Bad Credit Loans
If you need an influx of cash and your credit isn’t so great, there’s hope. With so many loan options to choose from in today’s financial market, it’s still possible to get a personal loan even with bad credit.
What is a bad credit personal loan?
A bad credit personal loan is a loan offered to individuals with less than stellar credit scores. It’s a fixed rate loan which is unsecured (not backed by collateral). Lenders normally use other criteria to determine your eligibility for these types of loans, such as your debt-to-income ratio and credit score.

What is a bad credit score?
Generally speaking, a credit score between 300-629 on the FICO scale is not ideal. However, having a credit score in this range won’t automatically disqualify you from getting a personal loan. All it will do is lower your chance of getting approved, and prevent you from getting the best interest rate on your loan.
How do bad credit loans work?
A bad credit loan can be used for any purpose – there’s no restrictions on what you can purchase with the funds. Many people use them to cover large unforeseen expenses, or even consolidate their debts. Keep in mind that some lenders will take into account what you’re using it for when making their decision on your application.
Bad credit loans are repaid in installments – usually monthly – over a period of 1 to 5 years.
Bad credit personal loans often come with high interest rates, ranging from 20 to 30% or more.
A bad credit loan can help rebuild your credit. Since the lender will report your payment activity to credit bureaus, you can repair damaged credit scores if you make your payments on time and never miss a single one.
Shopping for a bad credit loan? Here’s what you need to know
Special requirements
Some borrowers have specific requirements for you to qualify for a bad credit loan. They will normally take into account your credit report and debt-to-income ratio, but can also have a minimum credit score requirement. That means you’ll need to hit that target score or above to be approved for a loan.
Annual percentage rate
Bad credit loans have high interest rates on average, but it’s important to consider another figure: the annual percentage rate (or APR). This is similar to an interest rate, but includes any fees a lender may charge you. In general, an affordable loan has an APR below 36%.
Monthly payments
Make sure that you can afford the monthly payments of the loan. Plan your budget and use a personal loan calculator to see how the numbers look. If you’re overextended, consider an alternative or hold off on getting the loan. Most lenders will let you calculate this before you apply.
Term
The average term length for a personal loan falls somewhere between 2 and 7 years. In many cases, bad credit lenders will offer you 3 to 5 year repayment terms. Longer terms generally come with lower interest rates.
How to get a personal loan with bad credit
- Shop around – some lenders specialize in people with bad credit.
- Check your credit report – a higher score will increase your chances of getting a better rate and terms.
- Sort out your budget – make sure you can afford the monthly payments of the loan you’re applying for.
- Pre-qualify online – this will allow you to see how much you could potentially get, at what rate and what the repayment terms are. This will involve a soft credit check which will not affect your credit score.
- Look into a co-sign – this can improve your chances of getting a lower rate.
- Gather your documents ahead of time – this will streamline the process and allow you to get it done quickly.
How to manage your personal loan
Remember that a personal loan isn’t free money – you’ll have to pay it back within a certain time period.
Ensuring that you can pay the monthly installments is crucial. Make a budget and stick to it. If you need to, set up automatic payments to ensure you don’t make a mistake. In some cases, you might get a discounted rate from the lender if you set up auto-pay.
It’s important to keep in touch with your lender – let them know if you run into trouble so you can work on a solution as soon as possible. This could mean losing or changing your job, an unforeseen large expense, and so on. Some lenders might offer a temporary deferral of your payments or waive certain fees until your situation improves.
In the end, it’s all about doing your homework before you apply for a bad credit loan. With these tips, you’re well on your way to getting the right loan for your needs.