A low credit score can make it difficult to get a personal loan, but it’s not impossible. Many lenders offer options for borrowers with bad credit. In this article, we’ll explore the best strategies to secure a personal loan even with a poor credit history.
1. Understanding Credit Score Requirements
Lenders evaluate credit scores to assess a borrower’s risk level. Here’s how credit scores are generally classified:
| Credit Score Range | Category | Approval Chances |
|---|---|---|
| 750+ | Excellent | High |
| 700-749 | Good | Moderate |
| 650-699 | Fair | Low |
| Below 650 | Poor/Bad | Very Low |
If your score is below 650, many traditional banks may reject your application, but alternative lenders might still approve you.
2. Steps to Get a Personal Loan with Bad Credit
a) Check Your Credit Report
- Get a free credit report from agencies like Experian, Equifax, or TransUnion.
- Look for errors that might be lowering your score and dispute them.
b) Consider a Secured Loan
- Offer collateral (such as a car or savings account) to increase approval chances.
- Secured loans come with lower interest rates than unsecured loans.
c) Find a Co-Signer
- A co-signer with good credit can improve your chances of approval.
- If you default, the co-signer will be responsible for repaying the loan.
d) Apply with Online Lenders
- Many online lenders specialize in bad credit loans.
- Examples: OneMain Financial, Upgrade, Avant, and LendingClub.
e) Opt for a Payday Alternative Loan (PAL)
- Offered by credit unions as a safer alternative to payday loans.
- Lower interest rates and more manageable repayment terms.
f) Improve Your Credit Before Applying
- Pay off existing debt to boost your credit score.
- Lower your credit utilization ratio (keep credit card balances below 30% of the limit).
- Make on-time payments to show financial responsibility.
3. Best Lenders for Bad Credit Personal Loans
| Lender | Loan Amount | APR Range | Minimum Credit Score |
|---|---|---|---|
| OneMain Financial | $1,500 – $20,000 | 18% – 35.99% | No minimum |
| Upgrade | $1,000 – $50,000 | 5.94% – 35.97% | 560+ |
| Avant | $2,000 – $35,000 | 9.95% – 35.99% | 580+ |
| LendingClub | $1,000 – $40,000 | 8.05% – 35.89% | 600+ |
Note: Rates and terms vary based on your financial profile.
4. Things to Avoid When Applying for a Loan
- Applying with multiple lenders at once (hard inquiries can lower your score).
- Taking payday loans with extremely high interest rates.
- Borrowing more than needed, which can increase debt stress.
5. Final Thoughts
Even with bad credit, you can still qualify for a personal loan by choosing the right lender and improving your financial habits. Focus on credit-building strategies to get better loan terms in the future