Unearth Your Fortune

By Maddy Scheckel

March 9, 2023

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The average American owes $5,525 in credit card debt at a ridiculous 21.62% interest rate!

But what if I told you you could cut this interest rate in half overnight?

Several companies offer low-interest loans to help you consolidate debt and save thousands of dollars.

So if you’re looking for the best personal loans for bad credit scores, don’t worry. I’ve got you covered.

I’ve listed the five best personal loans for anyone looking to consolidate debt. So I hope you find something to help you pay off your credit cards and other high-interest loans.

What is a Bad Credit Personal Loan?

A bad credit personal loan is a specialized loan for consumers with suboptimal credit scores. These loans usually come with a fixed interest rate, so you won’t have to worry about interest rates increasing.

The good news is, most banks provide loans for bad credit, so you’ll be able to consolidate debt or pay for an emergency with ease

How to Get a Bad Credit Loan

Worried bad credit will hold you back? Don’t be! This five-step process will help you qualify for a personal loan in no time:

  1. Choose your loan type
  2. Compare lenders
  3. Pre-qualify
  4. Get a co-signer or offer collateral
  5. Apply for a loan

Step 1: Choose Your Loan Type

Most people think that there’s only one type of bad credit loan. Thankfully, there’s various types of loans for bad credit that you’ll have options to pick from. Find a loan that is tailored to your interest rate and payment plan needs. 

For example, debt consolidation loans can boost your credit score. They help you pay off several debts, by combining your debt into one loan. This streamlines monthly payments and saves you thousands of dollars by not paying multiple interest rates.

Step 2: Compare Lenders

Once you’ve chosen your loan type, it’s time to compare lenders.

But who really wants to spend hours crunching numbers to find the lowest interest rates? 

So to save you from pulling your hair out, I’ve come up with a list of the best loans for bad credit. See below. 

This well-researched list shares the current available offers for the best interest rates and payment plans. 

Step 3: Pre-qualify

Now it’s time to pre-qualify. Most lenders will allow you to complete this process online, and they’ll give you an idea of what to expect for

  • Interest rates
  • Loan amounts
  • Repayment options

You also won’t have to worry about this harming your credit score because most online lenders only do a “soft check” instead of a hard credit inquiry that would show up on your credit report. 

Although pre-qualifying doesn’t guarantee a loan, it gives you an idea of what’s available.

Step 4: Get a Co-Signer or Offer Collateral

Before you apply, consider getting a co-signer or offering some collateral. 

This step is optional, but it can increase your likeliness to qualify substantially. 

With a co-signer, someone else’s income and credit score is added to your loan application. The co-signer takes responsibility for paying back the loan if you can’t. 

This gives the lender a safety net, so it’s easier for you to qualify.

Another option is to offer collateral like a car or savings account. It helps you qualify because if you can’t pay your installments, lenders will be able to use the collateral as a payment alternative. 

Step 5: Apply for a Loan

When completing your loan application, you’ll have to gather documents like 

  • Two forms of personal identification (driver’s license, passport, military ID, state-issued ID) 
  • Proof of income (bank statements, paystubs, W-2s, 1099s)
  • Employer information
  • Proof of residence (utility bill, mortgage statement, insurance, property tax receipt) 

This can be a hassle, but it’s necessary to determine your ability and likelihood to pay back the loan. 

Fortunately, most lenders will let you know whether you’re approved or not the same day!

Best Loans for Bad Credit

1 – Avant

  • Best for: Reliable, low-interest rates and a mobile app that makes managing money easy.
  • Minimum credit score: 580
  • APR range: 9.95% to 35.95%
  • Loan amounts: $2,000 – $35,000
  • Available Term Lengths: 1 to 5 years
Pros Cons 
It’s the fastest way to borrow money.An origination fee may be charged.
Avant has a mobile app that helps you manage your loans.Compared to other providers, the maximum loan amount is low.

2 – Lending Club

  • Best for: Emergency funds and immediate cash.
  • Minimum credit score: 600
  • APR range: 8.30% to 36.00%
  • Loan amounts: $1,000 to $40,000
  • Available Term Lengths: 3 to 5 years
Pros Cons 
Joint loans available nationwide. You’ll have to submit tax documents.
Will pay multiple creditors directly for you. Lending Club is quick to call you if you miss a payment.

3 – Happy Money

  • Best for: Personalized credit card debt consolidation loans.
  • Minimum credit score: 640
  • APR range: 7.99% to 29.99%
  • Loan amounts: $5,000 to $40,000
  • Available Term Lengths: 2 to 5 years
Pros Cons 
Applying won’t harm your credit score.Exclusively for credit card debt consolidation. 
Do not charge late, bounced check, or failed ACH fees.Higher than most minimum credit score requirement. 

4 – Upstart

  • Best for: Accepting low credit scores and competitive interest rates.
  • Minimum credit score: 300
  • APR range: 5.6% to 35.99% (varies by state)
  • Loan amounts: $1,000 to $50,000
  • Available Term Lengths: 3 to 5 years
Pros Cons 
Lower than most interest rates (as low as 5.6%).They might charge an origination fee equal to 0% to 8% of the total loan amount.
No prepayment penalties. They don’t allow co-signers.

5 – Best Egg

  • Best for: Secured loans to buy a car or pay off debt.
  • Minimum credit score: 550
  • APR range: 7.99% to 35.99%
  • Loan amounts: $2,000 to $50,000
  • Available Term Lengths: 3 to 5 years
Pros Cons 
Unsecured and secured loan options are available.Higher than most origination fees. 
Wide variety of loan amounts.No option to choose the monthly payment date.

Types of Loans for Bad Credit

Not all loans are created equal. Here are the most common types of loans for bad credit.

1 – Secured Loans

Secured loans are backed by collateral like a car, house, or bank account. This ensures the lender makes their money back if the borrower can’t pay. These loans are usually easier to qualify for and often have lower interest rates.

2 – Unsecured Loans

Unsecured loans are a form of personal loan that doesn’t require collateral. Instead, banks rely on a borrower’s creditworthiness (credit score, credit history, income). This is riskier for lenders, so the interest rates are usually higher.

3 – Joint Personal Loans

Joint personal loans are similar to co-signed loans. They allow people to qualify for larger loans and better interest rates because both parties are responsible for the loan, not just one person.

4 – Payday Loans

Payday loans are for small amounts (typically a $500 limit) and are repaid in a single payment within a month of when the money was released. The nice part about payday loans is that they don’t require credit checks and the money is often disbursed immediately. 

5 – Cash Advances

Cash advances are short-term loans that allow you to borrow cash against your credit card limit, often at a higher interest rate. Be aware there is typically a fee to use this service. 

6 – Bank Agreements

Bank agreements are when your bank approves you for a short-term loan or agrees to a limited account overdraft. This is for people who have a good history with their bank and may not be available at all banking institutions.

7 – Home Equity Loans for Bad Credit

Home equity loans are when you need a lot of money upfront so you put your house down as collateral. Some people even use home equity loans to make improvements on their house to increase its value. Although, it’s important to keep in mind that if you default, you could lose your home

8 – HELOCs for Bad Credit

Also known as a home equity line of credit, a HELOC is similar to a home equity loan because they use your home as collateral. However, a HELOC functions more like a credit card. Borrow only what you need (up to a limit) and repay the balance plus a variable interest rate.

Commonly Asked Questions About Loans for Bad Credit:

What’s the easiest loan to get with bad credit?

Avant is one of the easiest loans for bad credit. They specialize in lending money to people who have poor credit. Avant also makes it easy to qualify by accepting credit scores as low as 580!

What are the best personal loan companies for bad credit?

Upstart is one of the best loans for bad credit. They cater to people with credit scores as low as 300 and have a lot of options for repayment plans. You can get pre-approved within minutes and receive your loan the day after applying!

What companies will give you a loan with bad credit?

AvantUpstartHappy MoneyLending Club, and Best Egg all provide loans for bad credit. You can apply online within minutes! Once pre-approved, most lenders will send money to your account within one business day!

Can I get a loan if my credit score is 500?

Yes, you can get loans for bad credit even if your credit score is 500 or below. Upstart offers personal loans to anyone with a credit score higher than 300! 

Can I get a quick loan with bad credit?

Most credit lenders will transfer the loan into your account within one business day. Providers like AvantHappy Money, and Lending Club even allow you to complete the entire loan application online (it only takes a few minutes), so you won’t have to leave your home.

What can a personal loan be used for?

Personal loans for bad credit can be used for debt consolidation, home improvements, and emergency expenses. But you can’t do anything you want with a personal loan. For instance, most mortgage lenders forbid using personal loans as a downpayment on a house.

Where to find bad credit loans?

The best place to find loans for bad credit is online. Companies like Avant cater to those with bad credit scores, making qualifying for a loan straightforward and easy. All you have to do is apply on their website, and you’ll be pre-approved within minutes!

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