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Online Personal Loans for Bad Credit

Your credit score affects many parts of your life, including your ability to rent a house or apartment, the cost of your insurance, whether certain employers will hire you, and the affordability of financial products like personal loans.

A personal loan for bad credit is funding for people with bad credit or a short credit history, also known as a payday loan or cash advance. These are signature loans offered from storefront and online direct lenders that usually has higher interest and fees than traditional bank loans. However, if you pay it off on time, you might be able to improve your credit score. These are typically unsecured loans.

Bad Credit Score

The full range of FICO credit scores is between 300 and 850. A bad credit score is anything below 620. These numbers take some factors into account, like your payment history, debts, credit history length, new credit you've applied for, and the different types of credit you use.

Learn more about applying for a personal loan online with bad credit. When you're ready to request funding, you can click the "Get Started" button at the top of the page.

Basic Loan Requirements

You have to meet a few basic requirements to be approved for a personal loan with bad credit. They are less strict than you might think. As long as you are at least 18 years old, a U.S. resident with a valid ID and Social Security number can show proof of income and have a bank account; there's a chance that you'll qualify for a personal loan. Of course, we can't guarantee that you will be eligible. We are not a lender, and it's up to the lender to decide how much you'll get or if you'll get anything at all.

Credit Options for Those with Bad Credit

If you have a lower score, lenders may view you as a greater risk of defaulting on a loan. With a credit score below 620, it can be challenging to qualify for loans, credit, and financial products. The loans that you do qualify for may come with higher interest rates. Borrowers with bad credit often gravitate towards bad credit personal loans, specifically geared towards borrowers with poor credit. These loans are available through direct lenders.

Sample Interest Rates

The interest rates for lenders and lending partners we work with start at 4.84% and go up to 35.99%. Those who have a bad credit score may be more likely to receive a higher APR. If you take out a loan, the lender will dictate your specific rate in your loan agreement. Be aware that each state regulates annual percentage rates and fees, such as origination fees and finance fees, differently.

How to Get a Personal Loan

Finding even a small persona loan can be difficult with less than good credit.

  • The first step to getting a personal loan is to research lenders in your area.
  • Online lenders are a popular option for signature loans. One reason is their convenience. Lenders that are based online are usually quick to respond to loan applications. Their loan approval process also tends to be quick. If you meet the eligibility criteria and are approved for a small loan, you may receive your funds as soon as one business day after approval.
  • To receive a loan from an online lender, all you have to do is submit a loan application online (many storefront lenders will also require you to complete the application form online before visiting the storefront for an in-person appointment).
  • When reviewing your application, the lender will conduct a credit check. Although there is no guarantee of approval, some lenders may not set a minimum credit score needed to apply.
  • Personal loans tend to be favorable to borrowers with bad credit. It is sometimes easier to receive this type of loan at credit unions.
  • The loan amount you can receive may depend on which state you live in. It's therefore essential to be informed on your state's lending laws and regulations. Each state sets its limits on minimum and maximum loan amounts and term, APR and finance charges, and the number of rollovers allowed
  • Finally, before signing a loan agreement, be sure to read the terms and conditions thoroughly. Ask the lender any questions you may have before signing any documents.

Lenders are required by law to be upfront about interest rates and fees you will be charged along with the principal loan amount. Be sure you understand the repayment terms, as you do not want to miss a payment.

Request a Loan through LoanStart

Unsecured, online personal loans for bad credit are much more popular than alternative options.

There are other types of personal loans, but we don't recommend all of them. If you need more than $1,000, then don't sign up for a cash advance. We recommend that you stick to unsecured personal loans, which often have much lower interest rates

If you are considering taking out a personal loan, you can request a loan through LoanStart.com. To try to find a lender who can get you the funds you need, use our free loan connection service today. We work with various online affiliate direct lenders who make personal loans to all types of borrowers, even those with bad credit. Fill in our form today, and we will do our best to connect you with one of our partners.

Find a Co-Signer

If you have bad credit, a lender might be more willing to offer you a loan if you have a co-signer. What's a co-signer? It's someone who agrees to pay off your loan for you if you cannot pay the loan off yourself. This person will need to have excellent credit to make up for your bad credit.

Many consumers use a co-signer when taking out their first big loan.

Even consumers who save up enough to pay in cash may want to have it financed to boost their credit history. Your credit history gets better the more times you prove you can pay off a significant amount of debt, but that's only true if you take the time to pay off the debt. So, if you buy a new car, it sometimes helps to get a loan and make regular payments for at least two-and-a-half years, so it counts as a good credit experience. Consumers who do this sometimes see their credit history them a lower interest rate when applying for a mortgage.

Unfortunately, many consumers are denied funding not because they have bad credit, but because they have no credit. Not having any positive marks on your credit history can be the same as having bad credit. A co-signer can fill in any blanks you have on your credit report.

Work with the Lender

Lenders are a stubborn bunch. You can trust them to try everything in their power to get you qualified for a loan. You just have to be willing to work with them. Here are some tips for when you're dealing with a lender:

  • Give them the information they need. We only work with reputable lenders, so you can feel safe giving them your information. We understand that it can be difficult to hand out sensitive information, like your Social Security number.
  • Be honest with them. Don't try to hide any big financial mistakes. Remember, they want to sign you up for a loan. They will help you through the process, but they need to have accurate information to do so.
  • Go ahead and offer suggestions. If you want to negotiate your rates or suggest adding a co-signer to the loan, go ahead and do it. They'll let you know what's possible and not possible.

In the case that you find a loan, your lender will offer you a loan agreement. Read over the contract and make sure it includes the price points you expected. Don't sign it until you have read it thoroughly and agreed with everything in the agreement. You can always call your lender if you have any questions.

How to Save on a Personal Loan

The best way to save on your loan is to pay it off as quickly as you can. The sooner you pay off your loan, the less interest you will pay. First, though, make sure there's no penalty for paying back your loan before the due date. If there's not, you should pay back your loan as fast as you can.

Your lender will set the fees and interest for your loan. These charges can be affected by state regulations and your credit history. There's not much you can do about your state laws, but you can bump up your credit score. Improving your credit score may also improve the chances that you'll get the loan in the first place.

Beware of credit repair companies that promise to improve your credit rating by getting negative information taken from your credit report. Most of the time, the bad stuff can't be removed unless it's old. According to the Credit Repair Organizations Act, it is illegal for these companies to make false promises or bill you before completing their services.

Raise Your Credit Score to Find More Loan Options

Although having a bad credit score can be discouraging, it is possible to raise it to the level of fair credit, good credit, or even excellent. It might take a few years, but many people successfully repair their credit. Below are a few things that may help your credit score:

  • Pay off overdue accounts - Focus on paying those off outstanding bills or invoices.
  • Settle collections - Work with creditors to settle issues if there are collections actions against you.
  • Pay bills on time - Continue to pay other bills on time, including student loans, credit cards, medical bills, and others.
  • Check your credit report - Request a free copy of your credit report, and then review it to make sure it is accurate. If anything is incorrect, file a dispute.
  • Be careful with credit cards - Stop using them or limit their use and try to pay off your balance monthly.
  • Don't apply for new credit - Until your score improves, don't apply for new accounts.
  • Contact the people in charge of your credit score and dispute any errors. The three major credit bureaus are Equifax, TransUnion, and Experian.
  • Apply for another credit card. As long as you pay your bills on time, having a couple of credit cards can bump up your credit score.
  • If you have more than one credit card, it's smart to spread your debt between the cards. If you max out a credit card, that'll be bad for your credit score. But if you use less than 30-percent of your limit spread across a few credit cards, then you'll likely have a better overall credit score.
  • You should also increase your credit limit on all of your credit cards. (Just don't also increase your spending.) This tip helps you in a couple of different ways. When you have a higher limit, it's easier to stay below the suggested 30-percent usage level. Also, just having a higher credit limit will improve your credit score.
  • Grab your phone, call your creditors, and negotiate. Remember, they want money, and you want a better credit score. Sometimes they'll offer a compromise, like erasing the accounts that went to collection on the condition that you pay the debt off. If you can't get them on the horn, then we suggest writing them a letter. Forbes says that you should request a "good-will adjustment," which is pretty much a mulligan for credit mistakes.

It will take time and effort on your part, but if you put in the work, there is reason to believe that you will improve your credit score.

Improving your credit score will, in turn, vastly improve your range of loan options. The higher your credit score, the more likely traditional financiers like credit bureaus or banks will give you a loan offer. You are also likely to receive a lower interest rate on your loan. Although loan approval is never guaranteed, excellent credit may lead to healthier financial options. This is why it's so important for borrowers to work towards a high credit score.

Checking Your Credit Score

According to the FCRA (Fair Credit Reporting Act), you are entitled to one free annual credit report from each of the three nationwide credit reporting agencies (Equifax, Experian, and TransUnion).

Requests for your free annual reports can be made at annualcreditreport.com. You can also call 1-877-322-8228 or complete the Annual Credit Report Request Form. Some people request a report from a different agency every few months allowing them to get up to three free reports each year.

Credit Monitoring Services

You can also check your credit score with a subscription to monthly credit monitoring services. For a minimal monthly fee (as low as $10 to $15), the service monitors your score at one, two, or all three major credit agencies. There are both pros and cons to using these services.

One of the main advantages is receiving regular updates. Because of this, you can stay on top of your credit activities and be notified of suspicious activity or errors. On the other hand, although these services alert you to fraud or errors, they cannot prevent them. You might not know until it is too late that someone used your name or SSN to open an account.

Before signing up for a credit monitoring service, you should check and make sure the company charges a reasonable rate. As we mentioned, suitable options exist at around $15 a month. If a company is charging two or three times that amount, you might be able to get their services for less elsewhere.

Personal Loan Alternatives

Although it can be difficult to get a loan with a bad credit score, some lenders might work with you. Some of the loan products that may be available to you are:

  • Bank Personal: Loans from your local bank or credit union, which sometimes have lower interest rates than other types of loans. With bad credit, but these can be harder to get. Approval for these loans can also be difficult if you are younger and have less experience with debt.
  • Installment: A type of personal loan paid back in a series of monthly payments rather than in one lump sum. This is one option for borrowers looking for larger loan amounts than they can obtain with a standard payday loan. Often, lenders will offer up to a one-year loan term for repayment. Some borrowers find the extended repayment term to be more favorable. However, keep in mind that the longer the repayment term, the more interest will accumulate.
  • Secured: Loans that are secured with collateral. These are popular loan options because they are often more viable for borrowers who don't have excellent credit. Note: You also should stay away from secured loans. These loans require you to offer collateral, such as your house (home equity loan) or car (auto title loan). If you can't pay off the loan, you lose whatever you offered against it. It's better to avoid that risk and instead apply for an unsecured loan.
  • Peer to Peer (P2P): Loans directly from a company or business, not a bank. Typically done online, these loans sometimes have lower interest rates than bank loans. Qualifying for a P2P loan with bad credit may be difficult.

There are also short-term options with higher interest and fees.

What is a Cash Advance or Payday Loan?

Payday loans are small personal loans with a short term and high annual percentage rate (APR). These cash advances can cover various costs such as medical bills, student loan payments, auto loan payments, or credit card debt. Whatever the expense, payday loans are best used only as emergency loans in times of financial hardship.

People favor payday loans for many reasons, including the following:

  • They supply quick cash. The loan approval process is quick, and the loan application itself is straightforward. Once approved, borrowers can sometimes receive their money within one to two business days. 
  • Lenders may not base approval solely on credit score. Every lender will conduct a credit check, but some payday lenders will consider applicants' unique situations in the approval decision. For example, lenders often consider factors such as the source of income in their decision. Approval is never guaranteed, but many direct lenders don't require a minimum credit score to apply.
  • Quick repayment terms. Cash advances are short-term small loans designed to be repaid once the borrower receives their next paycheck. As long as the borrower promptly repays the loan, they may not be locked in for an extended repayment term.
  • They are an alternative to traditional loans. Payday loans may be a more realistic option than conventional loans. They are also often available to people who would otherwise be denied by credit bureaus.

Consumers are better off avoiding short-term, high-interest loans. One way to find a payday loan alternative is by improving one's credit score.

Requesting Installment Loans

Payday or installment loans are different from the installment loans offered through traditional credit unions. The main difference between installment loans and conventional payday loans is that installment loans are paid off in small monthly installments. The loan term depends on state regulations but is usually around 30 days to one year. This extended repayment term allows borrowers in some states to take out more money through installment loans than they could in regular payday loans. Installment loans are also an option for borrowers who want a more flexible repayment schedule. In some states, you can receive up to $5,000 in installment loans. Typical installment loans range from $500 to $5,000.

Requesting Title Loans

Title loans, also called car title loans, are one type of secured personal loan. Title loans are short-term loans that are taken out against a borrower's vehicle title. This means the vehicle, be it a truck, car, or motorcycle is used as collateral.

Loan amounts typically range from $100 to $5,500, or 25% to 50% of the car's value being borrowed against. Title loans are taken out for an average of 30 days.

These loans can come with high APRs and fees. In some cases, APRs for title loans can exceed 300%. High APRs, combined with vehicular collateral, means that title loans are fairly risky. Borrowers risk repossession of their vehicle should they miss a payment or default on the loan. The Consumer Finance Protection Bureau found that one out of every five title loan borrowers loses their car to repossession for failing to repay their loans on time.

Consumers can apply for title loans online. While requirements will vary, lenders will typically request the following:

  • The hard copy of the vehicle title
  • A valid form of identification
  • Proof of income
  • Proof of residency
  • In some cases, lenders may require a valid registration of the vehicle being borrowed against

Interested consumers will need to go through an application process. After filling out the loan request form, the lender will ask you to bring in the vehicle you're using as collateral for inspection. Or, they may ask you to submit photos of your vehicle. The amount you can take out depends on the vehicle (the higher the value, the higher the loan amount) and, of course, your state's regulations. After signing a loan agreement, you will have to hand over the hard copy of your car title to the lender. You will receive the car title back once the loan is repaid.

Beware of Bad Loans

It's sad, but not all sites that offer "personal loans for bad credit" actually follow through. Here are a few products that won't help you get a personal loan.

  • Avoid refillable debit cards. When you search online for credit solutions for people with bad credit, you're bound to find sites offering refillable debit cards (often branded as credit cards). These will be useless to you. These cards require you to use your money to fill them up. Sometimes they have a monthly fee, upwards of $15. That means you are paying to have a place to keep the money you already have. They might be useful if you need to buy something online and don't have a credit card. But they won't help you if you require a personal loan.
  • Don't bother with low-limit loans. If you need less than $1,000, you probably shouldn't be applying for a personal loan. You should be a little wary if a lender offers you a personal loan for less than $1,000. Also, stretching your debt across several low-limit credit cards can be dangerous. If you forget to pay just one payment, your credit score will sink even lower.
  • Stay away from scam sites. When you fill out our secure form, we will try to help you find a reputable lender. This free service enables you to avoid the Internet's many scam sites. All of our lenders are licensed and allowed to lend money to borrowers. You should never enter your information into a site that doesn't guarantee that their lenders are licensed.

Don't believe the adage, "Beggars can't be choosers." You are allowed to search for the best loan for your circumstances. Try to avoid the unsavory ones. The Federal Trade Commission offers tips on how to recognize an advance-fee loan scam.

Debt Consolidation

Many types of small personal loans, including bad credit personal loans, can be used towards what is called debt consolidation. Debt consolidation is a debt refinancing method that involves taking out a small personal loan to cover existing loan debt.

In the case of installment and secured personal loans, missing even one payment can hurt your credit score. Suppose you're continually missing payments on a loan. In that case, a debt consolidation loan may help mitigate damage to your credit by giving you the boost you need to afford your monthly expenses. Of course, taking out another loan will only rack up more debt, so be cautious and think through your options before taking out a loan to cover the existing debt. You might first ask yourself how you can cut your monthly expenses or pay off some of your current loans in the shortest amount of time possible.

Much like small loans themselves, this method may be favorable in the short-term, but in the long run, the borrower may end up paying more in monthly interest payments than they would have otherwise.

With APR and various added fees such as finance charges and origination fees, small personal loans can quickly add up. A borrower who takes on more loans than they can handle can soon find themselves in a downward spiral. Be cautious when considering this type of loan. It may be tempting to merge your loan payments to provide relief from auto, student loan, or credit card debt, but whether this is a good decision varies depending on your circumstances.

The best way to avoid an inescapable debt cycle is to use small loans sparingly and not rely on them to solve long-term financial problems.

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