are not focused solely on profits. However, you shouldn’t rule out your local bank branch either, especially if you already have an account with a certain financial institution. In some cases, banks may be more likely to approve an applicant with bad credit if they have proven to be a loyal customer for many years.

To choose the best lender for your bad credit loan, you will need to do your research to perform a comparison of interest rates, loan repayment periods, and loan amounts.
Always make sure that your lender is a legitimate financial institution, especially when applying online where scams can be common, and your personal information may be at risk.
At Acorn Finance you can check offers from top national lenders that can help a wide variety of individuals with varying credit scores. While you may have less options than a borrower with good credit, it’s still important to shop and compare offers. If time allows you should improve your credit score before applying for a loan.

There are a number of online calculators to help consumers get a better idea of what loan payment they can expect to take on. Your loan payment will be largely based on a few key factors – your interest rate, loan amount, and loan repayment period. Playing with these numbers can help give you a better idea of what your monthly payment could be. To estimate payments you can check offers and use a personal loan payment calculator to play around with numbers or examine total loan costs.

The best options for taking out a loan with bad credit include credit unions and online lenders. Both of these options for receiving a personal loan are more likely to extend financing to applicants with less than favorable financial situations. There are a number of online lenders and credit unions who specifically market their services to consumers with poor credit. We will highlight a few of these lenders further down in this article.

The steps to applying for a loan with bad credit are essentially the same as applying for any other personal loan. Let’s take a look at the steps:
#1. Check your credit score
Before applying for a loan you should examine your credit report and check your credit score. This can help you determine what you might qualify for. It can also help you identify any potential ways to improve your credit score.
#2. Check offers
Whether you choose to use your local bank or credit union or an online lender, you should check offers. You may be asked to submit documentation such as proof of income, identification, and more to move forward with the offer. It can help the process go smoother by gathering these documents before checking offers. You will also want to make sure the information you submit is accurate. Reviewing documents such as proof of income beforehand can help ensure the information you submit is accurate and can be proven.
#3. Apply for a loan
You will need to apply either online or in person and be prepared to submit supporting documentation of everything from your identity to your income and current employment. The underwriting process can take anywhere from minutes to a few business days, and you can expect for loan origination and funding to take anywhere from 1 to 10 business days depending on your lender.
If you have bad credit you may need to do a little bit of additional research first in order to find a lender who is more likely to approve your application despite your poor credit score. Many lenders publish their lending requirements online, making it easy to know where you should apply and where you shouldn’t waste your time. Assuming that you know your credit score, it should be very clear which lenders are viable options for you and which are not.

One of the best places for applicants with bad credit to access personal loans is from an online lender. Online lenders may be able to take on more risks when extending credit and financing to applicants who traditional sources would likely deny. This is due in part to the fact that online lenders have fewer overhead costs to recuperate. In addition, consumers benefit from the fact that these lenders are trying to stay competitive with other websites by offering the best deals.
There are a number of sources for online personal loans for those with bad credit. Some of our favorite online lenders with lenient credit score requirements include Upgrade, Prosper, BestEgg, OneMain Financial, and LendingPoint. These lenders can offer fast funding, competitive interest rates, and trustworthy loan funding to applicants with less-than-perfect credit scores. Upgrade in particular allows applicants with credit scores as low as 560 to be considered for loan approval, and also allows borrowers to apply with a cosigner.

Sitting down and speaking with a loan officer in person can sometimes go a long way towards getting loan approval even with bad credit, versus an online application that uses algorithms and possibly even an automated underwriting process. In this case, consider a visit to your local bank or credit union branch to apply in person with your documentation.
In a pinch, borrowers with extremely poor credit can also pursue a secured loan like a car title loan which uses your vehicle as collateral, or a payday loan which does not require a credit check for approval. Either of these options carry their own risks but are viable options for those in need of funds who are having trouble getting approved elsewhere.

Oftentimes, consumers just need access to a small amount of cash but don’t want to apply for a payday loan or borrow money from friends or family. Where can you turn to get a small personal loan with bad credit? The best options for getting a small personal loan with bad credit include online lenders and credit unions.
Both online lenders and credit unions are more likely to offer access to loans of smaller amounts than traditional banks. For example, Upgrade originates loans for amounts as little as $1,000 while Prosper loan amounts start at just $2,000.
Applying for a loan through your local credit union allows you to take advantage of low rates, personalized service, beneficial loan terms, and flexible underwriting. Credit unions are not operated in the same way as banks are. Instead of being focused on profits, they are focused on their members who are also part-owners of a not-for-profit organization.
Many online lenders also offer lenient loan requirements and flexible loan terms to meet a variety of needs and accommodate for a variety of financial situations. Those with poor credit and/or low income will have better luck with these sources of lending than with a traditional bank. Applicants who have failed to get loan approval with a bank should try an online lender.
While some lenders can offer personal loans if you have bad credit you should seriously consider improving your credit score before applying for a loan. Bad credit loans can be expensive. If you fall behind on payments you risk worsening your credit score. It may be hard to recover or get a second chance if your credit score gets too low.