Best Personal Loans for People with Bad Credit in 2026

Updated on June 30, 2026 by Kayla Harris

A bad credit personal loan is a financing product designed for people with less-than-perfect credit scores. When it comes to loans, what is considered “less-than-perfect” depends on more than the scoring model. Each lender may set its own minimum credit score requirements within poor or fair credit ranges. Some banks may consider a score of less than 620 subprime, while online lenders may accept people with scores of 580 and below, or do not set any minimum criteria at all.

Table of Contents

1. What Counts as Bad Credit?
2. How Bad Credit Personal Loans Work
3. Pros and Cons of Personal Loans for Bad Credit
4. How to Find the Best Personal Loan for Bad Credit
5. What Do Lenders Assess When Processing Applications for Bad Credit Loans?
6. What Do You Need to Qualify for a Loan with Bad Credit?
7. Common Uses for a Bad Credit Personal Loan
8. How to Improve Your Approval Odds
9. Alternatives to Personal Loans for Bad Credit
10. Personal Loan Calculator
11. FAQ

What Counts as Bad Credit?

Each credit scoring model has its own range for bad credit. FICO and VantageScore are two major models used across the US. Although both have a scale from 300 to 850, the FICO model classifies scores between 300 and 579 as bad, while VantageScore uses the interval between 300 and 600.

FICO Score Ranges

Because the FICO model is used by 90% of top lenders (according to its website), most people refer to it when talking about credit scores. Here’s how FICO scores are classified:

What Makes Up Your Credit Score

The FICO model uses multiple factors grouped into 5 key categories when evaluating your credit score:

• Payment history (35%). Your payment history shows how responsible you are at managing your financial obligations. Even a single 30-day late payment can drop an excellent credit score by 60–80 points. If a payment is 90 days or more late, it could reduce the same score by 110–130 points.
• Credit utilization (30%). This factor evaluates what portion of your overall credit card limit you use. It’s commonly recommended to keep your credit utilization up to 30% to maintain good credit, ideally at 10% or less.
• Length of credit (15%). A long credit history shows lenders how you handle your finances and debts over time. It also suggests you are more experienced in managing your credit accounts.
• Credit mix (10%). A mix of credit reflects a diversity of credit accounts on your credit report. Lenders typically want to see how you balance managing installment debt and revolving credit.
• New accounts (10%). Each time you get a loan or a credit card, a new account appears on your credit report. It can affect your credit score by reducing the age of your credit. Opening a new account typically involves a hard credit check, which can also reduce your credit score by less than 5 points.

How Bad Credit Personal Loans Work

Bad credit personal loans work similarly to standard personal loans, but with low to no minimum credit score requirements. They provide you with a lump-sum amount upfront and require you to make equal monthly or biweekly payments over a fixed period of time, usually 12–60 months. Some lenders may offer longer terms of up to 84 months.

Most bad credit loans have amounts between $1,000 and $5,000, with some lenders advertising loans of up to $50,000. But real-world approval statistics show that poor credit often results in lower borrowing limits. According to the Q3 2025 TransUnion Report, the average amount subprime borrowers qualified for was $1,800.

Personal loans for bad credit can be either secured or unsecured. A secured loan requires collateral, often resulting in higher approval chances or more favorable terms. However, they come with the risk of losing a pledged item if you default. Unsecured loans are not backed by your assets and pose less risk to the borrower, but they typically have higher interest rates and stricter minimum credit score requirements.

Bad credit personal loan rates vary widely. While most lenders advertise standard APR ranges of 5.99%–35.99%*, subprime borrowers usually get rates closer to the highest value. According to the Credible analysis across 374 closed bad credit personal loans from June 2025 through May 2026, the average APR for these products was around 29.85%.

Interest rates are typically fixed. They apply to the outstanding balance. Each time you make payments, you cover a portion of both principal and interest. That means next time you pay, interest applies to a lower balance.

*These are illustrative ranges. The rate you actually receive depends on credit, income, loan amount, and term.

Pros and Cons of Personal Loans for Bad Credit

Let’s take a look at the benefits and downsides of getting a bad credit personal loan.

How to Find the Best Personal Loan for Bad Credit

Although bad credit loans have common features, they also vary widely by terms, depending on the lender, loan type, and your state regulations. This guide will help you choose a suitable loan offer with the best possible terms.

Check Your Credit Score First

Knowing your credit score helps you understand which loan options you may qualify for. The higher the score, even within the poor range, the more choices you have and the more likely you are to get better interest rates.

Request copies of your credit reports at AnnualCreditReport.com or directly from the three major credit bureaus (Experian, Equifax, and TransUnion). You can access free updates weekly.

Get Prequalified With a Soft Credit Check

Lenders often allow you to prequalify for a loan without providing supporting documents to get loan estimates and compare offers across multiple lenders. This process typically involves no hard credit check and does not affect your credit.

To prequalify, you usually need to complete a simple online form. The lender will evaluate your application details quickly and send you potential loan terms based on the information provided.

Compare Loan Terms

Get preliminary offers from at least 3–5 lenders and compare the key parameters that affect both the cost of borrowing and loan affordability. Pay attention to the APRs that include interest rates and fees associated with your loan. Sometimes, a loan with a lower interest rate turns out to be more expensive in terms of an APR due to higher origination fees.

Aim for the lowest APR, but look closely at extra charges that are not included in the calculations, such as late fees or prepayment penalties. These costs may add up under certain conditions, so make sure you understand their amounts and how they apply.

Also, look at the repayment options and choose a term that balances both the total cost and your monthly payments. While a longer repayment period comes with lower monthly payments, it also results in more interest paid over the life of your loan. Use a personal loan calculator to compare the numbers directly.

Look for Lender Perks

Unique lender perks can make the difference and save you money. Some lenders may offer an interest rate discount for automatic payments or direct deposits to creditors (which can help if you use the funds for debt consolidation). Others may have loyalty programs or cash back rewards.

Review what lenders offer and choose the one with the perks that are the most beneficial for you. But do not let these bonuses distract you from unfavorable terms. It’s also a good idea to check the lender’s reputation and customer reviews before committing.

What Do Lenders Assess When Processing Applications for Bad Credit Loans?

Credit scores are not the only parameter that determines whether you will qualify for a loan. When your credit is bad, lenders usually assess other factors that indicate your level of risk.

Income and Employment

Steady income and employment show lenders you are likely to have enough money to make loan payments. When your credit is low, the amount you earn becomes even more important. That means you should document all your income sources to prove you can pay on time.

Bank Account Activity

Your bank statements provide lenders with a day-by-day record of your financial behavior. By analyzing them, they can evaluate your income and spending habits, check for repeated overdraft fees and bounced checks, and assess your overall financial health.

Derogatory Marks

While lenders offering these loans overlook low credit scores, they may still review your credit history for red flags like debts in collections, bankruptcies, or accounts in default. If you have any unpaid debt or your credit file contains other signals of recent irresponsible credit behavior, lenders may not approve your application.

Debt-to-Income (DTI) Ratio

This ratio shows what portion of your income goes toward paying off your existing debts each month. Having a high ratio signals that you may face challenges with payments since you do not have enough cash flow left over for other expenses and financial goals. Commonly, a maximum DTI ratio for a personal loan is 50%. Experts recommend keeping your ratio at 36% or less to increase your chances of approval.

What Do You Need to Qualify for a Loan with Bad Credit?

Although requirements may vary by lender, here are some common documents and information you are likely to need:

• Age: you need to be at least 18 (19 or 21 in some states) to qualify.
• Identity: lenders require your valid ID and Social Security number for verification.
• Bank account: most lenders transfer loan funds electronically, so you need to have an active bank account in your name. Sometimes, it needs to be open for at least 6–12 months.
• Income: provide your bank statements, pay stubs, tax returns, 1099 forms, and any other documents that prove you earn enough to manage this potential debt.
• Address: as lenders must be licensed to operate in a particular state, they need to make sure you live in the area where they can legally provide their services. Prove your address with utility bills, rent or lease agreement, mortgage statements, or other documents.
• Personal and contact details: your full name, cell phone number, and email may be used to contact you if any questions arise while processing your application.

Common Uses for a Bad Credit Personal Loan

Personal loans typically have no specific purpose, meaning that they can be used for almost anything with just a few restrictions, depending on the lender. The most common uses are as follows:

Debt Consolidation

Debt consolidation is when you combine several debts into one with a single payment, often with a lower rate or more favorable repayment terms. Most borrowers turn to these loans when they have several credit cards and want to replace them with a more predictable loan to reduce total interest paid and avoid overspending. If you need a loan to consolidate debts, make sure the APR you are offered is lower than the average APR on your current loans or credit cards.

Emergency Expenses

Personal loans can help if you face unplanned financial shocks that require quick financing. For example, your car or home appliances may break down when you least expect them to, you may suddenly lose your job, or you may need to cover travel expenses associated with family emergencies.

Home Improvements

Sometimes you may need money quickly to make your home safer or more comfortable. Personal loans can be a great option for it, especially when it comes to projects or purchases with a fixed final cost.

Medical Bills

Out-of-pocket medical expenses can strain your finances, even if you have health insurance. Personal loans for bad credit serve as one of the options to cover the costs. Before applying, consider cheaper alternatives, such as payment plans with providers or borrowing from your family.

How to Improve Your Approval Odds

Although getting a loan with bad credit is often more challenging, here are some tips to improve your approval odds and help you get lower rates:

• Check your credit reports for mistakes. Review your credit files carefully to ensure accuracy. If you find some errors (accounts that do not belong to you, derogatory marks, inaccurate amounts, etc.), dispute them with the credit bureaus. Removing mistakes can boost your credit score and potentially help you access a broader range of loan options.
• Provide collateral. Collateral is an additional guarantee of repayment that makes lenders more willing to approve you. Before settling on this option, make sure you understand risks. The lender may seize your asset if you default.
• Add a cosigner. A cosigner will become responsible for repaying the loan with you, but they cannot use the money borrowed. By adding a cosigner with strong credit and stable income, you can seek better loan terms and improve your approval odds. Just note that a missed or late payment hurts your cosigner’s credit too, and they may be sued for the full balance if you default. Discuss this with them honestly.
• Pay off debts. If you already have loans or credit cards, consider paying off their outstanding balances to reduce your DTI ratio. Read about what debt to pay off first.
• Use credit-building tools. Secured credit cards or credit-builder loans can help you increase your credit score and access better loan options in the future. You can also use Experian Boost to make your on-time utility, cell phone, and rent payments help your Experian score.

Alternatives to Personal Loans for Bad Credit

Personal loans are not the only option you have if you need money with bad credit. Explore the following alternatives before you choose the right product for you.

401(k) Loans

A 401(k) loan is borrowing from your employer-sponsored retirement savings plan. You can typically get up to 50% of your vested account balance or $50,000, whichever is less. 401(k) loans involve no credit check and have low interest rates that also go toward your retirement savings when you repay the debt.

However, the interest you pay is subject to double taxation, since you pay it with your after-tax dollars, which will be taxed again when you withdraw your retirement savings. If you do not repay the loan, the IRS will consider it a taxable distribution. Income taxes plus a 10% withdrawal penalty may apply if you are under the age of 59½.

Peer-to-Peer Loans

Peer-to-peer loans are offered through specific platforms that connect borrowers with individual investors without any traditional bank intervention. To get a loan, you need to submit an online application. The platform will assess your creditworthiness, often through a soft credit check, and provide you with loan terms based on your credit and financial history. If you accept an offer, an investor will fund your loan (usually after performing a hard credit inquiry).

Although these loans offer accessibility and speed, they often have high interest rates and fees due to risk-based pricing. As platforms are private and not regulated or insured, your loan may be transferred to a third-party servicer if the platform goes bankrupt.

Home Equity Loans and Lines of Credit

These products may work for homeowners who need a high amount for a long period and are looking for reasonable APRs. Both of them are secured by your home equity, which is calculated as the total cost of your house minus your total liabilities on current mortgages.

Lenders typically use the combined loan-to-value (CLTV) to determine how much you can borrow. This ratio accounts for all loans and liens secured against the property, including the new debt. The amount you can borrow is the difference between your CLTV cap × home value and current mortgage balance. Most lenders cap CLTV at 80%–85%.

A home equity loan works more like a personal loan. You receive the full amount in your bank account and repay it gradually over the loan’s life, paying interest on the outstanding balance. Repayment periods typically range from 5 to 30 years.

With a home equity line of credit (HELOC), you get access to a specific credit limit. You can use the funds within it and only pay interest on the amount you actually use. HELOCs have two phases: the draw period and the repayment period. Within a draw period, you can use the funds, repay them, and borrow again, making interest-only payments. It usually lasts 5–10 years. Once the draw period ends, you can no longer withdraw money and need to pay down both principal and accumulated interest. A standard HELOC typically has a repayment period of 10–20 years.

Credit Union Loans

Credit unions are nonprofit organizations that help the communities they serve. They often have less strict requirements and are more likely to lend to people with bad credit. The most common options they offer to subprime borrowers include payday alternative loans (PALs). They are designed as an alternative to high-risk borrowing options and work best for short-term financial emergencies.

There are two types of PALs. PAL I requires you to be a credit union member for at least 1 month and offers amounts between $200 and $1,000 for 1–6 months. PAL II does not have minimum membership requirements. It allows you to borrow up to $2,000 for a maximum period of 12 months. For both types of PALs, APRs are capped at 28%. In addition, the National Credit Union Administration allows for an application fee of up to $20.

Borrowing Against a Life Insurance Policy

This financing option allows you to use your policy’s built-up cash value as collateral for a low-interest, tax-free loan. The money can be used for any purpose, and you do not need to undergo a credit check to qualify.

However, failing to repay the loan can reduce your death benefit. Moreover, if the total loan balance exceeds your policy’s cash value, your policy will lapse. If it happens, your unpaid loan balance may be subject to federal and state income taxes.

Installment Loans for Bad Credit

Bad credit installment loans are typically offered by online lenders. They are designed specifically for borrowers with low to no credit. Installment loans work similarly to standard personal loans but have shorter repayment terms of 2–24 months and higher APRs, which can reach 200%.

While being easy to qualify for, these loans are priced for risk. High APRs along with longer repayment terms result in significant overpayment and can overburden your finances. A $2,000 loan for 24 months with a 189% APR comes with a total cost of $7,792.91, almost 4 times higher than the initial amount you borrow. Avoid them if other alternatives are available and treat them as a last resort option.

Note: Some states ban high-interest installment loans or set strict APR caps to protect borrowers from excessive and unreasonable costs.

Personal Loan Calculator

Use a personal loan calculator to compare loan offers and see how much you will pay for your loan.

*These estimates are for educational purposes only and should not be treated as financial advice. Your lender may charge other fees that will affect the total cost of borrowing.

FAQ

What credit score is needed for a personal loan?

You generally need a credit score of at least 580 to get a personal loan. Traditional banks may set a higher minimum requirement of 620, while bad credit loan lenders may set no minimum at all. Borrowers with scores of 670 or higher are likely to get the most favorable interest rates and terms.

Can I prequalify for a loan with bad credit?

Yes, most lenders typically allow you to prequalify with a soft credit check, no matter your credit score. By doing this, you can compare loan offers and choose the most suitable option for you.

How fast can I get the money?

Unsecured loans are usually funded within 1–3 business days after approval. Some lenders offer emergency loans with same-day funding or instant deposits on a qualifying debit card. If you provide collateral, funding times may extend to several weeks due to property appraisal.

Will applying hurt my credit score?

If you prequalify for a loan to compare terms, it typically does not affect your credit. A hard credit check is typically performed if you decide to move forward with a particular lender. This check can affect your credit score by less than 5 points.

What APR can I expect with bad credit?

It depends on the lender and the loan type you choose. On average, borrowers with bad credit get APRs between 25% and 36%. If you are opting for a secured or a cosigned loan, the interest rate is likely to be lower due to an additional guarantee.

Are there fees beyond interest?

Lenders may charge a wide range of fees, including processing or origination fees, application fees, administrative fees, late payment fees, prepayment penalties, and more. Under the Truth in Lending Act, lenders must disclose the information regarding APRs, finance charges, and any hidden fees.

Can a personal loan help rebuild my credit?

If a lender reports to major credit bureaus, your on-time loan payments can help you rebuild credit, provided that you manage other credit accounts responsibly. But if your lender only reports to one or two credit bureaus, it will only help your scores managed by these credit reporting agencies.