Bad Credit Loans

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Bad credit loans are loans given to people with bad credit. Yes, you heard that right: even if you have bad credit, you can still get a loan.

Finding out you have a bad credit score can feel like getting bad news from your doctor. But, that doesn’t mean you are out of options. Even with a credit score below 600, you can still receive a loan from a trustworthy lender.

Things to Know about Personal Loans

Borrowing money with bad credit is a different experience from borrowing with good credit. At the end of the day, though, you’re still taking out a personal loan, so it’s important to understand what a personal loan is.

Here are three things to pay attention to:

1. Type of Debt: When you take out a loan, you need to pay it back. Based on your agreement with the lender, you can either pay in regular installments, or you can pay back the entirety of the sum you borrowed at one time (also known as revolving debt).

2. Interest Rate:  If you pay in regular monthly installments, the interest rate refers to the amount you pay each month.

3. Type of Loan:  Your loan can either be secured or unsecured. A secured loan is backed by collateral, meaning if you fail to pay back the loan on time, the lender can claim ownership over the piece of collateral you staked against the loan. An unsecured loan has no collateral attached to the loan agreement.

The Effects of Bad Credit

Each of the components of your loan is affected by your credit rating.

If you have bad credit, you’re likely going to get a high interest rate. That’s just the way it goes and there few ways around it. Most lenders offer a wide range of interest rates, and they give the customers that seem the most dependable the lowest ones. A bad credit ranking tells a lender that you might be less likely to repay your loan. To manage the risk of taking on a less reliable customer, lenders compensate by charging more to accept their business.

With bad credit, you can find loans that offer either regular installment plans or revolving debt options. Different lenders have different preferences. Some might insist on regular installments for customers with bad credit so they can know early on whether the person is likely to default. Others might offer revolving debt, but they might only grant low total amounts, or they might charge extremely high interest rates.

A bad credit rating might make it difficult to find an unsecured loan. Even with a high interest rate, some lenders might not want to take on the risk of a customer not being able to pay the loan back. In that case, a secured loan could be a good option for you, if you have a valuable piece of collateral that you’re willing to back the loan with.

If you have a poor credit rating and you’re in need of a loan, it doesn’t necessarily mean that you don’t have valuable assets. You might have homes, cars, or other items that could fetch a high market price. By offering those items as collateral, you could get a secured loan with a reasonable interest rate.

Advice for Loan-seekers with Bad Credit

Knowledge is power. And it can also help you make sound decisions, especially when you’re working with the disadvantage of having bad credit.

- Find Out Your Credit Score

Before doing anything, you need to know your credit score. Best case scenario, it’s not as bad as you thought and you can get a personal loan with a reasonable interest rate and favorable terms.

But even if it’s bad, knowing what it is will help you negotiate with the lender. Even if it feels like your low credit score puts you at a disadvantage when it comes to negotiating the terms of a loan, imagine how much worse it would be if the lender knew your credit score and you didn’t.

You can find out your FICO score from websites like

- Think About How Much Risk You’re Willing to Take on

The lender isn’t the only one taking a risk by loaning to someone with poor credit. The person taking on the loan is taking on a risk too—the risk of not being able to pay back the loan on time.

It’s important to think about an ideal, yet realistic, loan arrangement for you considering your poor-credit situation. Would you prefer to take on revolving debt or would you prefer to pay in regular installments? Does a secured or unsecured loan work better for you? What interest rate are you hoping to receive?

Your personal situation will determine what loan repayment arrangement works best for you. Have answers to all of these questions in mind before applying for a loan. You don’t want to sign on the dotted line too quickly before you’ve had a chance to think it through.

- Consider the Worst-case Scenario

What happens if you can’t make your loan payments? That’s not a question you want to start thinking about only after you’ve taken out the loan and realized you’re not going to be able to meet the terms and conditions you’ve already agreed to.

Before accepting a loan with a high interest rate, you also need to think about the never-ending fines and fees you’ll have to deal with if you can’t pay it back.

Before taking out a secured loan backed by a valuable asset, think about whether you’d be able to handle not having it in your life. If you’re considering staking your house to a secured loan so you can quit your day job and start your own business, maybe that’s not worth the risk. Don’t use anything as collateral that you’re not prepared to lose.

Where Should You Go to Get a Bad Credit Loan?

So you’ve done your homework. You know your credit score. You’ve thought about your financial situation and how much risk you can take on. Now where do you go to actually get a loan?

First, a word of warning:  Be cautious. There are a lot of predatory lenders out there that bait people with bad credit and a desperate need for cash into vicious agreements with obligations they could never meet.

Avoid payday loans. They might seem appealing by offering you quick deals for cash, but the terms are unreasonable and you’ll likely find yourself spiraling into a world of mounting fees and increasing debt, making a bad situation much, much worse.

It’s important to be aware of the bad actors out there. With bad credit, you’re going to be vulnerable, but by doing your homework you can scope out the bad loans and find the best option for you.

- Explore Personal Installment Lenders

Personal installment lenders offer flexible terms depending on your need and financial status. Often used for anything from financing a wedding to paying for an expensive hospital visit, these lending arrangements can vary in terms of the amount of money exchanged and the timeframe for paying them back.

Since these loans have a variety of functions and agreements, the lenders consider many different factors when deciding on your repayment terms. A bad credit rating isn’t a deal breaker for these kinds of loans.

- Consider What Collateral You Can Use for a Secured Loan

No, you don’t want to use something as collateral that would be devastating and potentially harmful if you were to lose it. But secured loans can still be a good option for those with bad credit and an inescapable need for cash.

If you have valuable assets, you can use those to help drive down the interest rate you might receive on your loan. With a valuable asset, a lending company might treat you like someone with a much higher credit score.

- Become a Member of a Credit Union

Credit unions offer great rates…if you’re a member. While they do consider your credit health, there are other factors that determine how they accept new members. Your personal background might make you eligible for credit unions you’ve never considered. There are great options for members of the military or government employees.

Do some research online and see if there any that you might qualify for. If you can become a member, you’re likely to qualify for a loan with a much more reasonable interest rate than if you went to a bank or a more traditional lender.

- Co-sign a Loan with Someone Else

Interest rates are calculated based on the credit score of the recipient. If there are multiple signers, the interest rate is based on the average of the two. So if you can find someone with a strong credit score to sign up for the loan with you, you can drive down the interest rate you’re likely to receive.

It could be a difficult situation on a personal level, and you’ll want to make sure the co-signer is willing to accept the risk, but if you can find the right person lending institutions that once seemed out of reach might now be in play for you.

Final Piece of Advice

Even if you have bad credit, the good news is that there are still loan options available for you. But there’s more good news, as well:  there are steps you can take to improve your credit score.

So if you’re not in a desperate need for cash, it might be worth it to wait to take out a loan and focus on improving your credit score first. Then, when your credit is in better shape, you can get a better loan with a lower interest rate.

Pay off as much debt as you can and limit how much additional debt you take on. Make sure your credit card balances are low, and also make sure that you’re paying your bills on time. With a concerted effort, your score will improve over time.

Typical cost is


Based on a loan amount of $25,000, 36 months and Interest rates (16.92%) are fixed for the term of the loan.