How to Get a Loan With Bad Credit

Quick Answer

You can get a loan while having a bad credit score by comparing interest rates and fees from lenders that offer loans designed for borrowers with bad credit. And better yet, consider improving your credit before applying for a loan so you qualify for better terms.
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You may be able to get a loan with bad credit if you work with a lender that doesn't require good credit, or if you can qualify based on other criteria. While your credit score can be an important factor in getting a loan, lenders may also consider your income, debts, collateral and credit history.

How Does Bad Credit Affect Your Ability to Get a Loan?

For credit scores that range from 300 to 850, a score lower than 670 could be considered a bad credit score by lenders. Having bad credit could limit your options and lead to more expensive loan offers.

People with bad credit tend to have negative marks in their credit reports, such as late payments or accounts that are past due or in collections. The resulting low credit score tells a lender that the person is more likely to miss a loan payment in the future, which could cost the lender money.

Some lenders decide to limit their risk by only working with prime (good credit) borrowers. Others see it as a business opportunity and focus on offering loans to subprime (bad credit) borrowers. There are also lenders that offer loans to borrowers across the credit spectrum.

In general, lenders that offer loans to borrowers with bad credit may offset their risk by charging a higher origination fee and interest rate, resulting in a higher annual percentage rate (APR).

For example, say you want to borrow $10,000 and repay the loan over three years.

  • If you have bad credit, you might receive a loan offer with a 5% origination fee and 29% interest rate—adding up to a 32.8% APR. You'd wind up paying about $419 each month and $5,086 in interest by the time the loan is paid off.
  • If you have good credit, you might get a loan offer with a 1% origination fee and 10% interest rate—a 10.69% APR. You'll pay about $323 each month and $1,616 in total interest.

A loan's APR takes its interest rate, fees and repayment term into account, which is why comparing loan offers' APRs can help you determine which loan is cheapest overall. Lenders often advertise an APR range with their loans, and your offers' rates can depend on your creditworthiness, the loan amounts and the repayment terms.

Getting a Personal Loan With Fair or Bad Credit

Fewer lenders will give you a loan if you have bad credit. However, you may still have options, and shopping around to find your best offers is still a good idea.

You could start by looking for lenders that regularly work with borrowers who have fair credit—credit scores ranging from 580 to 669. Here are two popular options:

  • Avant is an online lender and most of its borrowers have a credit score of 600 to 700. The lender offers personal loans ranging from $2,000 to $35,000 with up to 60-month repayment terms, and there's an administrative fee of up to 4.75% on the loans.
  • Upstart doesn't require you to have a credit score to receive a loan, but if you do, it can be as low as 300. It also looks at nontraditional factors (such as your employment history and higher education) that may make it easier for some borrowers to get approved with a low rate. Loan amounts can range from $1,000 to $50,000 with either three- or five-year terms and an origination fee of 0% to 10%.

The best options can also change over time. Even if your financial situation stays the same, lenders regularly tighten or ease their credit requirements based on competition in the marketplace and changes in the economy.

Consider Improving Your Credit Before Applying

If you aren't looking for an emergency loan, you may want to focus on improving your credit before borrowing money.

You can see how even a small change in your loan's interest rate can directly impact your monthly payment and how much you pay overall.

Personal Loan Calculator

The information provided is for educational purposes only and should not be construed as financial advice. Experian cannot guarantee the accuracy of the results provided. Your lender may charge other fees which have not been factored in this calculation. These results, based on the information provided by you, represent an estimate and you should consult your own financial advisor regarding your particular needs.

Moving from a bad to excellent credit score could take months or years. But even moving up within the fair credit range could give you more options and better offers. Try these tips to improve your scores:

  • Make your bill payments on time. Making your credit accounts payments (e.g., loans and credit cards) on time can add positive information to your credit reports. Some types of bills, such as phone or utility payments, don't commonly appear on your credit report. But falling behind could lead to a collection account that hurts your credit.
  • Sign up for Experian Boost®ø. If you want to get credit for the utility, phone and select streaming service payments that you've made on time, you could sign up for Experian Boost and add these to your Experian credit report. On average, users who got a boost saw their FICO® Score 8 based on their Experian credit report go up by 13 points.
  • Pay down credit card balances. Lowering your credit card balances can decrease your credit utilization ratio, which may improve your credit scores. Depending on why you have bad credit, this may be one of the fastest ways to raise your scores.

The steps you'll want to take could depend on your unique credit report. When you check your credit score for free with Experian, you'll see which factors help or hurt your credit score, and can then take a strategic approach to improving your credit.

What to Do if You're Denied for a Loan

When a lender rejects your loan application because of your credit, you can get a free copy of your credit report within 60 days. You'll also need to decide if you want to apply for a loan elsewhere.

While getting denied for a loan doesn't hurt your credit, each new application could result in a hard inquiry that could ding your score temporarily. With this in mind, try to get prequalified with a soft inquiry before submitting more applications.

Or, if you can wait, improving your creditworthiness might make more sense. Increasing your credit scores is part of the equation. But other factors could also be important, such as your debt-to-income ratio. You might need to increase your income or pay down other debts before you can get a loan.

Alternatives to Loans When You Have Bad Credit

If you're having trouble getting approved for a loan and you need money right away, you could also look for alternative options.

Rather than getting a small loan from a lender, a friend or family member may be able to offer help. Or, a creditworthy friend or relative may cosign on a loan, which could increase your chances of qualifying. Same day loans are also popular, but these may come with very high interest rates. Find out how same days loans work before you select this option for an alternative to a traditional loan.

You could also ask your current creditors to temporarily pause or lower your payments—freeing up money for your other needs. There are different types of debt counseling and financial assistance programs, although availability can depend on your specific situation.

Get Prequalified for a Loan

Many personal loan lenders let you submit a prequalification online to find out if you'll likely qualify for a loan and see your estimated loan offers without hurting your credit.

But rather than going lender by lender, you can log in with an Experian account and use the CreditMatchTM tool to submit a prequalification request. Experian will then display available loan offers from multiple partner lenders. You can compare the loan offers to see which is best, but you don't need to decide right away—the offers are good for 30 days.

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