A report by FICO revealed that more than a quarter of Americans have subprime or lower credit scores from major credit bureaus. That means, on a scale of 850, they average credit scores between 300 and 620. Unfortunately, a FICO Credit score below 580 is considered to be bad. And a bad FICO score tends to lead to a higher APR for loans and credit products. This is just one of the cons of having a poor credit history. 

People with lower credit scores and less credit history may experience difficulties qualifying for a loan, but they do have several loan options available to them. Applying for bad credit loans online and repaying them on time can be a great way to potentially improve your credit score and get a lower APR. To understand the value of these loan options, this article offers a bit more detail on the people who can benefit the most from them. 

The average credit score tends to improve with age, so younger Americans are more likely to have lower credit and therefore higher monthly payments on loans. However, there is a glaring borrowing anomaly in people between the ages of 30 and 39. This age group constitutes the largest population of consumers whose credit score is below 620, based on the FICO methodology.

Many people in their 30s have begun to settle down, which comes with expenses and debts such as first mortgages, weddings, credit cards, and other expenses. A study on American credit card habits showed that many in this age group also have too much debt as well as poor credit. Those below the age of 30 also have lower average credit scores and need easy loans to apply for. There could be many reasons for this, but this borrowing age group typically has limited financing access to loans for bad credit from their bank or credit union. This is why learning more about personal finance and how to budget is so important. 

The 2009 CARD Act made it a bit more difficult for anyone between the ages of 18 and 21 to open new credit card accounts. This means that the eligibility for many young adults to start building up their credit history cannot begin until later in life in many cases. Roughly 11% of the American population does not have a credit score (referred to as “credit invisible”). This borrowing group faces even more financing difficulty when getting personal loans compared to those with a bad credit score. Just like the cons of having a low score, no score at all can also mean a higher loan APR. 

Fortunately, several lenders offer loans for poor credit. You can even find online loan options that don’t require any credit check, which can benefit the credit invisible group. If you do your research, you may find a reasonable APR, low fees, and a perfect payoff amount that works with your annual income. You may even be able to find a good debt consolidation loan that you can use to pay off all of your other debts. Debt consolidation can be a great option for simplifying your finances if you find the right one. 

 Keep reading to find out more about the best loans for poor credit, and to find a perfect solution for your personal loan situation—even if you have a below-average credit score.

Here is a comprehensive list of online bad credit loan options:

1. Personal Loans with a Co-Signer

A convenient way of securing a personal loan (if you have a bad credit score or no prior credit record), is getting a co-signer who has an excellent credit score. In such a case, a co-signer with a great credit rating offers a layer of security for the lender by committing to pay in case you default. The largest borrowing advantage of these types of bad credit loans is that a credible co-signer increases your chances of getting a loan with reasonable terms and rates. You may be able to get a much better APR and payoff amount, or lower origination fee, with a cosigner. 

What if Your Loan Was Rejected Due To Bad Credit?

Similarly, if your loan application was rejected due to a bad credit rating, a co-signer can help you in securing a personal loan. Also, if you get a bad credit loan with unfavorable rates, a re-application with a credible co-signer might give you a better APR.

Your spouse, guardian, parent, any other close relative, or even a friend can be a co-signer to help you build your credit score. Whoever you select, make sure that person has a good-to-excellent credit score, a regular income, and they’re fully aware of the responsibilities of being your co-signer. Taking on the responsibility of loan payoff is not to be taken lightly. 

If you do choose this option, it’s wise to set up autopay for your payments, so you never miss a due date. This can save you and your co-signer from unnecessary fees in the long run. 

2. Joint Personal Loans

A personal loan with a co-signer has some similarities and differences with a joint personal bad credit loan (a personal loan with a co-borrower). But both types of personal loans can be used by people with a bad credit score.

In a joint personal loan, the co-borrower shares the responsibility of repaying the loan with you right from the start and receives part of the loan amount. On the other hand, co-signers are not entitled to any share of the loan amount and will only make repayments if you (the primary borrower) happen to default. Possibly affecting the credit of the co-signer.

Can a Co-borrower With Good Credit History Help Qualify for a Loan?

One similarity between joint and co-signed personal loans from online lenders is that the credit score of your co-signer or co-borrower can help you qualify for a personal loan with better terms or lower APR and rates.

Just as co-signers have to repay the personal loan when primary borrowers default (a 2016 report showed that this affects 38% of existing co-signed debts), a qualifying joint borrower must make the full monthly payment for an existing joint personal loan when the other joint borrower defaults.

3. Personal Loans for Bad Credit

Personal loans are arguably the fastest-growing mode of consumer lending in the U.S. According to the latest TransUnion consumer credit report, this type of debt from reputable lenders grew 19.2% in the first quarter of 2019.

In spite of the remarkable growth in personal loans from online lenders, the percentage of seriously delinquent borrowers was a paltry 3.47%, a record low for the first quarter of the year, even if they had poor credit. This means personal loans are offering more friendly terms or low interest rates that can help people with a bad credit score in repaying their debt. Personal loans for bad credit may offer the APR and loan amount you need for your specific budget. 

What About an Online Loan for Borrowers With a Low Credit Score?

You can receive an online personal loan from banks, online lenders, or credit unions without any collateral and be eligible for lower rates and a reasonable APR. These unsecured loans require no guarantees, unlike a secured loan, which requires some form of collateral or guarantee. If you have bad credit, a secured personal loan may be easier to access and help you to be approved for debt consolidation.

Some lenders also offer unsecured personal loans to people with a bad credit score. While these bad credit loans normally come with higher interest rates or payment terms than loans for people with good credit, they can be cheaper to repay than car title or payday loans. It may be ideal for people with bad credit. Just make sure you pay attention to the APR and origination fee no matter which type of loan or lending company you choose. 

Personal bad credit loans generally offer larger amounts than car title or payday loans and usually come with longer repayment periods or installments. Repayment on a reputable personal loan can last up to a period of 84 months, or longer, with loan amounts ranging from $100 to $100,000 and fixed or variable interest rates. Most of these options also offer autopay capabilities to help you avoid missed or late payments. 

The APR (annual percentage rate) for personal loans varies based on your credit score, ranging from an average of 10.3% (if you have a 720+ score) to over 100% (if you have a poor credit score that is less than 600).

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4. Peer-to-Peer Loans for a Poor Credit Score 

Also known as marketplace lending, peer-to-peer lending helps individual investors fund individual borrowers. The P2P lending industry has been growing steadily at an annual rate of 32.5% between 2014 and 2019. It’s currently worth $2 billion.

Requirements for this type of loan vary—although P2P lenders might not closely analyze your credit. Like personal loans, reputable peer-to-peer loans typically offer lower interest rates than car title or payday loans. You can also get larger loan amounts and longer repayment periods.

What You Need To Know as a Borrower: Is It the Best Option for Bad Credit Scores?

The process of borrowing from a peer-to-peer platform usually involves these steps:

  1. You submit a multi-step application that may include a credit check for eligibility and creditworthiness.
  2. The platform shows you your possible interest rate, APR, origination fee, and payoff amount for borrowing so you can decide whether to proceed to the funding stage.
  3. In the funding stage, individual investors review your loan request and decide whether to fund it.

Once your loan is successfully funded, you will then move to the repayment stage and begin making regular monthly payments for the life of the loan. Make sure you are familiar with the full payoff amount that includes principal, interest, origination fee, and other charges. 

Each payment that you make is divided among the individual investors or institutions who funded your loan. Each investor gets a proportional share based on their contribution. You can receive P2P loans worth $40,000 or higher.

The Various Types of P2P Loans (Peer-to-Peer Lending) You May Be Eligible for Include:


  • P2P Personal Loans

Borrowers typically use these types of loans to buy cars, pay medical bills, consolidate debt, and meet other personal expenses. Personal loans for people with bad credit scores are normally easier to access through social lending platforms since they typically don’t have strict requirements, unlike traditional financial institutions.

  • P2P Business Loans 

These kinds of loans can take care of start-up expenses, facility maintenance, and repair, marketing, product launch, or fund other business costs. Social lending groups are a convenient funding source of business loans since potential borrowers can present their business proposals to multiple investors. This increases the chances of loan approval and funding.

  • P2P Student/Educational Loans 

These are usually lump-sum loans and give borrowers the flexibility to use the money for a variety of school expenses. If you cannot get federal student aid, social lending platforms can offer inexpensive alternatives for student borrowing.

5. Payday Alternative Loans (PALs)

Payday alternative loans (PALs) are short-term loans normally offered by some federal credit unions and some lenders. They normally have lower interest rates, different credit requirements, interest rates and fees than ordinary payday loans. PALs must meet the following requirements set out by the National Credit Union Administration (NCUA), which controls federal credit unions in the United States:

  • Interest rates cannot exceed 28%, although interest rates may vary during the life of the loan.
  • The loan amount must range between $200 and $1,000.
  • Borrowers must repay the loan within a period of one to six months.
  • The application fees must be less than $20.
  • Each accepted borrower with a bad credit score can receive up to three PALs within a six-month period, without any PAL overlap or rollover.

6. Payday Alternative Loan II (PAL II)

The PAL II is an additional alternative bad credit loan option for borrowers. This new PAL provides similar protections as the original PAL, but it offers higher loan amounts and longer monthly repayment periods. The funded loan is offered by some federal credit unions. PAL II must meet the following requirements set out by the National Credit Union Administration (NCUA):

  • Loan amounts up to $2,000.
  • Repayment periods ranging from one month to 12 months.
  • Federal credit unions can offer the loan immediately when borrowers establish membership.
  • The lender can offer only one type of PAL at any given time.

7. Car Title Loans for Bad Credit

If you have bad credit, car title loans are usually one option borrowers can qualify for, if they own a vehicle. While they may seem like a good alternative for borrowers, they can be quite costly. A high interest rate, origination fee, and other charges make these loans quite expensive. 

The fact that borrowers offer the titles of their vehicles as collateral for the loan makes lenders more willing to offer the loan. These types of bad credit loans normally have a specific repayment period of 30 days or less, and the amount is often equal to about 25% to 50% of the current value the car used as collateral.

Typically, a borrower can receive a loan for an amount ranging from $100 to $5,500, and it can even go up to $10,000 or higher. Despite having a form of collateral, the annual percentage rate (APR) of many car title loans falls somewhere in the triple digits.

What About Online Car Title Lenders?

You will mostly find car title lenders operating from storefronts or online. Online lenders will typically give you a list of title loan stores operating closest to you. To finalize the application process, you must physically present your car, a clear title, proof of insurance, and a photo ID or driver’s license. Many lenders will also ask for a duplicate set of your car keys.

To be on the safe side, wherever you go for a car title loan, you need to do two things:

  • Carefully review the loan terms beforehand to avoid any unpleasant surprises.
  • Be wary of “add-ons” such as vehicle roadside service plans, which may inflate the cost of your loan.

When a car title loan is approved, the borrower receives the money in their checking account, and the lender keeps the car title. You can only get your title back once you fully pay off the outstanding debt.

Remember that these loans come with more cons than pros. If you cannot repay the loan, the lender can repossess your vehicle which can affect your credit score. If possible, it’s very important to set up autopay for these loans so that you don’t miss payments and lose your vehicle. 

8. Invoice Financing 

Invoice financing can help business owners to free up monthly capital when unpaid invoices slow down their cash flow, even with a low credit score. If it suits your unique funding requirements, invoice financing can be another alternative for business owners who have a poor credit score, depending on eligibility. Basically, it’s a self-collateralizing loan: the unpaid invoice acts as security for the financing, even with bad credit.

This category of loans is most suitable for business-to-business (b2b) startups. You’ll receive an advance of around 85% of the invoice amount from a lender. The lender will then follow up on your invoice, and once your client pays up, you will receive the balance after the lender has deducted the loan amount and fees. 

Lenders who offer invoice financing can help you turn your invoices into instant cash, and they are often ready to work with borrowers who have low credit scores.

This type of financing helps to sustain the cash flow of your business. It can help you pay your own bills even if your clients delay or pay erratically.

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9. Equipment Financing 

Businesses are spending more and more money on equipment, especially computers and communications tools, which has driven the need for equipment financing.

Equipment financing is particularly interesting since the loan provides its own collateral. The equipment you purchase or lease using this loan serves as the security, which also means that this type of loan typically has favorable interest rates, depending on your credit score.

However, this type of loan is specifically designed for business equipment. You cannot divert it to other expenses. Borrowers normally use it to purchase equipment like lawnmowers, trucks, tractors, or walk-in-coolers.

The Typical Equipment Financing Rates and Terms for Loans Include:

  • Loan amounts of up to 100% of the value of your equipment
  • Fixed interest rates ranging from 6% to 24%, or higher
  • Quick funding within typically three business days, although sometimes it’s a bit longer
  • Repayment periods lasting from several months to ten years or longer

Lenders may also have a minimum credit score or specific business operating history requirements.

10. Purchase Order Financing 

Like invoice financing, lenders in purchase order financing will take over your purchase order, while offering the necessary funds to allow you to supply products to your customers.

Purchase order financing is different from invoice financing since you get funding before delivering goods to, and invoicing, customers. Essentially, you get money to pay your supplier who provides the goods that your customers ordered.

After customers pay, lenders give you the balance after subtracting the loan amount and fees. This financing helps you to avoid the enormous capital needed to execute big orders from clients. But it will cost you 1.8% to 6% of the purchase order value for the first month, with extra costs after that.

Purchase Orders Typically Have the Following Minimum Loan Requirements:

  • Your supplier and customer are creditworthy and have decent credit
  • The purchase order has a 15 percent or higher profit margin
  • You have a business or government customers (B2C businesses are not eligible)
  • You sell tangible goods

11. Hard Money Loans

Hard money loans have some similarities to equipment financing. Just as equipment financing funds equipment purchases, hard money loans finance real estate as well as fixed assets.

The asset you purchase will serve as collateral for the hard money loan, which makes these types of loans accessible for startups, small-scale businesses, and individuals with bad credit.

The Key Features of Hard Money Loans Include:

  • A short-term financing option
  • A much higher interest rate compared to ordinary bank mortgages
  • Lenders include costly processing fees
  • Prepayment penalties for early loan payment
  • A large down payment, usually 30% or more of the value of your loan
  • Helps people who have equity but cannot get traditional loans
  • Quick funding, usually within two days
  • Lenders typically do not require financial disclosure or credit checks

12. Online Line of Credit 

Compared to banks, online lenders usually have softer qualification requirements and faster funding for lines of credit, sometimes as soon as the next day. However, the interest rates for online lines of credit are normally higher than banks. When you get a line of credit, you can access cash on demand, which allows you to borrow up to a set amount, while only paying interest on the amount you borrow.

If you’re running a business, the line of credit gives you capital that you can regularly utilize. It can even be in the form of a revolving credit line, which reverts to the initial amount once you pay the pending balance.

13. Short-Term Bad Credit Loans

This type of loan offers a speedy and accessible financing option because you can get approval in just one day, even if you have poor credit. Once you get the loan for bad credit, you can make daily or weekly payments for up to one year.

However, short-term loans typically come with high interest rates. Therefore, if you want to take these types of bad credit loans, keep that in mind when making payments for this type of bad credit loan.

14. Loans from Family Members or Friends

Getting a loan from close friends and family members can be challenging. Although such a loan may not require a credit check, it has the potential of ruining an important relationship if things go wrong.

Therefore, you should probably only consider this option as a last resort. Only do it if you are sure that you will be able to honor your promise of repayment. Although this kind of loan largely depends on good faith from both the lender and borrower, make everything official by drafting a loan agreement.

Clearly spell out the loan terms, including interest rate, duration of the repayment, and installment loan amounts. This helps prevent broken relationships, hurt feelings, and possible legal tussles from avoidable disagreements.

Benefits of Getting a Loan From a Close Family Member or Friend Include:

  • Approval and loan terms may not necessarily depend on your credit score
  • Receiving the money instantly
  • The payment plan is negotiable and flexible
  • The interest rate might be low or even non-existent
  • No credit check

Disadvantages of Getting a Loan From a Family Member or Friend Include:

  • Putting an important relationship at risk
  • You cannot easily borrow large amounts
  • Changes in your relationship can adversely affect your loan terms
  • You may face legal action for minor disagreements

15. Payday Loan with Bad Credit

Payday lenders normally don’t check your credit when deciding whether to give you a loan. According to a survey by CNBC, 11% of adults in the United States have taken out a payday bad credit loan. Moreover, payday loans are a whopping $9 billion business in the United States. Offering loans for bad credit attracts lots of people in this situation.

The extensive use of this type of loan by people with bad credit scores has a lot to do with how easy they are to get. All you need is a legal ID, bank account, no credit check, and sufficient proof of income. Once you get the loan, the principal, service fees, and interest are normally due on your next payday. Therefore, payday loans are meant for short-term financial needs. The typical payday loan amount is roughly $500, and it normally comes with higher fees. The interest alone can cause some payday loans to be a bit costlier than other types of bad credit loans.

As much as payday loans may provide quick funding, the Consumer Financial Protection Bureau revealed that the fees charged for a normal two-week payday loan result in an annual percentage rate (APR) of about 400%. This is higher than the APR on credit cards, which ranges from 12% to 30%.

If you take a $500 payday loan because of your credit score, at an APR of 391%, you will pay $575 two weeks later. However, some borrowers have a tendency of “rolling over” their payday loans several times. If you do that for about three months, on your $500 loan, the amount you will owe will be over $1,000. 

Certain states do not offer payday loans online, while other states have placed tighter regulations to ensure consumers are protected.

The Different Types of Payday Loans Include:

  • One-Hour Payday Loans

With this type of payday loan, you can get a loan decision within one hour—or perhaps even instantly, making it a popular choice for those looking for a loan with bad credit. The process is fast and easy; therefore, it’s suited to emergencies or urgent circumstances.

  • 24-Hour Payday Loans

In this type of loan, you can expect to have the money in your account in less than one business day after approval. This is different from normal payday loans, which can take two to four business days before the money reaches your bank account.

  • Instant Cash Advance

With instant payday loans or instant cash advances, the processing of your loan begins immediately after you fill out an online application. The lender may contact you by email, phone, or both to finalize the loan application process.

  • Payroll Advance 

This kind of payday loan is a short-term non-guaranteed loan, which allows employers to release payroll funds to their employees well in advance. 

  • Military Payday Loan

Military payday loans are particularly designed for people in the military.

These members can expect friendlier interest rates and fees because all active duty service members, together with all their dependents, are entitled to special protection through the Federal Military Lending Act (MLA). Such protections include a cap of 36% on the military annual percentage rate (MAPR). Other limitations apply on what lenders can charge for payday and other consumer loans.

However, all military personnel are expected to abide by strict financial restrictions. According to the Uniform Code of Military Justice (UCMJ), military members who fail to meet their financial obligations can be transferred, discharged, confined, or even court-martialed.

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16. Merchant Cash Advance (MCA)

If you have a business and are unable to qualify for other loans, a merchant cash advance (MCA) is one of the most flexible loans. The flexibility of MCAs is based on the fact that you pay more when business is doing well, and less when business is slow. This is because lenders take part in your credit and debit card sales (between 8% and 30% of your sales) after advancing you some cash.

You can get a cash advance of up to 250% of your company’s normal debit and credit card sales. Some lenders might offer a fixed dollar amount ranging from $2,500 to $250,000, or as high as several million.

You don’t need a spotless credit to qualify for a merchant cash advance, but lenders often require that your business meet certain requirements:

Merchant Cash Advance Criteria for Borrowers:

  • An operating history involving credit and debit card payments
  • Credit and debit card sales
  • Specific minimum monthly card sale volumes
  • Particular minimum annual revenue

Despite being a form of debt, an MCA isn’t technically a loan since the merchant cash advance company is purchasing your future debit and credit card sales. Therefore, an MCA doesn’t follow the same regulatory standards as typically business loans. The absence of regulation makes the merchant cash advance one of the most expensive loans.

Fortunately, legitimate MCAs are regulated by the Uniform Commercial Code established by each US state, rather than such federal banking laws as the Truth in Lending Act.


Out of the wide variety of these options, someone who happens to have bad credit can identify the best personal loan options available to them. Finding the best personal loan isn’t always easy. And depending on your credit, some options offer better rates and terms than others. The best bad credit option for you will also depend on how well it matches your specific needs. For instance, poor credit loan options specifically designed for businesses can better serve business owners. 

You can always find a way to get a personal loan with bad credit. But finding one with a low origination fee and APR is more difficult. It may be wise to consult with specific types of financial advisors before making your choice. This can help compare fees and options before signing for a loan you’re not sure about. 

Most importantly, prompt and complete repayment of the bad credit loan you take can help improve your credit score, so you can qualify for better loan rates in the future. Finding the right loan company, a low APR, and a low origination fee is key to finding the right loan for your budget. These aren’t easy decisions, but there are still options out there for borrowers with bad credit. 

Always keep in mind whether or not you can repay the loan and fees, no matter what loan you choose. Take into consideration your annual income, the APR, your debt consolidation options, and all of the fees. There’s a lot to consider, but the APR and total fees are the most important factors to consider. Pay attention to these things and you’re likely to find the best personal loan for your situation. 

To learn more about budgeting, loans, APR, and personal finance, check out the rest of our blogs in the CreditNinja Dojo.


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