Yes, you can get a personal loan with bad credit, but your options are narrower and the cost is higher

Lenders do offer personal loans to people with credit scores below 620, which most consider "bad credit." The difference is that you will pay a higher interest rate, may need to put down collateral or find a co-signer, and will face stricter limits on how much you can borrow. Some lenders specialise in bad-credit loans; others will consider your application alongside other factors like income and employment history, not just your score.

The real constraint is not whether loans exist — they do — but understanding what each type costs you and which lenders actually lend at your score range. A personal loan from a credit union at 18% interest is not the same offer as a payday loan at 400% annual percentage rate, even though both are available to someone with bad credit.

Key Takeaways

  • Personal loans for bad credit exist from credit unions, online lenders, and banks, but interest rates typically range from 15% to 36% depending on your score and the lender.
  • Adding a co-signer with better credit can lower your rate, but the co-signer is legally responsible for the full debt if you do not pay.
  • Secured loans (backed by collateral like a car or savings account) usually carry lower rates than unsecured loans, but you risk losing the collateral if you default.
  • Payday loans and title loans are legal in most states but charge extremely high rates and fees; they are a last resort, not a first option.
  • Your actual interest rate depends on your credit score, income, debt-to-income ratio, and employment history — not just one factor.

Where to find lenders who work with bad credit

Credit unions are often the cheapest option. Many credit unions will lend to members with credit scores as low as 550 and charge rates between 12% and 18%. You must be a member to borrow, which usually means opening an account and meeting a small deposit requirement. Credit unions are non-profit and regulated by the National Credit Union Administration, so they have less incentive to maximize profit from high rates.

Online lenders specialise in bad-credit loans and will often give you a rate quote without a hard credit pull (which would lower your score further). Lenders like Upstart, LendingClub, and OppFi work with scores in the 580–650 range. Rates typically run 15% to 36%, and approval can happen within one business day. The tradeoff is that online lenders charge origination fees (usually 1% to 10% of the loan amount) on top of interest.

Banks are generally the hardest route with bad credit. Most require a score of at least 620 and will offer rates only to borrowers in that range or higher. If your score is below 620, a bank personal loan is unlikely unless you have a co-signer or significant collateral.

Avoid payday lenders and title loan companies unless you have exhausted every other option. These lenders do not check credit at all — they lend based on your next paycheck or your car's value. But they charge annual rates of 300% to 500%, and the debt often rolls over into a new loan, trapping borrowers in a cycle. Many states cap payday loan rates by law, but others do not, and online payday lenders operate across state lines.

How a co-signer can lower your rate

A co-signer is someone with better credit who agrees to repay the loan if you do not. Adding a co-signer can lower your interest rate by 2 to 5 percentage points because the lender now has a second person to pursue if you default. A co-signer does not need to put money down — they are just legally liable for the full debt.

Before asking someone to co-sign, understand what you are asking them to do. If you miss a payment, the lender will contact the co-signer. If you default, the co-signer's credit score will drop along with yours, and they may be sued. Co-signers have been sued for debts they did not know about because they did not read the fine print. Make sure the person understands the risk.

Some lenders will remove the co-signer after you make 12 to 24 on-time payments, but you have to ask — it does not happen automatically. Check the loan agreement before you sign.

Secured loans versus unsecured loans

A secured loan is backed by collateral — something you own that the lender can take if you do not repay. Common collateral includes a car, savings account, or certificate of deposit (CD). Secured loans carry lower interest rates (often 8% to 15%) because the lender has a way to recover their money if you default.

The risk is real: if you put up your car as collateral and stop paying, the lender can repossess it. If you use a savings account, the lender can take the money directly. Before you secure a loan with something you need, ask yourself whether you can afford the payments without that asset.

An unsecured loan has no collateral, so the lender's only recourse is to sue you or send your debt to a collection agency. Because the lender takes on more risk, unsecured loans cost more — typically 15% to 36% for bad-credit borrowers. Most personal loans are unsecured.

What lenders actually look at besides your credit score

Your credit score is not the only number that matters. Lenders also examine your income, employment history, and debt-to-income ratio (the percentage of your monthly income that goes to debt payments). Someone with a 580 credit score but stable income and low existing debt may get a better rate than someone with a 650 score but high debt and irregular income.

Bring recent pay stubs, tax returns, and a list of your current debts when you apply. If you have been at your job for more than two years, mention it — lenders see that as a sign of stability. If you have recently recovered from a major problem (a medical debt that is now paid off, a late payment that is now five years old), some lenders will consider the context, though not all.

Online lenders tend to weight income and employment more heavily than traditional banks, which is why they can lend to people with lower scores. Banks rely more on the credit score itself.

How to compare loan offers and avoid predatory terms

When you get a rate quote, ask for the Annual Percentage Rate (APR), not just the interest rate. The APR includes the interest rate plus fees, so it is the true cost of borrowing. A loan with a 20% interest rate and a 5% origination fee has a higher APR than a loan with a 22% interest rate and no fees.

Check whether the loan has a prepayment penalty — a fee charged if you pay off the loan early. Some lenders penalise early repayment because they lose interest income. If you think you might pay off the loan faster, avoid lenders with prepayment penalties.

Read the fine print for balloon payments (a large lump sum due at the end), variable interest rates (rates that can go up over time), or automatic payment requirements. Some lenders require automatic withdrawal from your bank account, which can trigger overdraft fees if the payment fails.

If a lender asks for payment upfront before you receive the loan, it is a scam. Legitimate lenders deduct fees from the loan amount or add them to your monthly payment.

What happens to your credit score when you apply

Each time a lender pulls your credit report to make a lending decision, it creates a hard inquiry, which lowers your score by a few points. Multiple hard inquiries in a short time (within 14 to 45 days, depending on the credit bureau) usually count as one inquiry, so shopping around for rates in a narrow window does not hurt as much as applying to many lenders over weeks or months.

If you are approved and take out the loan, your score will drop further at first because you now have new debt. Over time, as you make on-time payments, your score will recover and eventually improve. Paying off a bad-credit loan on time is one of the fastest ways to rebuild credit.

Frequently Asked Questions

What credit score do I need to get a personal loan?

Most traditional lenders require a score of at least 620, but credit unions and online lenders will work with scores as low as 550 to 580. Your actual approval depends on income and employment history too, not just the score. Payday lenders do not check credit at all.

Will getting a personal loan help me rebuild my credit?

Yes, if you make all payments on time. A personal loan adds to your credit mix (you have both revolving credit like credit cards and installment credit like loans), and on-time payments are the biggest factor in your credit score. Missing even one payment will hurt more than the loan helps.

Can I get a personal loan if I have no income or am unemployed?

Most lenders require proof of income, but "income" can include unemployment benefits, disability payments, Social Security, or income from a spouse or partner. Some lenders will work with you if you have a co-signer with income. Payday lenders require only proof of a bank account and a job offer letter.

What is the difference between a personal loan and a payday loan?

A personal loan is typically unsecured, has a fixed repayment schedule (usually 2 to 7 years), and charges 15% to 36% APR. A payday loan is due in full when you get your next paycheck (usually two weeks), charges 300% to 500% APR, and often traps borrowers in repeat borrowing. Personal loans are the better choice if you can get one.

Should I use a loan to pay off credit card debt?

It depends on the interest rates. If your credit card charges 24% APR and you can get a personal loan at 18%, the loan saves you money. But taking out a loan to pay off credit cards only works if you do not run up the credit cards again. If you do, you will have both the loan and new credit card debt.