Where to get a personal loan with bad credit

You can get a personal loan with bad credit from credit unions, online lenders, banks that offer second-chance products, and peer-to-peer lending platforms. The real difference is not whether lenders exist — they do — but what they charge and what paperwork they actually check. A credit union may look at your full financial picture instead of just your score. An online lender may fund you in days but charge 36% interest. A bank may require a co-signer or collateral. Each route has different costs, speed, and odds of approval.

The lender you choose matters more than the category it falls into. Two online lenders can have vastly different rates and requirements. A credit union in one state may have rules that do not apply in another. Before you approach any lender, know your credit score (you can get it free from annualcreditreport.com), how much you need to borrow, and what you can afford to repay each month. That information tells you which lenders to contact first.

Key Takeaways

  • Credit unions often consider factors beyond your credit score, such as your employment history and savings, and typically charge lower rates than online lenders.
  • Online lenders fund quickly — sometimes within one business day — but rates can range from 25% to 36% or higher depending on your credit profile and the lender.
  • Banks with second-chance loan programs exist but usually require a co-signer, collateral, or proof of recent income improvement.
  • Peer-to-peer lending platforms connect you with individual investors and may approve you based on factors beyond your credit score, though rates vary widely.
  • Before you borrow, compare the total cost of the loan — interest rate, fees, and term length — not just the monthly payment.

Credit unions and membership requirements

Credit unions are nonprofit institutions owned by their members. Many will lend to people with bad credit because they look at your full financial history, not just your credit score. They may consider how long you have worked at your job, whether you have savings with them, and whether you have paid other debts on time. Some credit unions offer credit builder loans, which are designed specifically for people rebuilding credit — you borrow a small amount (often $500 to $1,000), make payments on time, and your payment history is reported to credit bureaus.

The catch is membership. You must join the credit union to borrow from it. Membership rules vary. Some credit unions are open to anyone in a geographic area. Others require you to work for a specific employer, belong to a certain organization, or have a family member who is already a member. You can search for credit unions near you at CO-OP Network or Alliant Credit Union's locator. Joining usually costs nothing or a small one-time fee ($5 to $25). Interest rates at credit unions are typically lower than online lenders — often 10% to 18% for personal loans — but approval can take one to two weeks.

Online lenders and speed versus cost

Online lenders approve and fund loans faster than traditional banks or credit unions — often within one business day. They use automated systems that may weigh your income and employment more heavily than your credit score. Many will lend to people with scores below 600. The tradeoff is cost. Interest rates at online lenders typically range from 25% to 36%, though some charge higher rates depending on how risky they judge your profile to be. Origination fees (charged upfront) can add another 1% to 10% to what you owe.

Online lenders also vary widely in how they treat borrowers. Some are regulated by state banking departments. Others operate in gray areas of regulation. Before you submit an application, check whether the lender is licensed in your state — your state's banking regulator website will have a list. Read reviews on independent sites like Trustpilot or the Better Business Bureau, but remember that people who had problems are more likely to leave reviews than people who had smooth experiences. Ask the lender in writing what the total cost of the loan will be, including all fees and interest, before you sign anything.

Banks with second-chance loan programs

Some banks offer personal loans to people with bad credit, though they usually require something extra: a co-signer with better credit, collateral (like a savings account or car), or proof that your financial situation has recently improved. These programs go by different names — "fresh start loans," "second chance loans," or "credit builder loans" — and availability depends on the bank and your state. Regional banks are more likely to offer them than national chains, though some national banks do.

To find out whether your bank offers one, call and ask directly. If your bank does not, ask whether they will consider a loan if you bring a co-signer. A co-signer is someone who agrees to repay the loan if you do not — they are equally responsible for the debt, so choose someone who trusts you and understands the risk. Banks typically charge lower rates than online lenders (8% to 20%) but take longer to approve (one to three weeks). If you have a savings account at the bank, you may be able to use that as collateral, which can lower the rate further.

Peer-to-peer lending platforms

Peer-to-peer (P2P) lending platforms connect borrowers directly with individual investors. Platforms like LendingClub and Prosper assess your creditworthiness using factors beyond your credit score — your income, employment history, and the reason for the loan all matter. Some people with bad credit have been approved on P2P platforms when banks turned them down. Interest rates typically range from 10% to 36% depending on the risk assessment.

The process is similar to online lending: you complete an application online, get a decision within days, and receive funds within one to two weeks. However, P2P platforms are less regulated than banks and credit unions in some states, so the protections you have are different. Read the terms carefully, especially the fee structure. Some platforms charge origination fees, late fees, and collection fees that can add significantly to what you owe. P2P lending works best if you need a moderate amount ($2,000 to $35,000) and can wait a week or two for funding.

What lenders actually check when your credit is bad

When your credit score is low, lenders shift their focus to other information. Most will verify your income — they want proof that you earn enough to repay the loan. This might be recent pay stubs, tax returns, or a letter from your employer. They may also check your employment history to see whether you have held your current job for at least a few months. Some lenders pull a soft credit inquiry, which does not affect your credit score, to see whether you have recent late payments or collections accounts.

Lenders also consider the size of the loan relative to your income. If you earn $2,000 per month and ask to borrow $10,000, most lenders will decline because the monthly payment would be too high relative to what you earn. The general rule is that your total monthly debt payments (including the new loan) should not exceed 40% to 50% of your gross monthly income. If you have a co-signer or collateral, lenders may be more flexible on this rule. Being honest about your income and employment situation on the application matters — lenders verify this information, and lying can disqualify you or lead to legal consequences.

Comparing offers and avoiding predatory lenders

Once you have been approved by more than one lender, compare the total cost of each loan, not just the interest rate. A loan with a lower rate but a longer term might cost more overall than a loan with a higher rate and shorter term. Use a loan calculator (available free on most lender websites) to see the total interest you will pay over the life of the loan. Also compare origination fees, prepayment penalties (charges if you pay off the loan early), and late fees.

Predatory lenders exist and target people with bad credit. Red flags include: lenders who may provide approval before checking your income, lenders who pressure you to borrow more than you need, lenders who do not clearly disclose the interest rate and fees upfront, and lenders who ask for payment before funding the loan. If a lender asks you to pay an upfront fee to receive the loan, that is a scam — legitimate lenders deduct fees from the loan amount or add them to your first payment. If something feels wrong, walk away and contact a different lender.

Frequently Asked Questions

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

There is no single cutoff. Credit unions may lend to people with scores below 600. Online lenders typically work with scores as low as 550 or even lower. Banks are more restrictive and often require scores of 620 or higher. Your score is one factor among many — income, employment, and the amount you want to borrow all matter. Contact lenders directly to ask whether they will consider your specific situation.

Can I get a personal loan if I have collections accounts or recent late payments?

Yes, but it will be harder and more expensive. Lenders see collections and recent late payments as signs of higher risk. Credit unions may still consider you if you can explain what happened and show that your situation has improved. Online lenders will likely charge you a higher interest rate. If the collections account is old (more than two years), it will hurt you less than a recent one. Paying off a collections account before you borrow can help, though it does not remove the account from your credit report.

What if I cannot afford the monthly payment on any loan I am offered?

Do not borrow. A loan you cannot afford will damage your credit further and may lead to debt collection. Instead, explore whether you have other options: a side job to increase income, help from family or friends, or assistance programs specific to your situation (medical debt, housing costs, or other hardships). If you do borrow, choose a longer loan term to lower the monthly payment, even though it will cost you more in total interest.

Will getting a personal loan hurt my credit score?

Yes, but usually temporarily. When a lender checks your credit, it creates a hard inquiry, which lowers your score by a few points. Once you take out the loan, your score may drop further because you now have more debt. However, making on-time payments on the new loan will rebuild your credit over time. After six to twelve months of on-time payments, your score should start to recover.

Should I use a co-signer to get better terms?

A co-signer with good credit can help you get approved and may lower your interest rate. However, the co-signer is equally responsible for the debt — if you do not pay, the lender will pursue them. Only ask someone to co-sign if you are certain you can make every payment on time. If you miss payments, you will damage both your credit and the co-signer's credit.