Top Loan Options for Challenged Scores in January 2024

Having a bad credit score doesn’t mean you’re shut out from getting a personal loan. There are lenders that cater specifically to individuals with low credit scores, offering a chance to access funds when needed. In this guide, we’ll explore the best loans for bad credit as of January 2024, providing insights into their features, advantages, and potential drawbacks.

Lenders for Bad Credit Loans

1. Upstart: Best for Thin Credit Profiles

Why it Made the List: Upstart stands out for its advanced underwriting approach. Instead of like credit and income, Upstart doesn’t just rely on traditional factors it considers alternative data such as education and work history to assess borrowers.

2. Universal Credit: Best for Credit-Building Tools

Why it Made the List: Universal Credit offers borrowers access to valuable credit-building tools, including a summary of your credit report, credit score simulator, and personalized recommendations. Owned by Upgrade, it may be a favorable option for bad-credit borrowers.

3. Avant: Best for Fast Funding

Why it Made the List: Avant is recognized for its quick approval process, often providing funding within one business day. 550 is the minimum credit score requirement of and it has a minimum monthly net income of $1,200, Avant caters to those with bad credit.

4. Best Egg: Best for Secured Bad Credit Loans

Why it Made the List: Best Egg stands out for accepting two types of collateral on secured loans: vehicles or home fixtures. This flexibility allows borrowers to secure a loan without risking their entire home or vehicle in case of repayment issues.

Understanding Bad Credit Loans

What Are Bad Credit Loans?

Crafted for individuals with low credit scores (typically ranging from 550 to 629) or limited credit histories, a bad credit personal loan is tailored to provide financial solutions. Although certain lenders may consider applicants with good or excellent credit, the flexible underwriting of these loans is specifically designed to cater to those with lower credit scores. These loans typically offer amounts ranging from $1,000 to $50,000, with annual percentage rates (APRs) capped at 36%. Explore the possibilities of securing a bad credit personal loan, ensuring you find the best budget-friendly solution for your financial needs.

How Do Bad Credit Personal Loans Work?

Loan Structure: Like all personal loans, bad credit loans come with fixed rates and are repaid in fixed monthly installments over one to seven years. They are usually unsecured, meaning they don’t require collateral.

Qualification: While you may qualify for a personal loan with bad credit, your interest rate is likely to be on the higher end of the lender’s range, and the approved loan amount may be smaller than your request.

Personal Loans for Bad Credit


Fast Funding: Some lenders can approve applications instantly, with funding happening the same day or within a couple of days.

Fixed, Predictable Payments: Personal loans typically have fixed interest rates, ensuring a consistent monthly payment throughout the loan term.

Credit Building: On-time loan payments contribute positively to your credit history.

Potentially Lower Rates: Rates may be lesser than credit cards and other high-interest loans.


High Rates: Bad-credit borrowers can expect higher APRs, often reaching the maximum of 36%.

Qualification Challenges: Those with the lowest credit scores may struggle to qualify.

Collateral or Co-signer May Be Required: Some borrowers might need collateral or a co-signer to secure the loan.

Risk of Predatory Lenders: Individuals with bad credit may be targeted by predatory lenders using deceptive practices.

Comparing Bad Credit Loans: Factors to Consider

1. Borrowing Requirements:

Credit Score: Lenders often have a minimum credit score requirement. Pre-qualify with multiple lenders to find the best match.

Debt-to-Income Ratio: Ensure that your monthly income can cover existing debts and the new loan payment.

Co-applicant and Collateral: Some lenders offer co-signed or secured loans, impacting your approval chances.

2. Annual Percentage Rate (APR):

APR Range: Check the APR, including any fees charged by the lender. Bad credit loan APRs can reach up to 36%.

3. Monthly Payments:

Affordability: Use a personal loan calculator to determine a monthly payment that fits your budget.

4. Additional Features:

Funding Time: Consider how quickly the lender can approve and fund the loan.

Credit-Building Assistance: Some lenders may offer tools or programs to help improve your credit.

Payment Date Flexibility: Check if the lender allows changes to the payment date.

Personal Loan for Bad Credit: Where to Get it?

Online Lenders: Many online lenders specialize in bad credit loans, considering alternative data in addition to credit and income.

Credit Unions: Credit unions may offer more flexibility, considering traditional factors like credit and income, as well as your history as a member.

Banks: Major banks typically base decisions on credit score, history, and income. Local banks may offer a personal touch and could consider your relationship with them.

Costs Associated with Bad Credit Loans

Origination Fee: Many bad-credit loans come with an origination fee, typically ranging from 1% to 10% of the loan amount. It’s included in the APR.

Example: A $10,000 loan with a 20% interest rate and a 5% origination fee results in an APR of 25.14%. If the lender deducts the origination fee upfront, you’d receive $9,500, and the lender keeps $500.

Late Payment and NSF Fees: Lenders often charge fees for late payments or insufficient funds.

How to Get a Personal Loan for Bad Credit

Check Your Credit: Evaluate your credit reports from major bureaus and correct any errors before applying.

Pre-Qualify: Many lenders offer online pre-qualification, allowing you to preview potential loan offers without impacting your credit score.

Submit an Application: Gather necessary documents and apply online or in person. Expect a decision within a few days.

Add Loan Payment to Budget: Include the new loan payment in your budget, setting up autopay to avoid a missed payment case.

Qualifying for a Bad Credit Loan

Add Collateral: Secured loans with collateral may offer lower rates.

Co-signer: Consider adding a co-signer to improve your chances or get a lower rate.

Include All Income: Ensure all sources of income are included in your application.

Request What You Need: Request a loan amount that you can comfortably repay.

Bad Credit and How to Improve It

What Is a Bad Credit Score?

A bad credit score generally ranges from 300 to 629, but definitions may vary. FICO defines poor credit as below 580, while VantageScore places “subprime” scores between 300 and 600.

How to Improve Bad Credit:

Pay Down Debts: Lowering credit card balances improves payment history and reduces credit utilization.

Request Higher Credit Limit: A higher limit can lower credit utilization, but check if it requires a hard credit pull.

Become an Authorized User: Being added to a credit card with good payment history can positively impact your credit.

Report Rent and Utility Payments: Some services add rent payments to credit reports.

Get a Secured Credit Card: Deposit funds as collateral for a credit card to build credit.

Types of Bad Credit Loans

1. Unsecured Personal Loan:

Summary: Doesn’t require collateral; qualification based on credit score, income, and cash flow.

Use Cases: Large purchases, debt consolidation, home improvement.

2. Secured Personal Loan:

Summary: Requires collateral (e.g., vehicle or bank account) for a lower interest rate.

Use Cases: When a lower rate is worth the risk of pledging collateral.

3. Co-signed Personal Loan:

Summary: Requires a co-signer to vouch for your ability to repay.

Use Cases: When a co-signer is available and understands the risks.

4. Joint Personal Loan:

Summary: Obtained with another person who shares responsibility for payments.

Use Cases: When a co-borrower is available and both need equal access to funds.

5. Buy Now, Pay Later:

Summary: At-checkout financing option to split a purchase into smaller installments.

Use Cases: Necessary purchases that may stretch your budget with traditional payments.

6. Cash Advance Apps:

Summary: Provides an advance up to a few hundred dollars, withdrawn on the next payday.

Use Cases: To bridge temporary income gaps for individuals who spend within their means.

Note: The information provided is accurate as of January 2024. Borrowers should verify details with lenders and stay informed about any updates or changes.

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