What Is a Personal Loan for Bad Credit?

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Bad-credit personal loans can help consumers with low scores break up major expenses into smaller monthly payments. Learn what a personal loan for bad credit is and what to expect if you get one.

What is a bad-credit personal loan?

A bad-credit personal loan is one that’s offered to consumers with credit scores below 630 and can be used to consolidate debt or cover a large expense. These loans are often unsecured, meaning they don’t require collateral to qualify, but some lenders offer both secured and unsecured loans for bad credit.

Bad-credit loans are primarily offered by online lenders, but you may be able to get a personal loan with a low credit score at your local bank or credit union. Loan amounts are usually $1,000 to $50,000, repayment terms are one to seven years, and annual percentage rates are 6% to 36%. Generally, borrowers with poor credit are offered low loan amounts and high rates. Credit scores below 500 are unlikely to qualify for a personal loan.

Key terms

Bad credit is generally a score below 630, but lenders and credit scoring companies have their own definitions. If you have bad credit, your credit report may show delinquent accounts or missed payments toward loans or credit cards.

An installment loan comes in a lump sum and is repaid, plus interest, in equal monthly installments. Bad-credit personal loans are installment loans.

A personal loan’s annual percentage rate, or APR, represents the cost of borrowing. This number is the interest rate plus any fees a lender charges. Your APR is heavily influenced by your credit score and history, so bad-credit borrowers should expect high APRs.

A personal loan origination fee is a percentage of the loan amount (usually 1% to 10%) that the lender takes from the loan before sending you funds. Bad-credit loans often have origination fees.

Most personal loans have fixed interest rates, meaning the rate and monthly payment stay the same for the full loan term. If you initially get a personal loan with a high rate and suspect you may qualify for a better one later on, the only way to lower the rate is by refinancing.

A payment that’s past due may not be considered “late,” depending on how many days past due it is. Most lenders have a grace period before charging a late fee, and late payments are usually not reported to the credit bureaus until they’re 30 days past due. If a lender reports your payment as late, your credit score will drop.

Common features of bad-credit personal loans

Consider these bad-credit loan features and weigh the pros and cons of bad-credit loans before you borrow.

High annual percentage rates

Personal loan borrowers with bad credit are likely to get a rate on the high end of a lender’s APR range. In 2024, the average personal loan rate for borrowers with scores below 630 is about 18% to 26%, according to aggregate, anonymized data from users who pre-qualified for a personal loan through NerdWallet.

Small dollar amounts

Bad-credit loans also tend to be smaller than loans offered to good- or excellent-credit borrowers (with credit scores above 689). For example, if a lender offers loan amounts from $1,000 to $50,000, a bad-credit borrower may not qualify for the maximum $50,000 amount.

Limited repayment term options

While good- and excellent-credit personal loan terms can extend to seven years or more, bad-credit loan terms are likely to be five years or less. Even if a lender offers repayment terms of six or seven years, bad-credit borrowers are likely to be approved for a shorter term.

🤓Nerdy Tip

Though your credit score is an important factor in determining your personal loan offer, it isn’t the only one. Loan applicants with high incomes and little existing debt may qualify for better rates and terms than those with lower incomes or high debt. The easiest way to determine whether you’ll qualify for a personal loan and for what terms is to pre-qualify, which lets you preview loan offers without a hard credit pull.

How to tell if a bad-credit personal loan is safe

Scammers and predatory lenders seek out consumers with bad credit who need money and may take advantage of them. Here are four signs of a safe bad-credit lender.

A good online reputation: Do an online search for the lender and check consumer reviews on forums like Reddit, professional review websites like NerdWallet, the Consumer Financial Protection Bureau’s complaint database and the Better Business Bureau. Look for lenders with positive reviews, few complaints with the CFPB and no actions from regulators like the Federal Trade Commission.
Loan information on display: A bad-credit loan website should include information like the APR range, repayment term options and loan amounts. This information is sometimes on the loan product page or in the site’s footer.
Requires a credit check: If you have bad credit, the thought of a credit check could be troubling, but a hard credit check is a sign the lender wants you to repay the loan. Promises of approval with no credit check may be a sign of a personal loan scammer or a lender that charges exorbitant interest rates.
A clear loan agreement: After you’ve chosen a lender and requested a loan, the lender will ask you to sign a loan agreement. This document should include the loan’s APR and any fees the lender charges.

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What Is a Personal Loan for Bad Credit?