Bad-credit loans are typically offered to borrowers with fair, poor or no credit. The range of credit scores varies across the three major credit bureaus. Generally, a good credit score is 670 or higher. A lender may consider a borrower with a score below 670 a high-risk borrower and could offer higher interest rates or require a joint applicant to mitigate their risk. A bad-credit loan can be a less costly way to cover unexpected expenses than a high-interest credit card. You can also use a bad-credit loan to build your credit.
Loans for bad-credit borrowers work similarly to loans for borrowers with good credit. By checking your credit history and score, lenders will determine the interest rate and repayment terms for which you qualify. Some lenders factor in other variables in the application process, like your education, income and employment, to better understand how likely you are to repay the loan. Bad-credit loans often come with higher interest rates. Depending on the lender, you may also be limited to lower loan amounts and shorter repayment terms.
Co-signed or joint loans are often the easiest loan options to get approved for with bad credit. They allow a co-signer or co-borrower who will share responsibility for the loan and usually has a credit history that meets the lender’s requirements. Secured loans are also easier to qualify for with poor credit since they require you to put up collateral, like a vehicle or savings account, to cover the lender if you default on the loan. No credit-check loans, like payday loans, are easy to get, but they often come with dangerously high interest rates and short repayment terms.
Apps like Earnin and Dave offer emergency loans by giving you early access to your paycheck, sometimes in exchange for a subscription or other fee. The money is usually paid back by your next payday. But borrowing against your future paychecks can make it hard to stick to a budget, leaving you relying on payday advances regularly.
You can borrow money with bad credit, though it may be very costly/ Look for lenders that serve borrowers with lower credit scores or allow you to apply with a co-borrower. Even with bad credit, you can still shop for the best personal loan.
No matter your credit score, only borrow what you can pay back. If you qualify for an affordable short-term personal loan with bad credit, taking out the loan to cover an emergency expense could be a sound decision. But if you don’t see how an additional monthly payment will fit into your budget, consider alternatives to taking on more debt. Consider working with a low- or no-cost credit counselor, financial adviser or nonprofit organization for guidance.
