Getting a personal loan with bad credit
A bad credit score, one that’s below 630, doesn’t have to keep you from getting a personal loan. Some online lenders cater specifically to people with bad credit. These companies take into account your credit scores and history when deciding whether to loan you money, but they also have more flexible requirements than banks do.
While personal loans from reputable online lenders can be good options for many borrowers, we recommend you first visit your local credit union when shopping for loans. Most credit unions offer flexible loan terms and lower interest rates than online lenders, especially for people with bad credit. The maximum annual percentage rate at a federal credit union is 18%.
If you can’t get a loan through your local credit union, we recommend you compare offers from multiple lenders before signing any loan agreement. Rates for bad credit borrowers can vary depending on the lender’s underwriting requirements. The easiest way to compare actual rates is to pre-qualify.
What rate should I expect?
Rates vary from lender to lender, but here is what interest rates for personal loans look like, on average:
|How’s your credit?||Score range||Estimated APR|
|Source: lender survey|
|Excellent||720 – 850||13.9%|
|Good||690 – 719||18.0%|
|Average||630 – 689||21.8%|
|Bad||300 – 629||27.2%; lowest scores unlikely to qualify|
Additional steps toward financial health
If you’re borrowing money to pay off debt, a personal loan works best if you have a plan to tackle your debts. Creating a budget and starting a savings habit are small steps that could help you build a stronger financial future.
If you don’t have an immediate need for cash, work on building your credit. A higher credit score will qualify you for more loan opportunities, lower interest rates and better loan terms in the future.
Don’t know your credit score? Several personal finance websites offer a free credit score. Look for a site the offers educational tools such as a credit score simulator plus access to your credit report.