You can get a personal loan with poor credit, but you'll pay more and have fewer lenders to choose from
A personal loan with a low credit score is possible. Banks and credit unions rarely lend to people with scores below 620, but online lenders, credit unions with membership-based lending, and secured loan options do. The trade-off is real: interest rates will be significantly higher than what someone with good credit pays, and loan amounts are usually smaller. You may also face stricter repayment terms or requirements like a co-signer.
The path forward depends on your score range, whether you have collateral to pledge, and how quickly you need the money. Some routes take weeks; others can fund in days. Understanding what each lender type actually requires — not what they advertise — saves you from wasting time on applications you won't be approved for.
Key Takeaways
- Online lenders and credit unions are more likely to lend to people with credit scores below 620 than traditional banks.
- Interest rates for poor-credit personal loans typically range from 25% to 36% or higher, depending on the lender and your specific situation.
- A secured personal loan, backed by a savings account or vehicle, usually carries lower rates than an unsecured loan but puts your collateral at risk if you miss payments.
- A co-signer with better credit can improve your chances of approval and lower your interest rate, but they become legally responsible if you default.
- Pre-qualification lets you see rates and terms without a hard credit inquiry that temporarily lowers your score.
Online lenders that work with lower credit scores
Online lenders are the most common source for personal loans when your credit is poor. They typically look at more than just your credit score — they consider income, employment history, and bank account activity. Many will lend to people with scores in the 500s or 600s, though rates reflect the risk they're taking.
Common online lenders in this space include LendingClub, Upstart, OppFi, and MoneyLion. Each has different score thresholds and approval odds. Some specialize in specific situations — for example, Upstart uses alternative data like education and employment to assess risk, which can help if your score is low but your income is stable. Others focus on installment loans or lines of credit rather than traditional personal loans.
The application process is entirely online and usually takes 5 to 10 minutes. Most lenders offer pre-qualification, which shows you estimated rates and terms without a hard credit pull. A hard pull happens only if you move forward, and it temporarily lowers your score by a few points. If you're shopping around, do all your applications within 14 days — multiple inquiries in a short window count as one inquiry for scoring purposes.
Credit unions and membership-based lending
Credit unions often have more flexible lending standards than banks, especially if you've been a member for a while. Some credit unions will lend to members with scores below 600, and a few offer credit-builder loans specifically designed to help people rebuild credit while borrowing small amounts.
To join a credit union, you typically need to meet a membership requirement — living in a certain area, working for a specific employer, or belonging to an organization. Some credit unions have opened membership to anyone, so it's worth checking what's available in your state. Once you're a member, ask about their personal loan options and whether they offer rates based on membership history rather than credit score alone.
The application process is slower than online lenders — expect 1 to 2 weeks for approval — but rates are often lower, and credit unions are more willing to work with you if you hit a rough patch during repayment.
Secured personal loans backed by collateral
A secured personal loan uses something you own — usually a savings account, certificate of deposit, or vehicle — as collateral. If you don't repay, the lender keeps the collateral. Because the lender has less risk, interest rates are lower than unsecured loans, sometimes 10 to 15 percentage points lower.
Savings-secured loans are the safest option for you. You pledge money in a savings account as collateral, but you keep earning interest on it. The lender holds the account but doesn't take the money unless you default. Rates are typically 5 to 10 percentage points above the savings account's interest rate, which is still far better than unsecured rates. Credit unions and some online lenders offer these.
Vehicle-title loans are faster and require less documentation, but the risk is much higher. If you miss payments, the lender can repossess your car. Title loans also often come with very short repayment periods — sometimes just 30 days — which makes them difficult to manage. Avoid this option unless you have no other choice and can repay quickly.
Adding a co-signer to improve your chances
A co-signer is someone with better credit who agrees to repay the loan if you don't. Lenders are much more likely to approve you with a co-signer, and your interest rate will be lower — sometimes 5 to 10 percentage points lower than you'd get alone. The co-signer doesn't need to put up money; they're just legally responsible for the debt.
The catch is real: if you miss a payment, the lender contacts the co-signer, not just you. Late payments show up on both your credit reports. If you default, the lender can sue the co-signer for the full amount. This damages the co-signer's credit and can strain your relationship. Only ask someone you trust completely, and be honest about the risk.
Parents, spouses, and close friends are common co-signers. Some lenders allow a co-signer to be added after approval if you're denied alone, so ask before you assume you need one upfront.
What to expect: rates, terms, and monthly payments
Interest rates for unsecured personal loans with poor credit typically range from 25% to 36% or higher, depending on the lender and your exact situation. A few lenders go above 36%, though some states cap rates by law. Secured loans are usually 10 to 15 percentage points lower.
Loan amounts for first-time borrowers with low credit are often $500 to $5,000, though some lenders go higher if your income supports it. Repayment terms are typically 2 to 5 years. A $3,000 loan at 30% interest over 3 years costs about $110 per month; the same loan at 15% costs about $90 per month. That difference adds up.
Before you commit, use a loan calculator to see what your actual monthly payment will be. Many lenders provide this during pre-qualification. Make sure the payment fits your budget — missing payments will damage your credit further and may trigger default fees or collection action.
Steps to apply and what documents you'll need
Most online lenders need only basic information to start: your name, address, income, and employment. You won't need to upload documents for pre-qualification. If you move to a full application, you'll typically provide a recent pay stub, bank statements (usually the last 2 months), and a government ID.
Credit unions may ask for more — proof of membership, tax returns, or references. The application takes longer but gives you a chance to explain your situation in person, which can help if your credit score doesn't tell the whole story.
Gather these documents before you apply: recent pay stubs, 2 months of bank statements, a government ID, and your Social Security number. If you're self-employed, have 2 years of tax returns ready. If you're using a co-signer, they'll need to provide the same documentation. Having everything ready speeds up the process and shows lenders you're organized.
Frequently Asked Questions
Will applying for a personal loan hurt my credit score?
A hard credit inquiry lowers your score by a few points, usually 5 to 10. The impact is temporary — it stops affecting your score after 12 months and disappears from your report after 2 years. Multiple applications within 14 days count as one inquiry, so shop around quickly if you're comparing lenders.
What's the difference between a personal loan and a payday loan?
Personal loans have repayment terms of 2 to 5 years and fixed monthly payments. Payday loans are due in full in 2 to 4 weeks, which makes them much harder to repay. Payday loans also carry much higher effective interest rates — sometimes 400% or more — and trap many borrowers in a cycle of rolling over debt. A personal loan is almost always the better choice.
Can I get a personal loan if I'm currently in default or have collections on my credit report?
It's harder but not impossible. Online lenders are more likely to work with you than banks. Settling or paying off the collection account before you apply improves your chances. Some lenders will lend to you even with an active collection if your income is stable, but rates will be higher and loan amounts smaller.
How long does it take to get approved and funded?
Online lenders typically approve within 1 to 3 business days and fund within 1 to 5 business days after approval. Credit unions take longer — usually 1 to 2 weeks for approval and another few days to fund. Some online lenders offer same-day or next-day funding, but these usually come with higher rates or fees.
Should I take out a personal loan to pay off credit card debt?
Sometimes. If the personal loan's interest rate is lower than your credit card rate and you can stick to a repayment plan, consolidating can save money and simplify your payments. But if you pay off credit cards with a personal loan and then run up the cards again, you've increased your total debt. Only consolidate if you're committed to not adding new debt.