A bad credit score, one that’s below 630, doesn’t have to keep you from getting a personal loan. Some online lenders cater specifically to people with bad credit. These companies take into account your credit scores and history when deciding whether to loan you money, but they also have more flexible requirements than banks do.
While personal loans from reputable online lenders can be good options for many borrowers, NerdWallet recommends you first visit your local credit union when shopping for loans. Most credit unions offer flexible loan terms and lower interest rates than online lenders, especially for people with bad credit. The maximum annual percentage rate at a federal credit union is 18%.
If you can’t get a loan through your local credit union, NerdWallet recommends you compare offers from multiple lenders before signing any loan agreement. Rates for bad credit borrowers can vary depending on the lender’s underwriting requirements. The easiest way to compare actual rates is to pre-qualify. Learn about the pre-qualification process.
Additional steps toward financial health
If you’re borrowing money to pay off debt, a personal loan works best if you have a plan to tackle your debts. Creating a budget and starting a savings habit are small steps that could help you build a stronger financial future.
If you don’t have an immediate need for cash, work on building your credit. A higher credit score will qualify you for more loan opportunities, lower interest rates and better loan terms in the future.
Don’t know your credit score? Several personal finance websites, including NerdWallet, offer a free credit score. Look for a site the offers educational tools such as a credit score simulator plus access to your credit report.
If you have made poor financial decisions in the past and your credit score shows it, you may still qualify for a loan. That’s good news if you need to borrow money for any reason, whether a loan is needed to consolidate debt, pay overdue medical bills, or upgrade the car you need to get to work.
Now, onto the bad news. The problem with loans for people with bad credit is that, by and large, they tend to come with higher interest rates and fees. This means you’ll need to compare several loan options to find the best deal for your personal situation. This shouldn’t be a deal-breaker by any means, but you should plan to spend some time on your search.
Fortunately, we did most of the work for you when we created this list of the best loans for people with bad credit. If your credit is less than perfect but you still need to borrow money, consider this list of lenders and what they have to offer.