Having bad credit or no credit history can make it feel like getting a personal loan is impossible. Traditional banks and credit unions often require high credit scores, leaving many people feeling stuck. But the good news is that there are personal loan options specifically designed for people with bad credit or no credit.
Whether you need to cover an emergency expense, consolidate debt, or fund a major purchase, this guide will walk you through the best personal loan options, how to qualify, and tips to increase your chances of approval.
Can You Get a Personal Loan with Bad Credit or No Credit?
Yes, you can get a personal loan with bad credit or no credit. While traditional lenders may deny your application, many alternative lenders specialize in loans for people with low credit scores. These lenders look at other factors beyond your credit score, such as income, employment history, and ability to repay the loan.
While interest rates on loans for bad credit may be higher, they provide access to the cash you need when traditional options aren’t available. With responsible repayment, these loans can also help you build credit over time.
Best Personal Loan Options for People with Bad Credit or No Credit
If you have poor credit, these loan options may be your best bet:
Online Personal Loans
Online lenders like Upgrade, LendingClub, and Upstart offer personal loans to people with lower credit scores. These lenders often have more flexible requirements than traditional banks and provide faster approvals, sometimes within 24 to 48 hours. Online lenders may also consider factors like your employment history, education, and current income instead of focusing solely on your credit score.
Key Features
- Loan amounts: $1,000 to $50,000 (varies by lender)
- Repayment terms: 12 to 60 months
- Interest rates: 6% to 36% APR, depending on credit score and loan terms
Pros
- Faster approval and funding (often 24-48 hours)
- No need for in-person visits or lengthy paperwork
- Can improve your credit if payments are made on time
Cons
- Higher interest rates for those with bad credit
- May have origination fees or prepayment penalties
Credit Builder Loans
Credit builder loans are designed to help people with no credit or poor credit build a positive payment history. Unlike traditional loans, you don’t receive the money upfront. Instead, the lender places the loan amount in a savings account or certificate of deposit (CD), and you make fixed monthly payments. Once the loan is repaid, you gain access to the funds, along with any accrued interest.
Key Features
- Loan amounts: $300 to $1,000 (typically smaller amounts)
- Repayment terms: 6 to 24 months
- Interest rates: Vary, but some lenders charge a small fee instead of interest
Pros
- Helps build credit history
- No risk of taking on debt since you don’t get access to the money until it’s repaid
- Often available from local credit unions and community banks
Cons
- No access to cash until the loan is paid off
- May have small fees
Secured Personal Loans
A secured personal loan requires collateral, such as a car, savings account, or other valuable assets. If you default on the loan, the lender can seize the collateral. Since the lender has security, these loans are easier to qualify for, even with bad credit.
Key Features
- Loan amounts: $1,000 to $50,000 or more (depending on collateral)
- Repayment terms: 12 to 84 months (varies by lender)
- Interest rates: Lower than unsecured loans because they are backed by collateral
Pros
- Easier approval for borrowers with bad credit
- Lower interest rates than unsecured loans
- Ability to borrow larger loan amounts
Cons
- Risk of losing your collateral if you default on payments
- Approval may take longer due to asset valuation requirements
Payday Alternative Loans (PALs)
Offered by federal credit unions, Payday Alternative Loans (PALs) are designed to be a safer option than traditional payday loans. PALs have lower fees and interest rates than payday loans and are available to credit union members.
Key Features
- Loan amounts: $200 to $2,000
- Repayment terms: 1 to 12 months
- Interest rates: Capped at 28% APR (far lower than payday loans)
Pros
- Low-cost alternative to payday loans
- Available to borrowers with no credit or poor credit
- Quick application process if you’re a member of a credit union
Cons
- Must be a member of a participating credit union
- Loan amounts are smaller than other loan types
Peer-to-Peer Loans (P2P Loans)
Peer-to-peer loans connect borrowers directly with individual investors on platforms like LendingClub and Prosper. These platforms evaluate your application and match you with potential investors willing to lend you money.
Key Features
- Loan amounts: $1,000 to $40,000
- Repayment terms: 36 to 60 months
- Interest rates: Vary based on credit profile, starting at around 7% to 36% APR
Pros
- Can qualify with lower credit scores than required by banks
- Competitive interest rates compared to payday loans or cash advances
- Ability to consolidate multiple debts into one monthly payment
Cons
- Origination fees (1% to 6% of the loan amount)
- Interest rates may be high for borrowers with low credit scores
How to Qualify for a Personal Loan with Bad Credit or No Credit
If you have bad credit, here’s how you can increase your chances of qualifying for a loan:
Check Your Credit Score
Before applying for a loan, review your credit report for errors or inaccuracies that may be lowering your score. Correcting these issues can improve your credit score.
Consider a Co-Signer
If possible, ask a family member or friend with good credit to co-sign your loan. This can increase your approval chances and reduce the interest rate.
Provide Proof of Income
Lenders want to see proof of your ability to repay the loan. Providing pay stubs, bank statements, or tax returns can strengthen your application.
Opt for Secured Loans
If you have valuable assets, like a car or savings account, consider applying for a secured loan. Lenders are more willing to approve secured loans since they have collateral to fall back on if you default.
Apply for Prequalification
Many online lenders offer prequalification tools that show your chances of approval without affecting your credit score. Prequalification allows you to compare multiple loan offers before submitting a formal application.
How to Avoid Scams and Predatory Lenders
Unfortunately, people with bad credit are often targeted by predatory lenders. Here’s how to protect yourself:
Watch for Upfront Fees
Legitimate lenders do not charge application fees before approval. If a lender asks for upfront payments, it’s likely a scam.
Check the Lender’s License
Ensure the lender is licensed to operate in your state. Use the National Multistate Licensing System (NMLS) to verify their credentials.
Read Online Reviews
Check reviews on sites like Trustpilot or the Better Business Bureau (BBB) to see if other borrowers have had negative experiences with the lender.
Avoid Payday Loans
Payday loans often have APRs as high as 400%, which can trap borrowers in a cycle of debt. Instead, consider Payday Alternative Loans (PALs) offered by credit unions.
Frequently Asked Questions
Can I get a personal loan with a credit score of 500?
Yes, but you may face higher interest rates. Look for online lenders, secured loans, or credit builder loans.
What is the easiest loan to get with no credit?
Credit builder loans and Payday Alternative Loans (PALs) are among the easiest to qualify for with no credit.
How much can I borrow with bad credit?
Loan amounts range from $200 to $50,000, depending on the lender and loan type.
Do I need a co-signer for a bad credit loan?
Not necessarily. While having a co-signer can increase your chances of approval, there are plenty of lenders who don’t require one.
