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Personal Loans for Bad Credit: Compare and Apply

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Lauren Ward

Lauren Ward

Updated August 23, 2021
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Personal Loans For Bad Credit: Compare and Apply; Do you have bad credit and need a personal loan? Learn more about how to qualify and apply for personal loans for bad credit with Lantern Credit today!
Finding personal loans for bad credit can help you in a variety of situations, whether you’re experiencing a financial emergency or need help with a major expense. But not all bad credit loans are created equally. While most come with above-average interest rates, some have additional terms that are not consumer-friendly. That’s why it’s so important to learn how loans for bad credit work and what to look out for when you apply.

What Is a Personal Loan for Bad Credit?

Personal credit scores typically range from a low of 300 to a high of 850. Any score less than 670 may be considered “poor.” When your score is in that range, it’s generally more difficult to qualify for any type of financing, including credit cards and personal loans. And if you do qualify, you’re likely to be charged high interest rates and given low limits. 

Credit Score Ranges and Categories

A personal loan for bad credit is designed to help you qualify for the funding, while still providing the lender with enough security to make the risk worth it. In addition to charging high interest rates, some personal loans may require you to provide collateral if your credit isn’t strong enough. You may also have to make payments more frequently, such as weekly or bi-weekly.  Like other personal loans, most bad credit loans are flexible about how you spend the loan funds. And online lenders offer fast approvals and quick funding times. Whether you need a personal loan for car repairs, medical bills, or another financial emergency, there are generally options available.

How Does Coronavirus Affect Bad Credit Loans?

Many lenders have been offering some type of loan relief for borrowers who have faced financial setbacks because of the COVID-19 pandemic. Some of those options have included putting a loan into forbearance or deferring payments. If you’re feeling a financial pinch, ask your lender about these ways to pause your payments. Interest will probably still accrue even with one of these options, but you wouldn’t have to worry about late payments hurting your credit score. 

How to Get a Loan with Bad Credit

There are a few ways to help improve your chances of qualifying for a loan with bad credit. First, learn what steps you might take to work on your credit score. Check your credit report to make sure everything is correct. If it’s not, you can file a dispute to have any inaccuracies corrected. Going forward, make a point of paying all of your bills on time. Also, try to pay off excessive debt, especially your credit card balances. You could consider refinancing into a personal loan as a way to consolidate debt and potentially get a lower interest rate than what you are paying on a credit card.Another way to improve your odds of being approved is to apply for a personal loan with a cosigner. This allows you to leverage that person’s credit history and income in addition to your own. However, if the loan is approved, your cosigner will also be liable for the loan. Any negative activity, like late payments, could damage your cosigner's credit as well as yours. 

Will Taking a Loan with Bad Credit Affect My Credit Score?

There are a few ways a loan may potentially impact your credit score, and some are actually positive. Most lenders report your payments to the three major credit bureaus—Equifax, Experian, and TransUnion. That means that the bureaus will know and keep on record whether you do or don’t make your payments on time. While you are taking on more debt, a personal loan is considered installment debt, which is counted more favorably than revolving debt. This may contribute to a better credit mix.Additionally, installment loans typically don’t count toward your credit utilization, since they are repaid regularly over a set period of time. In other words, your score isn’t typically penalized as it would be if you maxed out your credit card with the same amount. And if you’re worried about lender credit checks harming your credit score, typically you can get pre-qualified without damaging your credit score. Just be sure the lender advertises using a “soft” credit pull rather than a hard one. Then you can review your loan offer and not have a full credit check done until you find terms you’re happy with. 

How to Choose the Best Bad Credit Loan Company

There can be a lot of variation among lenders, so review the terms and conditions of your loan agreement carefully before you sign. Here are some top factors to consider when choosing a lender for a bad credit loan:

APR and Lender Fees

The APR helps you figure out the total cost of the loan. It includes the interest rate as well as any fees the lender charges, like an origination fee. Compare the APRs on loans you’re considering as well as all of the rates and fees broken down individually so you understand exactly what you’ll be paying. 

Monthly Payments

Even if you get approved for a personal loan with bad credit, make sure you can afford the monthly payments. Otherwise, you might damage your credit even more with missed payments and a potential loan default.

Funding Time

Bad credit loans online typically have the fastest funding times. Some even advertise that borrowers can get the loan money within a day. If you need cash fast, compare funding times as well as your loan terms before making a decision.

Types of Bad Credit Loans

There are a number of types of loans that you may be able to get with poor credit. 
  • Secured Personal Loans: Securing a loan means you use some type of personal asset as collateral for the loan. If you default, the lender can then take that asset as repayment for the loan funds. You might be able to borrow more money or nab a lower interest rate with a secured loan, since the lender is taking on less of a risk.
  • Unsecured Personal Loans: Also known as a signature loan, an unsecured personal loan doesn’t require any collateral. The lender primarily looks at your creditworthiness to decide on your approval. It may be more difficult to get approved for an unsecured personal loan than for a secured personal loan. 
  • Payday Loans: A payday loan is a type of small personal loan for bad credit that is both risky and expensive. The average APR for a payday loan is typically 4000% or more and you usually only have a short period of time to repay the funds, usually between 15 and 90 days. If you can’t pay, you may be able to roll over the loan for another period, but you’ll just be tacking on more interest and costly fees. 
  • Cash Advances: You may be able to get money from an ATM by charging the withdrawal as a credit card cash advance. Be aware that there might be a lower limit than your full credit limit. Also, cash advances usually have a higher APR than your normal credit card rate. You may also have to pay ATM fees. Interest charges start immediately and your creditor can put your payments toward your lower-interest balance before paying off the more expensive cash advance. 
  • Bank Agreements: 
    • Home Equity Loans for Poor Credit: A home equity loan could still be attainable with bad credit, especially if you have substantial equity in your home and enough income to handle the payments. Also known as a second mortgage, a home equity loan uses your property as collateral, so you could potentially qualify even with bad credit.
    • HELOCs for Poor Credit: Like a home equity loan, a home equity line of credit (HELOC) uses a variety of factors to determine eligibility—not just your credit. Your income, current levels of debt, and amount of equity in the property could help you qualify even if your credit score is less than stellar. 
    • Small Business Loans for Bad Credit: If you’re an entrepreneur and need help with your company’s cash flow, there are some options for small business loans for bad credit. Your business may need to meet revenue requirements and be in business for a certain amount of time.  

How to Spot a Bad Credit Loan Scam

Unfortunately, there’s no shortage of fraudsters trying to take advantage of individuals who need financial help. Learning how to spot bad credit loan scams can help prevent you from losing money and becoming a victim of identity fraud. Here are some red flags to watch out for.

“Guaranteed” Loans

There’s no such thing as a guaranteed loan. Any lender who claims not to look at your credit history could very well be a scammer. While there are legitimate lenders that specialize in borrowers with bad credit, you should still expect a full application and review. 

Advance Fee Loans

Avoid any lender that requires you to pay an upfront fee, especially if it asks for a wire transfer (they are non-refundable). Lenders may charge an origination fee for the loan, but that will be taken out of the loan funds before they’re disbursed. No one should ever ask you to pay anything before you receive any funds.

The Takeaway

Typically, it’s possible to get a personal loan for bad credit. Just be sure to search out lenders with good reputations. And read your loan terms carefully so you know exactly how repayment works, what kind of collateral may be required, and how much all of the fees cost.Ready to compare offers from multiple lenders? Check your eligibility with Lantern Credit and get multiple offers to compare from our lending partner network.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit ( tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC0421044

Frequently Asked Questions

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About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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