When you have bad credit, it seems like it comes back to haunt you at the most inconvenient times. Whether you have a medical emergency or your car gets totaled, there may come a time when you need extra cash fast.
You don’t have to automatically resort to title loans or payday lenders. There are actually several online lenders who specifically cater to people with bad credit. You might have to look a little harder, but they’re out there.
To help you with your search, we’ve compiled a list of the five best online personal loans for bad credit. We’ve also pulled together some tips on what to watch out for when picking out a personal loan, plus what to expect throughout the process.
Even if you’re working on repairing your credit, we all know that it takes time, and you simply can’t plan for every financial emergency that pops up. In the meantime, don’t stress out that you can’t access new credit to pay for those unexpected expenses. Instead, keep working on that credit repair and look for a bad credit loan with affordable terms. Obviously, you don’t want to get yourself into further financial difficulty, but a personal loan actually could help increase your credit score if you make your payments on time.
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What to Look for in an Online Lender
The two biggest things to look at with an online lender (especially those who brand themselves as bad credit loans) are transparency and security. Unfortunately, the Internet is riddled with scammers and predatory lenders, but there are several steps you can take to avoid getting into trouble.
First, make sure the lender is registered to do business in your state. You can find this out by contacting your state’s financial institution regulatory bureau. Also, make sure the lender’s website begins with “https” rather than just “http” — that indicates a safe, secure site where your personal information can’t easily be compromised.
Once you’ve established these two items, next look for transparency in fees and loan terms. Carefully read all of the fine print on the lender’s website. You should never be asked to pay any fees upfront before receiving your loan funds. In fact, reputable lenders deduct their origination fees from the loan funds, so you never pay anything except your monthly bill.
A final tip is to check and see if the lender reports to the major credit bureaus. This doesn’t imply whether they’re trustworthy or not, but it does help your credit score if your timely payments are regularly reported. After all, you may as well take advantage of those on-time payments by increasing your credit score.
What to Expect with a Bad Credit Loan
When you start looking for online personal loans, it’s important to be aware of a few different things. The lower your credit score is, the higher your APR will be — both your interest rate and often your origination fee. Don’t be surprised to see your loan offer with an APR of 20% or more. It’s also likely that you’ll only have access to lower loan amounts.
If your credit is really bad, you might only qualify to borrow $1,000 or $2,000. Pay careful attention to your actual loan needs and what your monthly payments look like. If it is really going to pinch your budget, it may not be worth it.
This is especially true if your lender requires you to use collateral for a secured loan. That’s how many lenders defer the risk of making a bad credit loan. They have you use your personal property to secure the loan— whether it’s your car, boat, or savings account. In the event you default on your loan, the lender then takes possession of that collateral to offset the cost of the loan. This really ramps up the stakes of a bad credit loan, so just be sure to proceed with caution.
However, if you pay off the loan quickly and on time, those regular payments could positively influence your credit report. This will put you on the path to better credit (and consequently, better credit offers in the future).
Next, let’s take a look at our top picks for best online personal loans for bad credit. You’ll see a diverse mix of options and ideally find the right choice for you.
Rather than being a direct lender, BadCreditLoans.com serves as a loan marketplace. That means that after filling out a single request form, the website sends your information to several lenders that then respond to you with multiple loan offers.
As its name implies, BadCreditLoans.com truly caters to people with extremely low credit who need cash fast. The typical loan range is only between $500 and $5,000 and the loan terms are short, making them akin to online payday loans. In fact, your repayment term could be as short as three months, or as long as five years.
There are only a few requirements to qualify for a loan through BadCreditLoans.com. You need to be at least 18 years old, a legal U.S citizen, and have a steady income for the last 90 days (either through a job, disability or Social Security). Believe it or not, there is no minimum credit score, but even if you meet the basic qualifications, it doesn’t mean you’ll automatically be approved for a loan.
You must wait to receive an offer from the website’s network of lenders. Depending on your request, you might not receive any offers at all, or you might receive several to choose from. You’re never under any obligation to accept any offer you receive, so you can make sure it fits your budget before making a decision.
PersonalLoans.com is another loan marketplace where you get matched with multiple lenders based on a single application. Because the lenders vary, the available APRs vary as well. Expect to see rates anywhere from 5.99% to 35.99%. Similarly, the loan amounts start off as low as $500 and go up to $35,000 depending on your application and needs. Loan terms are quite flexible, starting at six months and lasting up to 72 months (or six years).
PersonalLoans.com works with three different types of lenders, each of which has different minimum requirements. P2P lenders require a minimum credit score of 600 and you must also earn at least $2,000 a month in verifiable income. Both installment lenders and bank lenders require just a 580 credit score, although with a bank loan you’ll need at least $3,000 in income. For all loans, you must be at least 18 with a social security number, regular income, and a valid checking account.
Another requirement is that even with bad credit history, you cannot have had an account with a late payment longer than 60 days or a recent bankruptcy. Another restriction is that you can’t have any recent charge-offs, nor should you have a regular pattern of late payments. If you meet these requirements, then PersonalLoans.com could be an excellent choice for several different loan types, regardless of your current credit score.
LendingPoint targets poor and fair credit borrowers looking for a personal loan. You can borrow anywhere between $3,500 and $20,000 with interest rates ranging between 17.46% and 35.99% APR. All loans are subject to a flat origination fee of 5%. To qualify, you’ll need at least a 600 credit score and a minimum gross annual income of $25,000.
Another requirement is that your debt-to-income ratio should be no more than 45%. Finally, applicants must live in one of the following states: Alabama, California, Colorado, Delaware, Georgia, Michigan, Missouri, Montana, New Jersey, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Texas, Utah, and Washington. If you meet these basic qualifications, then you’re a strong candidate for a LendingPoint loan.
LendingPoint’s application process is quick and easy. Just pull together some basic documents, like your proof of employment and income, recent bank statements, a voided check, as well as your driver’s license. Once you sit down to apply online, it should take no more than five minutes. If you’re approved, you’ll be provided with different loan options to choose from. Pick one and receive your funds as soon as one day later.
Mariner Finance is a financial institution with both an online presence and physical locations. Their personal loans cater to poor credit borrowers who have at least five years of credit history. Loans range between $500 and $50,000 depending on what state you live in. While interest rates can be high, ranging from 24% to 36%, that’s still much lower than some other bad credit loans, particularly payday loans. You also get flexible repayment terms lasting anywhere between one and five years.
A unique part of Mariner Finance’s personal loan application process is that you need to bring your documentation into a physical branch as part of the approval process. You can call the local branch throughout the application process to check on the status so you can get an idea of how things are going. In fact, each loan is considered by an actual person, not by a computer underwriting system. Since there’s more of a personal relationship with your loan officer, expect good customer service throughout the life of the loan.
Another great thing about Mariner Finance’s personal loans is that you can use a co-signer to help you get approved and qualify for a better interest rate. Not many lenders allow for this option, so it helps if that’s a route you want to take. For any loan over $10,000, you’ll need to secure it with collateral. This is usually some type of physical property like your vehicle.
Unlike many other online lenders for bad credit loans, Peerform is a peer-to-peer lender catering specifically to this demographic. The bare minimum score to qualify is a 600, although the average borrower has a credit score of 665. You’ll also need just one year of credit history, so it’s also a good option if you simply don’t have a lengthy credit report. There is no income minimum, but you will need less than a 40% debt to income ratio.
Loan amounts vary between $1,000 and $25,000. Interest rates are also competitive, particularly for lower credit, coming in at 7.12% to 29.99% APR. A promising feature about Peerform, though, is that it uses its own algorithm to make loan offers; analyzing many different data points rather than over-relying on FICO scores. Like many online loans, Peerform’s most popular use for funds is debt consolidation. This may or may not be right for you, depending on how your APRs stack up against each other.
What does it mean to take out a P2P loan? The process starts out just the same as any other lender but takes a different turn when it comes to funding. You start off by filling out an application just as you would anywhere else, and you’ll then receive your loan term offer, which is based on your assigned risk category.
However, just because your loan is approved doesn’t mean it’s funded just yet. It’s then listed for investors to select whether or not they want to fund the loan. In most cases, the loan does get funded, but the process does take a bit longer because of that extra step.
OneMain is a well-established lender specifically targeting individuals with bad credit. The minimum credit score is just 550 and typical APRs range from 25.10% and 36%. The amount you can borrow depends on where you live, but you’ll find the scale goes anywhere from $1,500 to $25,000. Each loan does come with an origination fee anywhere between $25 and $40, and it’s more expensive for smaller loan amounts.
To qualify for a OneMain loan with bad credit, you’ll most likely need to take out a secured personal loan. You can use an automobile, truck, motorcycle, camper, or RV as collateral. Whatever you choose, you must have an appraisal completed to ensure its value meets your loan amount. Vehicles also must be insured while the loan is active.
An interesting step in OneMain’s approval process is that you must actually go to a physical branch location to bring in your documents for verification and discuss your loan options. This may seem like a cumbersome step. However, if you already have bad credit, you may find it helpful to compare loan offers with a professional to help decide how different options can affect your payments.
Once you get your OneMain loan, you have flexible payment options each month. You can pay online or through the OneMain app, at a branch, through the mail, or even at a Walmart Service Desk. However, there is a fee each time you pay by debit card or at a Walmart.