Bad Credit Loans - Loans for Consumers with Bad Credit

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Updated: September 2018
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If you have bad credit, you're not alone. In fact, 30% of Americans have bad credit. You may encounter a few speed bumps along the way, but that doesn't mean you won't get a bad credit loan in the end.

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An Overview of Bad Credit Loans

Loan Options if You Have Bad Credit

Sometimes life throws you a curveball and suddenly, you have unexpected expenses and bills. Or maybe you need extra money to help pay for a wedding or to purchase a new home. A loan can help, but if you have bad credit, you may be wondering what your options are, and if loans are available.

The good news is that people with bad credit can still qualify for personal loans. These are also referred to as bad credit loans, or bad credit personal loans. Bad credit is said to affect 30% of Americans. If you have a low credit score, there are millions of others who are in the same situation.

We know it can be hard to understand your options, so we put together this guide to cover the benefits of a bad credit loan, two types of bad credit personal loans, where to find a loan, and steps to take to get approved for a bad credit loan. We’ve also included information about credit scores and tips, so you can start rebuilding your credit since a better credit score will help you apply for loans in the future.

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How Bad Credit Loans Can Help You

There is no getting around it: people with good credit are given better interest rates and terms on loans. But if you need money now, and have a low credit score, you may still be able to find a loan.

Helps With Rebuilding Credit

The terms will not be as favorable, but the loan will help ease your financial concerns and can help you rebuild your credit. For a great article on bad credit, you should read: The Effects of Bad Credit and Why It Should Matter to You. Lenders understand you cannot eliminate all debt overnight, and borrowers with low credit scores can qualify for bad credit personal loans to help pay for unexpected emergencies, or life events. Your credit score will factor into the loan terms. Typically, the interest rates on the loans will be higher for a borrower with low credit. Take your time to shop around in order to find the best rates and loan terms.

May Increase Your Total Available Credit

In addition to getting the funds you need, and rebuilding your credit, there are other benefits to bad credit loans. Obtaining a loan increases your total amount of credit, which has a positive impact on your credit score. By making regular payments, and paying off the loan, you will improve your credit score. This will put you in good standing with the lenders if you need another loan in the future.

The Two Types of Bad Credit Personal Loans

There are two types of Personal Loans you need to know about when applying for a bad credit loan: unsecured personal loans and secured personal loans.

Unsecured Personal Loans

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Unsecured loans are traditional and extremely popular. Lenders will give you a loan based on your credit score and report. You can use the funds from an unsecured loan for nearly anything and you don't need to put up any type of collateral.

Typically, unsecured loans are available for people with good credit but, even if you have bad credit, you still may be able to qualify for an unsecured personal loan, though the terms may not be in your favor. The interest rates could even be nearly double or triple the amount of someone with "Excellent" credit. So, you need to weigh those options and consider other types of bad credit loans if the interest rates of an unsecured loan are going to be too high.

Secured Personal Loans

Just as the name implies, you need to secure your loan with some type of collateral—essentially borrowing against your assets. If you miss payments or default, the collateral can be seized by the lender. Common types of collateral secured through traditional lenders would be a car, house, or boat—anything that's valuable that you own with the most equity. Your savings accounts and stocks can also be used as collateral for secured loans. If you have bad credit and can't qualify for an unsecured loan, or if you qualify but the terms are unfavorable, a secured loan may be your best option. You'll get better interest rates because you're willing to risk your assets.

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Lenders won't see you as much of a risk when you're willing to borrow against your equity. Rather than borrowing the amount of the purchase price of your house or car, the loan is based on the fair market value if the collateral were to be sold today. Expect lenders to estimate that value slightly lower, then take that number and subtract the amount that you still owe to determine the amount that you can borrow against. So, if your house is worth $250,000 on the market today, and you only owe $100,000 on your mortgage, then you could borrow up to $150,000 (assuming you found the right lender). There are also some drawbacks of secured loans, such as failure to repay the loan resulting in the loss of your collateral. Don't apply for these if you don't think that you can make the payments, as this could have a major impact on your life if you lose your vehicle or home.

Where to Find a Bad Credit Loan

There are lots of different places to get a loan. To help you find the right option, here are the primary lenders where you can find a bad credit loan:


Bank Graphic

Banks are the most traditional place to get a loan and starting your search at your local bank is reasonable, but don't settle. Expect banks to have higher interest rates, especially for people with bad credit. After all, that's how they make money. Shop around to find the best lender for your situation.

Credit Unions

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Many experts recommend turning to a local credit union to apply for a personal loan if you have poor credit. Owned by their members, credit unions are non-profits that frequently pass along earnings by giving members lower fees. They tend to look at your overall situation when considering extending you a loan, whether it be an installment loan, various short-term loans or even a bad credit loan.

Peer-to-peer Lending

two people with arrows in middle

Using an online platform known as person-to-person, peer-to-peer, or P2P lending you can get a loan directly from an individual investor as opposed to a credit union or bank. P2P lending has been around for less than 15 years and is a great option for people with bad credit. The investors are used to dealing with people who have low credit scores, know what they are getting into when they join these platforms, and are usually more flexible than a bank. While you shouldn't expect to see extremely low interest rates, the rates will probably still be better than traditional lending options if you have bad credit.

Alternative Lenders

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P2P Lenders are just one kind of alternative lender on the market today. Private lending organizations provide offline and online loans to individuals with bad credit and a number of online alternative lenders specialize in fast microloans. If you need a small loan right away, microloans may be a better option than a cash advance company.

Family and Friends

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A family member or close friend may be willing to directly loan you money. These won't have interest rates, and the payback terms can be flexible. Write everything down to make it official and treat this as a legal document. Specify the loan amount, terms, and consequences if you don't repay. Money can make situations awkward or damage relationships, so ask yourself if this is really the best option.

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Stay Vigilant When Applying for a Bad Credit Loan

Any lender you choose needs to be legitimate trustworthy. Don't fall for a cash advance scam from a "lender" that's promising you an unrealistic amount and rate based on your bad credit score.

When Looking for a Lender, Watch Out for These Red Flags:

Unsecured websites. Never send sensitive information through an unsecured website. Look for it to start with https, not http.

No fine print or terms listed. A legitimate lender should include their privacy policy, terms and conditions, and other legal disclosures somewhere on their website.

Is there a clear amortization schedule or listing of loan terms on the website? A reputable lender should be able to give you this information and explain what your loan is going to cost you and what happens if you are late with your payments.

Poor online presence. Most lenders have information about themselves online, such as a website, customer reviews, a social media presence, etc. If you can't find any of these things, it might be a good idea to look elsewhere.

They pressure you or demand deposits. A true lender will allow you to review paperwork and won’t pressure you to sign papers or push you to sign-up.

Also, be wary of online lenders that demand an upfront deposit. There are legitimate institutions that may ask for security—but this can also be a scam.

Along with these red flags, always make sure your lender is linked to a bank and registered with bureaus like Equifax. Look at reviews, accreditations, and rankings on and The Better Business Bureau (BBB) to see what past customers have to say.

If the company is questionable, you'll likely see a lot of comments about it being a scam.

How to Improve Your Chances of Getting Approved for Bad Credit Loans

In addition to borrowing against your assets, there are steps you can take to improve your chances of being approved for a personal loan when you have bad credit.

Here Are Six Ways to Improve Your Chances:

1. Provide Proof of Income

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Lenders need to know you can pay back what you borrowed, plus interest. A steady job is the best way to show that you can repay a bad credit loan but last week’s paycheck won’t necessarily prove job security. In addition to recent pay stubs, be prepared to show tax return documents from previous years, like W2's and 1099 forms. The longer you've been at the same job, the better your chances of getting approved. Large gaps in your employment history, several different jobs over the past couple of years, or job loss may be seen as a risk. Have proof of income documentation prepared even if it isn't required for an application. Showing this to a lender lets them know that you're serious about the loan and responsible.

2. Get a Cosigner

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A surefire way to get approved, and get the best rates, is to find a cosigner with excellent credit. Traits to look for in a cosigner include: seeking out someone you have a long-standing relationship with; such as your parent, guardian, relative, or spouse. Finding someone who understands and supports your financial goals and who has a good payment history along with strong credit score. And finally, someone with stable employment.

3. Only Ask for the Amount You Need

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If you need $5,000 don't apply for $20,000. People make this mistake all of the time, and it's why they get rejected. A lender isn't going to be comfortable loaning you huge amounts of money, especially with bad credit. The larger the loan amount, the greater the risk. Even if did get approved, you'd pay much higher interest charges. Someone who is already perceived as a potentially high-risk borrower has a much better chance of getting approved for a lower amount of money. Explain to the lender exactly what you need the money for and show them how much it will cost.

4. Only Apply for One Loan at a Time

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Applying for multiple loans simultaneously does not increase your chances of getting approved. It will have the opposite effect. Each time you apply for a loan or new credit, an inquiry is placed on your credit report. If a lender sees you applied for multiple loans at once, they'll see that as a red flag. They'll wonder why you would need so much money and if you had some kind of ulterior motive, which makes you a higher risk. If you are going to owe money to multiple lenders at once, how could a lender be sure that they'll get repaid? It's easier for them to reject your application than to deal with that kind of a headache. Take your time, do your research, and find the loan that best fits your needs from a trustworthy lender. Just apply for one loan, and it will increase your chances of getting approved.

5. Pay Off Debt

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Lenders often look at your debt-to-income ratio when evaluating you for a loan, which is the amount of your monthly debt payments divided by your monthly gross income. Aim for a debt-to-income ratio of 36% or less to increase your chances of approval. Knowing that you owe less is good for them because they'll have a better chance of getting their money back. I'm not saying you can just completely eliminate your debt with the snap of a finger. Obviously, things like student loans, car payments, and mortgages can be too high to pay off right now and lenders understand that. But if you're spending thousands of dollars on your credit cards each month and only paying the $30 minimum and racking up interest charges, it's not going to help you get a bad credit loan. Start by paying off those high-interest credit cards, medical bills, retail store cards, and past due utilities before you apply for a new loan.

6. Be Honest

Loans are based on trust and intentionally submitting wrong information is a fast way to get denied. A lender won't just assume everything on your application is true. They'll investigate on their own, so it's better to be straightforward and transparent. Even if you think something hurts your chances of getting approved, it's better that the lender hears about it from you as opposed to you trying to lie about it. To read more about how to improve your credit score, check out Kathryn Vasel’s article on CNN Money: 5 Easy Steps to Improve Your Credit Score

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Why Credit Scores Matter When Applying for a Bad Credit Loan

Lenders use credit scores to decide whether or not your loan application is approved, but your credit score can also impact your life in other ways. Landlords and potential employers often run credit checks and use your credit score when deciding if you can rent an apartment or be hired at their company. Credit scores typically range between 300 and 850 (the higher the score, the better) and are made up of a variety of factors to determine how likely you are to pay back a personal loan.

The Top Factors Are:

35% Payment history. Lenders want to see whether you've paid back other loans in full and on time.

30% Revolving Balances. Lenders may view people who carry a lot of debt as risky or less likely to pay back new loans.

15% Length of credit history. You'll get a higher credit score when you have more experience managing debt. Lenders like to see a long history of responsible borrowing.

10% Types of credit in use. This part of the equation looks at what type of credit a person has: an auto loan, credit cards, student loans, etc.

10% New credit. Applying for a lot of new loan applications in a short period of time is considered a greater credit risk and lowers credit scores.

Knowing your credit score will help you understand your financing options. You can check your score for free once a year at: Looking up your own credit score is a “soft pull” and will not damage your credit. “Hard pulls,” however, can hurt your score. Hard inquiries happen when companies or lenders look up your credit score. This is why applying for a lot of new loans in a short period of time can damage your overall score. For more information see our guide to understanding your credit score.

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How to Start Rebuilding Credit

Now that you understand how Credit Scores work and your loan financing options, you may want to take a few steps that will improve your credit, so you can avoid having to apply for bad credit loans in the future.

A Few Ways to Begin Fixing Your Bad Credit and Improving Your Credit Score:

Pay Bills on Time: Your credit score can start going down once you're 30 days late in making a payment. It's a good idea to try to pay all bills within their grace period.

Focus on Your Credit Card Balances: Your credit scores are more sensitive to revolving debt (like credit cards) than to installment loans (like personal loans). Wiping clean balances on credit cards can be more impactful than paying off mortgages, for example.

Use Credit Cards Sparingly: Even if you're paying off your credit card debt monthly, your credit score can still be tarnished if you're keeping large balances on your credit card. A good rule of thumb is to stay under a 10% utilization rate — that means on a $10,000 credit line, you use only $1,000.

Consolidate Your Loans: You can be penalized for having too many accounts outstanding. Try to consolidate much of your credit debt onto one card. That said, you may want to keep your old cards active to maintain a healthy utilization rate. Make small charges on these cards every other month or so.

Review Your Credit Report

All too often I see people surprised when they hear from a lender about certain parts of their credit report.

You should check and review all of this information before applying for a bad credit loan.

Legally, you're entitled to a free copy of your credit report every 12 months and is a government-authorized website where you can pull your free copy today.

Review your report and check for any errors. If you do see mistakes, you can dispute them for removal. Otherwise, negative marks can remain on your report for up to several years. You may even see something on there that is showing as unpaid, but you know that you paid it, and that's definitely a reason for a dispute.

Here are the key areas you should review to ensure there are no errors:

  • Your name
  • Address
  • Employment information
  • Social Security number
  • Account numbers
  • Balances
  • Dates
  • Account statuses
  • Payment statuses
  • Credit limits
  • Discharged debts
  • Duplicate accounts

Disputing Errors on Credit Reports

Under the Fair Credit Reporting Act, you can dispute a claim yourself. To do so, make sure you follow these simple steps:

  1. Write to the reporting company. Don't email. Don't call.

    Here are the mailing addresses for each of them:


    P.O. Box 740256, Atlanta, GA 30374


    P.O. Box 2002, Allen, TX 75013


    P.O. Box 2000, Chester, PA 19022

  2. You may also want to make it a certified letter which will give you a record in case your dispute doesn't get resolved.

    You don't want them to claim they simply never your letter.

  3. Write one letter per error.

    If you find more than one issue, make sure they're addressed in separate letters.

  4. Explain what the error is and include a copy of your credit report with it highlighted.

    The FTC (Federal Trade Commission) had a sample dispute letter that you can use as your template:

  5. Include photocopies of any supporting documents for your claim.

  6. Equifax and TransUnion will also require you mail in a dispute form accompanying the letter, while Experian does not. These forms can be found on their websites.

  7. Ask them to either correct the mistake or remove the entry.

  8. Make sure you keep copies of everything.

  9. Contact the source of the error as well. This means the original lender such as your credit card company, bank, etc.

  10. Sent them the same dispute letter and supporting documents you sent to the credit bureaus.

  11. Make sure you specifically ask them to correct it.

Credit bureaus have 30 days to respond to any dispute letter.

Usually, in the interest of time, the bureaus would rather delete the disputed claim then address it directly.

If some blemishes are left undeleted, you can simply re-submit those letters until they're gone, at no risk to you!

You should see a measurable increase in your credit score within a few weeks.

How to Find the Right Bad Credit Loan for You

There are tons of different loan options out there; just because you have bad credit doesn't mean you can't get the financing that you need. First, find the right lender based on what you're looking for and your specific credit circumstances. Remember that traditional lenders aren't always the best option for people with bad credit. Don't be afraid to shop around and don't wait until the last minute to look for a loan.

Find a Bad Credit Loans Lender

If you need a loan, our process is fast, secure, and there is no charge to find a lender. All credit types are welcome, and the funds could be deposited directly into your bank account as soon as tomorrow.

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Make sure that you're able to repay the amount that you borrow so you don't get trapped in a cycle of bad credit. Now that you know everything about bad credit loans, why not apply for one? Take a look at some of the best loans available from®. Since 1998 we've been a resource that over 750,000 consumers have used to get the funds they've needed and we can help you too. In fact, you could have access to the funds in as little as 24 hours, and CreditLoan® charges absolutely no fees for this service.