9 Best Bad Credit Loan Options
Disclosure: Stilt is a lending company. Nonetheless, we are committed to recommending the best loan products to our readers when their needs are outside Stilt’s loan offerings.
According to predictive analytics company FICO, 34% of people have “bad credit”. A bad credit score is anything in the poor-fair range or a score between 300-669.
If you have a bad credit score, your access to loans will be severely limited–leaving mostly predatory loans with high interest rates and unfavorable terms.
But if you’ve got a bad credit score, it doesn’t mean that there aren’t favorable loan options that you can explore. Here are our picks for the best bad credit loans for people with bad credit as well as some additional information to help you choose a safe loan decision that meets your needs.
Understanding Credit Scores
A credit score is tallied like a test. The calculation process has different questions. Your credit score depends on the outcome of each question. Let’s say the credit score test adds up to 100%. According to Experian, your score will be determined by the following factors and the corresponding weight per factor:
- Payment History – 35%
- Utilization – 30%
- Length of Credit History – 15%
- Recent Activity – 10%
- Overall Capacity – 10%
One or all of these factors can contribute to a person having a bad credit score and your credit score will determine what kind of loans you will have access to.
Bad Credit Interest Rates
Your credit rate on a personal loan is determined by a number of factors, but primary among those factors is your credit history and your ability to repay your loan. Here are the average interest rates for personal loans by credit score:
|How's your credit?||Score range||Estimated APR|
|Excellent||720 - 850||13.90%|
|Good||690 - 719||18.00%|
|Fair||630 - 689||21.80%|
|Bad||300 - 629||27.2%|
8 Best Bad Credit Loans Lenders At a Glance
|Lender||Best For||Estimated APR||Loan Term||Minimum Credit Score||Example||Visit|
|Avant||Bad Credit Loans||9.95-35.99%||24-60 Months||580||$5000 at 17.99% APR = $249.60/month for 24 months ($5990.31 total)|
|Capital Good Fund||Bad Credit Loans||10.00-24.00%||24-36 Months||None||$5000 at 12.00% APR = $235.37/month for 24 months ($5648.82 total)|
|LendingClub||Bad Credit Loans||6.95-35.89%||36 or 60 Months||600||$5000 at 17.99% APR = $249.60/month for 24 months ($5990.31 total)|
|OneMain Financial||Bad Credit Loans||18.00-35.99%||24-60 Months||None||$5000 at 17.99% APR = $249.60/month for 24 months ($5990.31 total)|
|Oportun||Bad Credit Loans||20.00-67.00%||Up to 12 Months||None||$5000 at 33.50% APR = 288.65/month for 24 months ($6927.62 total)|
|Prosper||Bad Credit Loans||6.95-35.99%||36-60 Months||640||$5000 at 17.99% APR = $249.60/month for 24 months ($5990.31 total)|
|Upgrade||Bad Credit Loans||6.98-35.89%||36 or 60 Months||600||$5000 at 17.99% APR = $249.60/month for 24 months ($5990.31 total)|
|Upstart||Bad Credit Loans||5.67-35.99%||36 or 60 Months||620||$5000 at 17.99% APR = $249.60/month for 24 months ($5990.31 total)|
Credit Union Bad Credit Loans
If you’re wary of taking a bad credit loan from a big bank or online lender, your local credit union is a comparable alternative when you need a loan quick. Credit unions can be good options for borrowers (especially immigrants) with bad credit because they take a more holistic approach to risk assessment and consider criteria beyond just your credit score. Additionally, you might find that your local credit union offer lower rates and terms
Generally speaking, to become a member of your local credit union, you must work, study, or live within a certain distance or be associated (directly or peripherally) to a particular group. To open an account, you will have to purchase a share of the credit union, which usually costs between $5 and $25.
Considerations When Choosing a Bad Credit Loan
Application-to Disbursement Time: Depending on your circumstances, getting your loan disbursed quickly may be very important. Depending on the lender, disbursement times can range from 2 days up to a week.
To help streamline the loan process and save time, make sure to provide all of the required documentation in a timely manner and track the progress of your loan application to make sure you’re not missing anything.
Associated Fees: Even if you need your loan in a hurry, you should never commit to a loan without knowing what fees are associated with the lending agreement. Make sure you know what the APR on the loan is as well as the loan term. Generally, a lower APR and longer loan term will mean smaller monthly payments.
Before committing to a loan, always use a loan calculator to determine the total cost of your loan (principal + interest) and know upfront what you’re monthly payments will be and if you can afford them.
Lender Features: While considering the associated costs of your loan, it’s just as important to consider the features your lender offers. Some beneficial features to look for are the ability to change your due date, the option to forgive a late payment, and the option to skip a payment if needed.
Bad Credit Loan Alternatives
When you need money quickly or for an emergency, a bad credit loan might seem like the best option, but you should always exhaust all of your non-loan options before looking for a bad credit lender. Try these options first:
- Ask family and friends to lend a hand
- Inquire about getting a paycheck advance
- Reach out to non-profits, religious organizations, and charities
- Research income-driven repayment plans other repayment options
Plan for Emergencies with Savings
Your best option when it comes to bad credit loans is to not need one when an emergency hits. Most financial experts recommend that you have somewhere between three months and six months of basic living expenses in your emergency fund. The three-month recommendation is for general for those with salaried incomes. Those with hourly wages and other non-salaried income are encouraged to maintain at least six month’s worth in their emergency savings.
Regardless of whether you are salaried or have non-salaried income, you can head over to Money Under 30’s Emergency Loan Calculator to start planning your emergency fund.
Stilt considers a wholistic range of features when considering personal loan lenders, including, but not limited to: accessible customer service, reporting of payments to credit bureaus and financial education, flexible payment options, related fees, soft credit checks, and transparency of loan rates and terms. We also review consider the complaints filed with agencies like the Consumer Financial Protection Bureau. Stilt is not compensated in any way for our reviews and recommendations.
Recap: Stilt’s Picks for Best Loans for Bad Credit
- Avant: Best for bad credit loans
- Capital Good Fund: Best for bad credit loans
- LendingClub: Best for bad credit loans
- OneMain Financial: Best for bad credit loans
- Oportun: Best for bad credit loans
- Prosper: Best for bad credit loans
- Upgrade: Best for bad credit loans
- Upstart: Best for bad credit loans
6 Ways to Protect Yourself from Bad Credit Scams
Having imperfect credit can make many people feel desperate when they need a loan and oftentimes they’ll accept whatever loans they can get approved for. Unfortunately, there are “lenders” out there who will take advantage of others’ desperation.
But there are some things you can watch for to protect yourself from bad credit scams:
Guarantees – Legitimate lenders are not allowed to tell you that you will definitely get a loan without any prior knowledge of your credit report. So if a lender guarantees a loan, it is probably a scam. Legit lenders need to check your credit history before they can promise you anything.
Upfront Fees – No lender is allowed to charge you any type of application fee before they can process your application for a bad credit personal loan. So if the lender asks for upfront payment, run!
Spammy Communication – Lenders who pester you with constant generic emails or texts are generally bad news. They will not offer you the best personal loans for bad credit. Make sure you get personalized service from a real legit lender.
Oddly Named Companies – Companies that sound too much like existing companies are probably fake. Anyone that sounds like a made-up person should also be avoided. You want to work with lenders who actually exist. If you’re not sure, look them up on platforms such as the Better Business Bureau.
Strange Requests for Personal Information – You should only supply personal information to companies you trust. Refrain from supplying any personal details over the phone. A lender will need your bank account number to transfer your loan to you. But, they certainly don’t need your passwords or pin codes. So don’t supply any information that is too personal or too sensitive.
Scare Tactics – No one needs to (or is allowed to) force you into a decision. Any company that tries to scare people into personal loans for bad credit is not worth it. This is your financial wellbeing at stake. You don’t need to rush it. So avoid any lenders who try to pressure you.
Final Thoughts on Bad Credit Loans
Having a credit score of less than 670 is a tough situation. Your access to loans will only be more limited as your credit score decreases, too. But that doesn’t mean that there aren’t loan options available to you. You should, however, be sure to understand the pros and cons of bad credit loans and how to protect yourself before signing any agreements.