A Realistic Guide to Borrowing Smart
If you have a less-than-perfect credit score, you’re not alone. Millions of people struggle with bad credit due to missed payments, high debt, or unexpected financial setbacks. But just because your credit score isn’t ideal doesn’t mean you’re out of borrowing options. The truth is, there are loans designed specifically for bad credit borrowers, and many of them can help you regain control of your finances.
In this article, we’ll break down the best loans for bad credit, how they work, where to find them, and what to look out for—so you can borrow smart and build a better financial future.
🔍 What Is a Bad Credit Score?
Before exploring your loan options, it’s important to understand what’s considered “bad” credit.
Credit Score Range Rating
800 – 850 Excellent
740 – 799 Very Good
670 – 739 Good
580 – 669 Fair
300 – 579 Poor (Bad Credit)
If your credit score falls below 580, lenders see you as high risk. But don’t worry—bad credit doesn’t mean no credit. It just means you need to find the right lenders and loan types suited for your situation.
💡 Can You Get a Loan with Bad Credit?
Yes, you can. But you may face:
Higher interest rates
Stricter approval requirements
Lower loan limits
More limited lender options
The key is knowing where to look and how to prepare. Let’s explore the best types of loans for bad credit borrowers.
🏆 Best Loans for Bad Credit
- Personal Loans from Online Lenders
Best For: Emergency expenses, debt consolidation, or personal use
Many online lenders specialize in personal loans for people with bad credit. These platforms use alternative credit evaluation methods—like income, employment history, or banking behavior—rather than just your FICO score.
Pros:
Quick application and approval process
Fixed monthly payments
Loan terms typically range from 12–60 months
Cons:
Higher APR (typically 18% – 36%)
May require proof of stable income
Top Lenders for Bad Credit:
Upstart
Avant
LendingPoint
OneMain Financial
- Secured Personal Loans
Best For: Borrowers who own a car, savings, or property
A secured loan requires collateral. Because the lender has security (like your car or savings account), they may approve you even with bad credit.
Pros:
Lower interest rates than unsecured loans
Easier approval
Higher loan amounts
Cons:
Risk of losing your collateral
Slower processing time compared to online loans
Common Collateral Options:
Car title
CD/savings account
Home equity (for home equity loans or lines)
- Credit Union Loans
Best For: Members with poor credit who need small to mid-sized loans
Credit unions often have more flexible lending criteria than traditional banks. They may offer “credit builder loans” or personal loans for members with bad credit.
Pros:
Lower APRs than most lenders
Personalized customer service
Flexible repayment plans
Cons:
You must be a member to apply
Limited branches or online presence
Tip: Find a local or national credit union like Navy Federal, Alliant, or PenFed.
- Payday Alternative Loans (PALs)
Best For: Small, short-term borrowing needs
Offered by federally chartered credit unions, PALs are a safer alternative to payday loans and offer fair terms even for borrowers with very bad credit.
Pros:
Max loan amount typically $1,000
Interest rates capped by federal law
No rollovers allowed
Cons:
Small loan amounts
Must be a credit union member for at least one month
- Peer-to-Peer (P2P) Lending
Best For: Borrowers looking for non-traditional loan options
P2P lending platforms connect borrowers directly with investors. These platforms may take a more holistic view of your financial picture.
Pros:
Competitive rates based on borrower profile
Transparent fees
Flexible loan terms
Cons:
May still require fair credit
Not available in all states
Popular Platforms:
Prosper
LendingClub
- Co-Signed Personal Loans
Best For: Those with a trusted friend or family member with good credit
A co-signer agrees to repay the loan if you default. This drastically reduces the lender’s risk and helps you qualify for better terms.
Pros:
Higher approval chances
Lower interest rates
Can help improve your credit if paid on time
Cons:
Co-signer is legally responsible if you miss payments
Can strain relationships if not managed responsibly
❌ Loans to Avoid with Bad Credit
- Payday Loans
Extremely high APRs (up to 400%+)
Short repayment periods
Easy to fall into a debt cycle
- Title Loans
Use your car as collateral