When your credit score is less than ideal, finding a personal loan that offers fair terms can feel like searching for a needle in a haystack. A poor credit score typically means higher interest rates and more scrutiny from lenders. However, that doesn’t mean you’re out of options. In fact, the personal loan market has expanded significantly in recent years, with several lenders specializing in loans for individuals with bad credit.
In this article, we’ll break down what “bad credit” really means, what types of personal loans are available to borrowers with poor credit, how to improve your approval chances, and the best lenders and options in 2025.
Understanding Bad Credit
Before diving into loan options, it’s essential to understand what qualifies as “bad credit.” Most lenders use the FICO score system, which categorizes credit scores as follows:
- 800–850: Excellent
- 740–799: Very Good
- 670–739: Good
- 580–669: Fair
- 300–579: Poor
If your score falls below 670, you may be seen as a higher-risk borrower. A score below 580 usually signals significant credit problems, such as defaults, missed payments, or high credit utilization.
Why Personal Loans for Bad Credit Are Challenging
When you have bad credit, lenders may worry that you won’t repay the loan. As a result, you may face:
- Higher interest rates (sometimes above 30%)
- Shorter repayment terms
- Higher origination fees
- Lower borrowing limits
- The need for collateral or a co-signer
But the good news is that many lenders cater specifically to this market. The key is knowing which lenders to trust and how to present yourself as a responsible borrower.
What to Consider Before Applying
Before applying for a personal loan with bad credit, you should evaluate the following:
- Interest Rates: Compare rates across multiple lenders. Even a few percentage points can make a big difference over time.
- Fees: Watch out for origination fees, late payment penalties, and prepayment fees.
- Loan Terms: Check the length of the loan. A longer term means lower monthly payments, but more interest over time.
- Loan Amount: Know exactly how much you need and avoid borrowing more than necessary.
- Lender Reputation: Read reviews, check for Better Business Bureau accreditation, and verify that the lender is legitimate.
Top Personal Loan Options for Bad Credit in 2025
Here are some of the best personal loan options for bad credit borrowers:
1. Upgrade
- Credit score requirement: 560+
- APR range: 8.49% – 35.99%
- Loan amounts: $1,000 – $50,000
- Terms: 24 to 84 months
Upgrade offers personal loans to borrowers with fair or poor credit and reports to all three credit bureaus. It also provides a credit-building tool and a user-friendly mobile app.
2. Upstart
- Credit score requirement: 580+
- APR range: 6.4% – 35.99%
- Loan amounts: $1,000 – $50,000
- Terms: 36 or 60 months
Upstart uses artificial intelligence to assess your application, considering factors like education and job history in addition to your credit score. This makes it ideal for people with limited credit history.
3. Avant
- Credit score requirement: 580+
- APR range: 9.95% – 35.99%
- Loan amounts: $2,000 – $35,000
- Terms: 12 to 60 months
Avant specializes in helping people with low credit scores. It has flexible repayment terms and fast funding — often as soon as the next business day.
4. OneMain Financial
- Credit score requirement: No minimum
- APR range: 18.00% – 35.99%
- Loan amounts: $1,500 – $20,000
- Terms: 24 to 60 months
OneMain offers secured and unsecured personal loans. If your credit is extremely poor, you may need to offer collateral like a vehicle. However, it provides in-person service at physical branches.
5. LendingPoint
- Credit score requirement: 600+
- APR range: 7.99% – 35.99%
- Loan amounts: $2,000 – $36,500
- Terms: 24 to 72 months
LendingPoint considers more than just your credit score — including your employment history and income. It also offers quick funding and no prepayment penalties.
6. BadCreditLoans.com
- Credit score requirement: None
- APR range: 5.99% – 35.99%
- Loan amounts: $500 – $10,000
- Terms: Varies
BadCreditLoans.com is a loan aggregator that connects borrowers with poor credit to a network of lenders. It’s not a direct lender, but it simplifies the comparison process.
Tips to Improve Your Chances of Getting Approved
Even if you have poor credit, there are ways to improve your odds of being approved:
1. Prequalify
Many lenders offer prequalification tools that let you check your rates without affecting your credit score.
2. Add a Co-signer
A co-signer with better credit can increase your chances of approval and help you get a lower interest rate.
3. Consider a Secured Loan
Offering collateral reduces the lender’s risk, making it easier to get approved and potentially lowering your rate.
4. Reduce Your Debt-to-Income Ratio (DTI)
Pay down existing debts or increase your income. Lenders prefer DTI ratios under 40%.
5. Avoid Multiple Applications
Submitting several loan applications in a short period can hurt your credit score. Use prequalification instead.
6. Review Your Credit Report
Check for errors or outdated information that may be lowering your score. You can dispute incorrect entries with the credit bureaus.
Alternatives to Personal Loans for Bad Credit
If you’re having trouble getting a personal loan, consider these alternatives:
- Credit union loans: Credit unions often have more flexible lending criteria and lower rates.
- Payday alternative loans (PALs): Offered by some credit unions, these are safer than traditional payday loans.
- Borrowing from friends or family: Risky, but can help you avoid high interest.
- Home equity loan or HELOC: If you own a home, you may be able to borrow against your equity. These loans typically have lower rates but put your home at risk if you default.
- Peer-to-peer lending platforms: Sites like LendingClub or Prosper connect borrowers directly with individual investors.
Using a Bad Credit Loan Wisely
Getting a personal loan with bad credit can be empowering — if used wisely. Here’s how to make the most of it:
- Use it for productive purposes: Such as debt consolidation, medical bills, or emergency expenses — not vacations or shopping.
- Pay on time: Set up auto-pay to avoid missing due dates.
- Build credit: Making consistent, on-time payments will help improve your credit score.
- Avoid additional debt: Don’t use a loan as an excuse to take on new debt. Focus on paying down existing obligations.
Final Thoughts
Having bad credit doesn’t mean you’re out of options. With a bit of research and preparation, you can find personal loan options that fit your needs and help you rebuild your financial standing. The key is to compare lenders, understand the fine print, and only borrow what you truly need.
While you may pay higher interest rates initially, using the loan responsibly can set you on a path to better credit, lower rates in the future, and financial freedom.
