How to Get a Personal Loan With Bad Credit (and Which Offers to Avoid)
Where borrowers with low credit scores can still find fair terms, what each option really costs, the warning signs of predatory and fake lenders, and how to qualify for better rates next time.
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Key takeaways
- Start with a credit union: federal credit unions cannot charge more than 18% on most loans, and their payday alternative loans are capped at 28%.
- A secured loan backed by savings, or a creditworthy co-borrower, can cut the rate dramatically.
- A typical payday loan fee of $15 per $100 for two weeks equals an APR of about 391%.
- A lender that "guarantees" approval or wants a fee before you get the money is a scam warning sign.
A low credit score narrows your choices, and the lenders most eager to say yes are often the most expensive. The goal is not just to get approved but to borrow at a cost you can actually repay, without making your credit worse. The options below are listed roughly from cheapest to most expensive.
Please note
General information as of October 2026. Lending laws, including rate caps, differ by state. If you are struggling with existing debt, a nonprofit credit counselor can help you review your options before you borrow more.
What "bad credit" means to a lender
On the FICO scale, scores below 580 are labeled poor and 580 to 669 fair. Lenders look beyond the number at what caused it: a single old collection is treated differently from several recent late payments. Your income and debt-to-income ratio also matter, which is why some applicants with low scores still qualify. Details in what credit score you need for a personal loan.
Option 1: A credit union personal loan
Credit unions are member-owned and often more flexible with members whose credit is imperfect. Federal credit unions are limited to an 18% interest rate on most loans, a ceiling the NCUA board has extended through September 2027. Membership is usually based on where you live, work or worship, or through an association, and joining often takes little more than a small deposit.
Option 2: A payday alternative loan (PAL)
For small, short-term needs, many federal credit unions offer PALs: loans of up to $1,000 (PAL I) or $2,000 (PAL II), repaid over one to twelve months, with interest capped at 28% and an application fee of at most $20. That is far cheaper than a payday loan. The rules are explained in payday alternative loans.
Option 3: A secured personal loan
If you have money in savings or a certificate of deposit, a share-secured or CD-secured loan lets you borrow against it. Because the lender can recover the money from your account, rates are often only a few points above what the savings earn. Some lenders also accept a vehicle as collateral, but then a default can cost you the car.
Option 4: Apply with a co-borrower or co-signer
A co-borrower with strong credit can unlock a lower rate. Understand what you are asking: a co-signer is fully responsible for the debt if you do not pay, and late payments appear on their credit report too. The Federal Trade Commission requires lenders to give co-signers a written notice explaining exactly this.
Option 5: Online lenders that serve fair credit
Several online lenders approve applicants with fair credit, typically at APRs near the top of their ranges and often with an origination fee. Prequalify with soft credit checks to compare offers without hurting your score, and compare by APR and total repayment, not by monthly payment.
What different options cost
| Option | Typical pricing | Main risk |
|---|---|---|
| Credit union loan | Up to 18% (federal credit unions) | Membership and approval requirements |
| Payday alternative loan | Up to 28% plus a fee of at most $20 | Small amounts only |
| Share- or CD-secured loan | Often a few points above the savings rate | Savings are frozen as collateral |
| Online lender, fair credit | Often in the 20s to 35.99% APR | High cost, origination fees |
| Payday loan | About 391% APR at $15 per $100 for two weeks | Repeat borrowing and rollover fees |
Why payday and title loans cost so much
The Consumer Financial Protection Bureau describes a typical two-week payday loan with a fee of $15 per $100 borrowed. That looks small, but annualized it is an APR of almost 400%. Many borrowers cannot repay in two weeks and renew the loan, paying the fee again: a $1,000 loan kept going for six two-week periods costs $900 in fees without reducing the principal. Auto title loans add the risk of losing your car. Several states ban or cap these products, and active-duty service members are protected by a 36% cap under the Military Lending Act.
Red flags of loan scams
- Guaranteed approval regardless of credit.
- A fee before you receive the loan, especially by wire transfer, gift card or cryptocurrency. The FTC calls these advance-fee loan scams.
- No physical address or a lender not registered in your state.
- Pressure to act immediately or to share account passwords.
You can check whether a lender is licensed through your state's financial regulator and look up complaints in the CFPB's complaint database.
Build credit so the next loan is cheaper
- Make every payment on time; payment history is 35% of a FICO score.
- Keep card balances low relative to limits.
- Consider a secured credit card or a credit-builder loan from a credit union.
- Refinance a high-rate loan once your score improves.
Frequently asked questions
Can I get a personal loan with a 500 credit score?
It is difficult with unsecured lenders. A share-secured loan, a payday alternative loan from a credit union or a creditworthy co-borrower are the most realistic options.
Are "no credit check" loans safe?
Some are legitimate, but many are payday or title loans with triple-digit APRs. Always look at the APR and total repayment, and avoid any lender that asks for an upfront fee.
Will applying for a loan hurt my already low score?
Prequalification does not. A formal application usually adds a hard inquiry, which typically costs less than five points on a FICO score.
What is the cheapest way to borrow with bad credit?
Usually a credit union loan or a loan secured by your own savings. Both tend to cost far less than online subprime lenders or payday lenders.
How fast can I improve my credit for a better loan?
Lowering card balances can raise a score within one or two billing cycles. Recovering from late payments takes longer, as their impact fades over months and years of on-time history.
