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If you’re looking for a personal loan but have less-than-perfect credit, it may be tough to find an affordable option.
That doesn’t mean you should give up. If you need the money for a true emergency expense or other use, you can find lenders that offer personal loans for bad credit. (For example, FICO defines a “poor” credit score as anything below 580.)
But beware: In some cases, personal loans targeting those with bad credit can have annual percentage rates, or APRs, that are much higher than the average personal loan, so you’ll want to be selective and compare multiple lenders whenever feasible.
And before you accept a personal loan, it’s important to compare offers for their APRs, fees, loan terms and monthly payments as well as for transparency. You deserve and need to know what you’re getting into.
The lenders we’ve picked as the best personal loans for bad credit all offer prequalification options that let you preview your estimated rate without a hard inquiry on your credit reports. Keep in mind that if you officially apply, the lender may pull a hard inquiry at that time, and your final terms may change.
Also keep in mind that these loans are not necessarily available in all states.
- Best for larger loan amounts: Personify
- Best for small loan amounts: LendUp
- Best for building credit: Oportun
- Best for educational resources: NetCredit
Best for larger loan amounts: Personify
Why Personify stands out: If you’re looking to borrow more than a few hundred dollars through a personal loan, Personify could be a good option. This lender offers personal loans of $500 to $10,000, depending on where you live.
Here are some more details about Personify’s personal loans.
- Considers factors besides credit scores — Personify says its application process considers “many factors” besides credit scores, which may be useful if you have bad credit.
- There may be an origination fee — Personify doesn’t charge prepayment fees but may charge an origination fee depending on what state you live in. If you have to pay an origination fee, it will be 5% of the amount you’re approved to borrow and will be added on to your total amount.
- High interest rates — Personify has a wide range of interest rates it may charge depending on your credit and what state you live in. For example, in Alaska, Personify offers rates between 35% and 180%.
- Not available in all states — Personify offers personal loans in 29 states: Alabama, Alaska, Arizona, California (only available to those who received a prequalification before Dec. 31, 2019), Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Utah and Washington state.
- Reports to credit bureaus — Personify will report your loan payments to the credit bureaus, which may help you build credit if you make your payments on time.
Best for small loan amounts: LendUp
Why LendUp stands out: If you have an unexpected expense but no emergency fund, you might end up in a situation where you need to borrow a few hundred dollars. LendUp could be a good option in that situation. The amount LendUp offers depends on where you live, but it could be as low as $100 and generally won’t exceed $1,000. You may see different terms if you apply on Credit Karma.
Here are some additional details about LendUp personal loans.
- Good credit not a requirement — LendUp says you don’t need to have good credit to apply and that it will consider all types of credit history.
- Short-term loans — The loans LendUp offers vary depending on where you live, but you’ll usually have to repay your personal loan within six months to 12 months of borrowing.
- Potentially high interest rates — LendUp’s personal loan interest rates vary depending on where you live. Its APRs can reach well into the triple digits depending on the state.
- Not available in all states — LendUp is only accepting new personal loan applications in the following states: California, Louisiana, Missouri, Mississippi, Texas and Tennessee.
- Only certain borrowers get repayment reported to credit bureaus — LendUp offers a “LendUp Ladder” program that allows borrowers to earn points for things like on-time payments and taking educational courses available on LendUp’s website. Platinum and Prime borrowers have the option to get their loan payment reported to credit bureaus. The ladder may not be available in every state where LendUp offers loans.
Best for building credit: Oportun
Why Oportun stands out: If you’re looking to build credit from scratch, Oportun may be a good option for a personal loan because you don’t need to have credit scores to apply. Oportun also reports personal loan payment history to credit bureaus, so you may be able to establish positive credit history as long as you make your loan payments on time.
But be careful — Oportun doesn’t give much info on its website about its range of interest rates, so it’s important to check the terms of any prequalification offer closely. (Remember, also, that the terms of a prequalification offer are not guaranteed — your final offer may be different.)
Here are some other things to keep in mind about a personal loan from Oportun.
- High interest rates — Oportun offers loans from $300 to $9,000. While Oportun doesn’t say what its range of APRs are, some states set laws restricting APRs to certain maximums. In Missouri, for example, a loan APR may be as high as 59.9%, while in New Mexico, it can’t exceed 175%.
- Only available in some states — Oportun accepts applications online, by phone or in person in nine states: Arizona, California, Florida, Illinois, New Jersey, New Mexico, Nevada, Texas and Utah. You can apply with Oportun — online only — in three additional states: Idaho, Missouri and Wisconsin.
- Origination fee but no prepayment fee — Oportun charges an origination fee that’s calculated as part of your APR — but there’s no info on its website saying how much the fee is. There’s no application fee or penalty fee for paying off your loan early.
Best for educational resources: NetCredit
Why NetCredit stands out: NetCredit provides a variety of educational articles and resources to potential borrowers as well as budgeting tools to help you track expenses. This may make the lender an appealing option if you’re looking to learn more about how credit works or get your budget on track.
Here are some other things to think about if you’re considering a personal loan from NetCredit.
- Must have a bank account — NetCredit requires applicants to have a checking account and an email address in order to apply for a loan.
- Reviews more than your credit scores — NetCredit says it takes more into account than your credit scores, which could be helpful if your credit isn’t perfect.
- Potential origination fee — NetCredit may charge an origination fee depending on where you live. NetCredit deducts the origination fee from your loan amount, which means you’ll be receiving a smaller sum of money than you request when applying for the loan. For example, if you borrow $5,000 with a 5% fee, you’ll only receive $4,750 because $250 will be taken out as a fee.
- High interest rates — NetCredit’s loans have interest rates that may reach into the triple digits. If you’re trying to consolidate debt, you may be better off considering a balance transfer credit card instead.
Things to know about personal loans with bad credit
Whether you want to consolidate high-interest debt, finance a home improvement or take care of an emergency cost, a personal loan may help. Here are some things to know if you’re considering applying for a personal loan with bad credit.
Compare loan terms
If you have bad credit, a personal loan may cost you more because lenders may see you as a greater credit risk. Since personal loans for people with bad credit can be more expensive, it’s especially important to compare loan terms to find the best deal. Here are a few basic terms to pay attention to.
- Annual percentage rate: APR is the total cost you pay each year to borrow the money, including interest and certain fees. A lower APR means the loan will typically cost you less. A personal loan for someone with bad credit will likely have a higher APR.
- Loan repayment terms: Your loan repayment period is the time frame in which you’ll have to repay the loan. Most personal loans require you to make fixed monthly payments for a set period of time. The longer the repayment period, the more interest you’ll likely pay, and the more the loan is likely to cost you.
- Monthly payments: Monthly payments are largely determined by the amount you borrow, your interest rate and your loan term. Make sure the payments are affordable for your budget.
- Loan minimum and maximum: Lenders usually establish a minimum amount and maximum amount they’re willing to lend. A lender may not be a good fit for you if it won’t loan you enough money or if it will require you to borrow more than you want.
- Loan fees: See if the lender charges a loan origination fee to process the loan, a prepayment penalty or a late payment fee.
Also consider the lender’s reputation, especially if you’ll be borrowing from a lender that’s marketing loans for bad credit.
The Better Business Bureau has information about many lenders, and you can check the consumer complaint database maintained by the Consumer Financial Protection Bureau to find out if people have filed complaints against a lender you’re considering.
Should you take out a personal loan if you have bad credit?
While qualifying for a personal loan can be challenging and expensive for someone with bad credit, borrowing may make sense in certain situations.
A key question Is whether the loan option will not only help you now — but won’t hurt you financially in the long term. This can depend upon the loan terms and the loan amount, as well as what you’ll use the loan for. For example, a personal loan for someone with bad credit could be helpful if …
- You have high-interest credit card debt. You could use a personal loan to pay it off. If the personal loan can help you reduce the amount of interest you’ll pay on the debt, it could save you money in the long run. Plus, it could consolidate multiple payments from different credit card issuers into a simpler single payment to one lender.
- You have unforeseen expenses. A personal loan could be a less expensive way to borrow compared to a credit card or payday loan.
In each case, the cost of borrowing can determine whether a personal loan makes sense. With a high-interest personal loan, consolidating may not be worth it if the loan doesn’t actually provide any savings.Should you take out a loan to pay off credit card debt?
Should you consider a payday loan?
If you need money right away, need a small loan or have been denied a personal loan because of your credit, you may be tempted to try a payday loan.
A payday loan is a short-term loan for a small amount, usually $100 to $500. With payday loans, you typically give the lender a post-dated check or electronic access to automatically withdraw money from your bank account. And the loan is usually due on your next pay date, along with fees.
Depending on the state, payday lenders may charge from $10 to $30 per $100 you borrow. For example, if a payday lender charges you $15 for every $100 you borrow per two weeks, it amounts to an APR of 391%, according to research by The Pew Charitable Trusts.
A payday lender won’t necessarily perform a credit check with the major credit bureaus when you apply for a loan. While that may make it easier to get a payday loan when you have bad credit, the high cost could make it difficult to repay.
High-cost payday lending is prohibited in some states. Other states set limits on how much payday lenders can loan, maximum loan terms and finance charges.
Before applying for a payday loan, explore all other alternatives first, such as borrowing from a credit union, signing up for overdraft protection on your bank account or working with a consumer credit counseling service to work out a payment plan with creditors.Your guide to understanding credit counseling
What can you do if you’re denied a personal loan?
If you’re denied a personal loan with bad credit, you have some options.
- Look for borrowing alternatives. If a national bank has denied you, an online lender or credit union may be willing to offer you financing. If you can qualify for a credit card, look for a card with low promotional rates.
- Build your credit. Your scores can go up over time if you pay at least the minimum on your monthly bills on time, establish a positive payment history and pay down your debts so that your credit utilization rate improves. You should also check your credit reports for potential errors since a mistake on your credit reports could affect your scores.
If you’re denied credit because of information in your credit reports, you should receive what’s called an adverse action notice from the lender, giving you an explanation. This can help you understand why you were denied and inspire you to comb through your credit reports and see where your credit stands.
How we picked these loans
When we looked for the best personal loans for bad credit we considered factors such as ease of the loan application process, interest rates, fees, loan amounts offered, loan terms and lender transparency.