If you have poor credit, that doesn’t mean that you can’t get a personal loan. Check out this guide to learn more about the best personal loans for bad credit.

In the US, almost 1/3 of people have credit scores that fall below 601.

When an emergency happens and you need access to money, a credit score that low impacts your ability to get a loan. But there are loans for people with bad credit, you just need to know where to look.

Part of finding the best personal loans for bad credit is a matter of applying to the right lenders. The other part is – working to improve your credit – is just as important.

Keep reading to learn more about how to get a loan with bad credit. 

What is Bad Credit?

Lenders check your credit score whenever you apply for a loan. They use your credit score to gauge your ability to repay the loan. It affects the terms of the loans as well as the interest you pay.

Credit scores range between 300 and 850. They’re rated on the following scale:

  • 800 or above is exceptional
  • 740-799 is very good 
  • 670-739 is good
  • 580-669 is fair
  • 579 or lower is poor

Your credit score is negatively affected by things like late payments on bills, civil judgments against you, and using too much of the credit available to you. You might also not have any credit history, which means you have no credit scores for lenders to check.

Having no credit, or having midrange to low scores makes it more difficult to get a personal loan. That’s especially true with big banks and other traditional lenders that have strict qualifying criteria.

Finding the Best Personal Loans for Bad Credit

When you’re looking for the best personal loans for bad credit, half the battle is improving your credit to get better terms. The other half is doing your research and knowing where to look for good lenders. Below, we detail all the steps to find the best personal loans for bad credit.

Rebuild Your Credit

If you can take some time to improve your credit before looking for your loan, you should. To start rebuilding your credit, you can:

  1. Look at your credit report. Go through the report thoroughly and look for any errors or fraudulent activity. If you find any, dispute those with your credit card company.
  2. Don’t make late payments. It goes without saying that you should never miss a payment, but making late payment also has a major impact on your credit score. Setting your bill to auto-pay will help avoid this common mistake.
  3. Lower your credit utilization. Your credit utilization ratio is the ratio of how much total credit you have and how much you’re using (i.e. your outstanding balance). You should never be using more than 30% of your total credit limit.
  4. Keep your accounts open. The age of your accounts has an impact on your credit score. The longer you’ve had a credit account, the better it reflects on your score. 

The better your credit score, the more lenders you can access and the better the chances you’ll be approved for your loan. Having better credit will also give you access to loans with more favorable terms. As if that’s not reason enough to work on your credit, you’ll also find loans at much lower interest rates.

Do Your Research

Do your research before choosing a lender for a bad credit personal loan. Look into the various terms and interest rates and compare all of your options before choosing what works for your financial situation. For all the reputable companies that make funds available to people with bad credit, such as Bonsai Finance, there are also those you should avoid.

Payday loans, for example, aren’t always a great option. While they provide cash fast, some research suggests that payday loans can devastate those that use them. In some cases, payday loans charge annualized interest rates of 400%, which makes it very difficult to pay back.

But you should also avoid lenders that don’t do a thorough background check on your ability to repay the loan. A reputable lender should check your financial circumstances and your credit history.

Bad Credit Personal Loans

There are loans that are specifically made for people with bad credit. You can get these at banks, credit unions, and through various online lenders.

How much you can get from a bad credit personal loan depends on your credit score. You’re usually able to get larger loans when it’s secured rather than unsecured.

For a secured loan, you have to put up something of value as collateral. In the case you can’t pay back your loan, the lender can seize that item in return for the money lost. Unsecured loans are those that aren’t backed by collateral and aren’t typically worth as much.

Peer-To-Peer Lending

A peer-to-peer lending platform links borrowers with individuals or groups of individuals who are willing to lend money. These lenders usually do have a restriction on credit scores, but you have a better chance at securing a loan with them then a big bank. And because they have less overhead, you usually pay lower fees as well.


You might also consider looking for personal loan lenders that accept co-signers. In this arrangement, you’re essentially borrowing the good credit history of your co-signer. You use their good credit to offset your bad credit.

You might ask a close family member or friend to be your co-signer. This third party is essentially agreeing to repay your loan should you default.

Ask Friends or Family

Although not always ideal, if you’re in a crunch for a personal loan, you might consider asking friends or family if they’d be willing to lend you the money you need. This foregoes the need for a credit check, and you can write the terms based on an agreement between you and your family or friend.

All The Financial Advice

The first step in finding the best personal loans for bad credit is rebuilding your credit. The better your credit score is, the better the loan terms you’ll find and the lower the interest you’ll pay.

After that, do your research. Look for reputable lenders of bad credit personal loans, peer-to-peer lenders, or ask a family member to co-sign for you. And for more ways to get your finances in order, check out our blog.