How to Get a Personal Loan with Bad Credit
Learn exactly how to get approved for a personal loan with bad credit. Follow our step-by-step guide to improve your chances of approval.
Having bad credit doesn't mean you can't get a personal loan. While traditional banks may turn you away, many lenders specialize in working with borrowers who have less-than-perfect credit. This guide will walk you through exactly how to secure a loan, even with a credit score below 600.
Check your credit score
Before applying, know exactly where you stand. Get your free credit report from AnnualCreditReport.com and check your score through a free service like Credit Karma. Understanding your score helps you target the right lenders.
💡 Pro Tip: Look for errors on your credit report that could be hurting your score. Disputing inaccuracies can sometimes boost your score quickly.
Calculate how much you need
Only borrow what you actually need. Smaller loan amounts are easier to get approved for and cheaper to repay. Make a list of your expenses and stick to that number.
💡 Pro Tip: Remember that interest and fees add to your total cost. A $3,000 loan might cost $3,500+ to repay.
Research bad credit lenders
Look for lenders that specifically work with bad credit borrowers. Online lenders, credit unions, and peer-to-peer platforms often have more flexible requirements than traditional banks.
💡 Pro Tip: Avoid payday lenders at all costs. Their rates (300-500% APR) can trap you in debt.
Gather required documents
Prepare proof of identity (driver's license), proof of income (pay stubs or bank statements), proof of address (utility bill), and your Social Security number.
💡 Pro Tip: Having documents ready speeds up approval and shows lenders you're organized.
Consider a co-signer or collateral
A co-signer with good credit can significantly improve your approval odds and get you better rates. Alternatively, offering collateral (like a car or savings) for a secured loan can help.
💡 Pro Tip: Only ask someone to co-sign if you're confident you can make all payments—their credit is on the line too.
Pre-qualify with multiple lenders
Many lenders offer pre-qualification with a soft credit check that won't hurt your score. Compare offers from at least 3-5 lenders to find the best rates and terms.
💡 Pro Tip: Focus on APR (not just interest rate) and total cost of the loan when comparing.
Submit your application
Once you've found the best offer, complete the full application. Be honest about your income and employment—lenders verify this information.
💡 Pro Tip: Apply during business hours for potentially faster processing.
Review and accept your loan
Carefully read all loan terms before signing. Understand your monthly payment, total interest, any fees, and the payoff date. Once accepted, funds typically arrive in 1-3 business days.
💡 Pro Tip: Set up automatic payments to avoid missed payments and potentially get a rate discount.
Additional Tips for Success
- Start with smaller loan amounts—they're easier to get approved
- Credit unions often have better rates for members with bad credit
- Building a relationship with a bank can help future applications
- Consider a credit-builder loan to improve your score for future borrowing
- Avoid multiple hard credit inquiries in a short period
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