A personal loan can be a quick way to get cash if you need to cover an unexpected cost. They can pay for emergency expenses like car repairs, high medical bills, and more. Borrowers also frequently use these loans to consolidate high-interest credit card debt, as they tend to have lower rates.
While a personal loan offers flexibility and utility, most lenders require that borrowers have good credit as a condition of approval. Qualifying with a poor credit history can be much more difficult, though it’s not impossible. Here’s what to know about getting a personal loan with bad credit.
Lenders commonly rely on the popular FICO credit scoring model when evaluating borrowers’ loan applications, so understanding this framework is important if you plan to apply for a personal loan. FICO scores range from 300-850, and are categorized as follows:
Many lenders require at least fair credit for a personal loan, though this isn’t the case with every institution. Case in point: TransUnion’s most recent Unsecured Personal Lending Industry Insights Report indicates that 37% of personal loans made at the end of 2024 were issued to borrowers with subprime credit scores under 600.
However, a poor credit score comes with trade-offs when borrowing. Generally, you’ll be offered a higher interest rate and a smaller loan amount than someone with good or excellent credit.
If your credit is less-than-perfect, here’s what to expect from the personal loan application process.
1. Review your credit reports and scores
Before you apply, review your credit reports and scores to get an idea of your approval odds and potential interest rates. Fortunately, this info is pretty simple to access.
You can check your credit reports for free each week at AnnualCreditReport.com. Note that your credit reports won’t show your credit scores, but they will show your borrowing and credit history, helping you understand what lenders see when you apply for a personal loan.
Most credit card issuers and banks also let you check your credit scores for free, which could be your best option if you want insight into your scores. Alternatively, myFICO.com offers free or paid access to your credit score and other reporting.
Read more: How to check your credit score for free
While it can be harder to find a lender if you have poor credit, you likely still have some options. Here are a few places to start your search for a personal loan.
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Credit unions: As nonprofit institutions owned by their members, credit unions may have more flexible borrower requirements and lower interest rates. Contact your local credit union to ask about their personal loans and how you can become a member.
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Community banks: If you’ve been a loyal customer with your local bank, they may be more willing to lend to you even if your credit isn’t great. Consider reaching out to a loan officer there to discuss your options.
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Online lenders: Some online lenders may also be willing to lend to you if you have poor credit. However, these loans may come with higher interest rates or worse borrowing terms than the options above.
Read more: Community bank vs. credit union
Once you’ve narrowed your options, it can be helpful to prequalify for a personal loan before formally applying. Prequalifying involves sharing some basic personal and financial information with prospective lenders. Lenders then provide an estimate of potential rates, loan amounts, and terms. Be mindful of fees — application and origination fees are common with personal loans.
Prequalification typically results in a soft credit check, which won’t ding your credit score like the hard credit pull you’ll undergo when you formally apply for a personal loan. Consider prequalifying with a few different lenders to find the most favorable options.
Estimating your monthly payments with a personal loan calculator is your next step. This lets you input a potential loan amount, your estimated interest rate, and your loan term to get an estimated monthly payment based on the information you share. This can help you understand how a new payment will fit into your budget. MyCreditUnion.gov offers a variety of calculators to assist you.
If you can comfortably manage the monthly payment, you can move forward with a formal loan application. Be prepared to share more detailed personal and financial information when you apply.
Your lender will likely request the following:
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Personal info such as your name, address, and birth date
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Social Security or Individual Tax Identification Number
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Employer name and contact information
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Copies of identification, such as a driver’s license or passport
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Proof of income
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Copies of recent bank statements, pay stubs, or tax returns
If you’re denied a loan due to poor credit or another issue, you might still have some recourse. Here are some options to consider.
If interest rates are too high with an unsecured personal loan, or getting approved is proving difficult, consider a secured personal loan.
With a secured personal loan, you put up something of value as collateral. It could be a paid-off vehicle, a savings account, a certificate of deposit, or another asset you’re willing to pledge. Just be aware that a lender can seize your collateral if you default on your personal loan.
Read more: Do you need collateral for a personal loan?
Some lenders may also let you use a co-signer for a personal loan. A co-signer or co-borrower is typically a family member or close friend with good credit who signs on as support when you apply for a loan. Your lender will look at your co-signer’s credit in addition to yours when evaluating your loan application.
Using a cosigner might increase your chances of getting approved for a personal loan, but your cosigner will be responsible for your monthly payments if you default. Missing payments or paying late can also damage their credit.
If the above strategies aren’t an option, consider asking a trusted friend or family member for a small loan. They may be willing to work with you if you’re struggling with an unexpected expense. Just ensure you draw up a firm repayment plan in writing first, so you’re both clear on your obligations.
You could also consider asking for a raise or starting a side gig to increase your income. Bringing in some extra cash each month could reduce your financial stress and make it easier to cover your costs. A higher income might also improve your chances of qualifying for a personal loan if you decide to reapply in the future.
If you’re struggling financially and your loan options are limited, you might feel pressured to find a quick solution. Predatory lenders often target people in dire financial circumstances, promising no credit checks and fast loan approvals. Unfortunately, these promises are often too good to be true, and working with one of these lenders could result in a vicious cycle of recurring debt and rapidly ballooning interest costs.
Here are some predatory loans to avoid:
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Payday loans: These loans, typically due by your next payday, are notorious for astronomical interest rates and high fees. These costs make it much more difficult to repay your loan balance.
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No-credit-check loans: Predatory lenders may also offer loans without a credit check. These loans can be another debt trap, as they often have high fees.
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Car title loans: With a car title loan, you put up your car’s title as collateral. These loans differ from true secured personal loans because they usually have extraordinarily high rates. If you can’t repay your balance, the lender can seize your vehicle.
Read more:
Payday loan vs. personal loan
How no-credit-check loans work
Poor credit can make it more difficult to get approved for a personal loan. Even if you do qualify, your interest rate could be fairly high. Still, a personal loan could provide some much-needed relief if you’re faced with a financial emergency.
If a lender rejects your initial loan application, consider alternatives like a secured personal loan, working with a cosigner, or borrowing from a loved one. Just ensure you avoid predatory loans that could make your financial situation worse.
