If your credit history is a rocky one, you may struggle to find lenders who will extend credit to you. But because it can take quite a bit of time to repair a bad credit score, you’ll likely need to find a bad credit loan or another form of credit in the meantime.
Fortunately, there are a few reputable lenders who will lend money to subprime borrowers. Here’s our list of the top five lenders for bad credit loans.
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What is a bad credit score?
The FICO credit score model assigns everyone a number between 300 to 850 that indicates how likely that person is to default on a loan based on their credit history. The lower your FICO score is, the riskier you will appear to lenders, and the harder it will be to borrow money.
Most lenders consider a FICO score under 580 to be subprime, which is the technical term lenders use for someone with bad credit. Some lenders are even pickier, setting the bar at a score of 600. Under the VantageScore system, which is a slightly different credit scoring model, a score under 601 indicates bad credit.
If your credit scores fall below the subprime line, you will struggle to find a lender who will work with you. Unfortunately, that makes repairing your credit much harder—how can you hope to raise your credit score if you can’t show a good repayment history because no one will lend you money?
There are a few lenders who specialize in subprime lending. These lenders are willing to assume the risk of working with bad credit borrowers, but they’ll usually make you pay for the privilege by charging high interest rates and frequently colossal fees. If your credit is truly poor, however, you may have no other choice but to swallow these extra costs to get an installment loan.
The Best Companies that Provide Bad Credit Loans
The lending industry is unfortunately full of “predatory lenders”: lenders who take advantage of people who desperately need money by charging obscenely high interest rates and fees. If you have bad credit, it’s essential to stick with reputable lenders who won’t rip you off.
Here are five of the best companies that have decent customer service, will help you rebuild your credit by reporting your payments to credit bureaus, and keep the interest rates and fees to a non-predatory level.
Avant is an online lending platform that provides both personal loans and credit cards. Most Avant borrowers have credit scores between 600 and 700, but the lender does accept borrowers with credit scores under 600.
Avant’s personal loans run between $2,000 and $35,000 and may be available as soon as the next business day, making this lender a good source for emergency loans. As of this writing, APRs on those personal loans run from 9.95 percent to 35.99 percent. Repayment terms generally fall between two and five years.
The lender’s credit cards (known as AvantCards) typically have credit limits between $300 and $1,000. The AvantCard annual membership fee and APR vary based on your credit history. This card includes a cash advance option with an industry-standard fee of 3 percent of the advance or five dollars, whichever is greater.
Avant is one of the largest subprime lenders, and its online platform is feature-rich, making it easy for borrowers to track their loan information, make or change payments, and apply for credit quickly and easily. Avant’s customer service team is generally willing to work with borrowers who are having trouble making payments on their loans or credit cards. However, borrowers with very low credit scores may have difficulty getting approval from this lender. If you get a loan through Avant, you’ll pay an administration fee of up to 4.75 percent.
BadCreditLoans.com is a loan aggregator that works with borrowers regardless of credit score. The company is not a lender itself; instead, it will take your loan application and present you with several offers from various lenders. You can then choose the offer that looks like the best fit for you.
There’s no charge to apply for a loan on BadCreditLoans.com, and available loan amounts run from $500 to $5,000—however, lenders on this platform will rarely extend more than $1,000 to a subprime borrower. Typical APRs range from 5.99 percent to 35.99 percent, and repayment terms are generally between three months and three years.
To apply for a loan on BadCreditLoans.com you must:
- Be 18 or older
- Be a U.S. citizen
- Have a regular income (though not necessarily from traditional employment)
- Have a checking account in your name
- Have a valid phone number and email address
It’s important to remember that any loan offers you get through BadCreditLoans.com will come from a range of lenders, all of whom likely have different fees, interest rates, and rules. Review the loan documents carefully before committing to a particular loan so that you can avoid unpleasant surprises later.
LendingPoint can be a good choice for borrowers with poor credit but decent income, as this lender is more concerned with debt to income ratio than credit score. That being said, the minimum credit score to get a LendingPoint loan is 585, which rules out many borrowers with bad credit. LendingPoint loans are not available in West Virginia.
LendingPoint offers personal loans of up to $25,000, and the money may be available as soon as the next business day after completing the online application. As of this writing, APRs range from 9.99 percent to 35.99 percent, and loan repayment terms typically run between 2 to 4 years. Borrowers may be charged a loan origination fee of up to 6 percent.
LendingPoint has some nice features that aren’t typically available on bad credit. For example, if you make at least six months of consistently on-time payments, you may be eligible to refinance the loan to get more money, a lower interest rate, and/or a smaller monthly payment. You can also choose your payment due date and set up your payments on either a biweekly or monthly schedule.
Unlike most of the bad credit lenders on this list, OneMainFinancial is an actual brick-and-mortar financial institution. This can be reassuring for borrowers who prefer to work with a real live person instead of getting an online loan. On the other hand, you must visit a OneMainFinancial branch to open your loan. OneMainFinancial currently has 1,600 offices in 44 states.
While you do have to hit a branch to complete your loan, you can complete the application process online or over the phone to see what you’d qualify for. OneMainFinancial has no minimum credit score requirement, making it an excellent choice for borrowers who haven’t been able to find credit elsewhere. The loan approval process can also be very fast, in some cases as little as 10 minutes, and you may be able to get your funds the same day you apply.
Loan amounts with OneMainFinancial typically run between $1,500 and $20,000, with repayment terms from 2 to 5 years. As of this writing, APRs range from 18 percent to 35.99 percent. You’ll also pay a loan origination fee of up to 5 percent.
OneMainFinancial also has a secured loan option for borrowers with bad credit. With a secured loan, you’ll offer something you own as collateral on the loan—for example, your vehicle. Having collateral can make it easier to qualify for a loan with bad credit. However, be aware that if you failed to make your payments, you could lose your collateral.
Upstart is designed for borrowers with little to no credit history but decent income or earning potential. That makes it an excellent choice for new graduates and others who haven’t had the chance to use credit in the past. Upstart looks at factors like education and job history to set loan terms and may have your funds to you as soon as the next business day.
Like BadCreditLoans.com, Upstart is a lending platform rather than an online lender. When you apply, you’ll see offers from several approved lenders. As of this writing, APRs on Upstart range from 6.14 percent to 35.99 percent, and loan amounts run between $1,000 and $50,000. Loan repayment terms typically fall between 3 to 5 years.
Remember, the offers you see on Upstart come from different lenders with different rules and repayment options, so read through the documents carefully before you pick a lender.
The bad bad credit loan options
If you have bad credit and need money now, you may have considered getting a no-credit-check loan or payday loan. Unfortunately, both these types of loans fall under the category of predatory lending—you’ll end up paying a fortune for getting your hands on those funds.
No credit check loans
Some lenders advertise that they’ll lend you money without ever checking your credit score. The problem with these loans is that they come with insanely high interest rates—often as much as 400 percent. Such a high interest rate means you’d be locked into enormous monthly payments and end up paying back several times as much as you borrowed in the first place.
A payday loan, sometimes also called a cash advance loan, works differently from a traditional loan. With a payday loan, you’ll write a check for the amount of the loan plus fees and give it to the lender. The lender will hold onto that check until your next payday, then cash it. It sounds like a great idea, right?
Unfortunately, the fees that payday lenders charge work out to be as high an interest rate as the no-credit-check lenders charge. That’s because these loans are so short-term, typically running for a week or two. If you compare the fee the payday lender charges to what your interest rate would be on a traditional loan that ran over such a short time frame, you’ll see an enormous difference.
Payday lenders are so rapacious that the FTC warns borrowers explicitly against taking out such a loan.
Using Your Loan to Build Good Credit
Qualifying for a bad credit loan can be hugely helpful, and not just because you’re getting your hands on some badly needed funds. Make your payments on time and in full, and your credit score will likely climb as a result. Once your credit score exceeds 600, you’ll have a good chance at refinancing your loan with a traditional lender (and at a much better rate of interest). As you continue to make your payments with the new lender, your credit score will continue to go up.
The higher your credit score gets, the easier it will be to borrow money at lower rates of interest—which means your monthly payments will be smaller and easier to meet.
Once you’ve got your credit score headed in the right direction, it will be easier and easier to keep it moving upwards. This is particularly helpful for borrowers drowning in credit card debt because you’ll be able to get a debt consolidation loan. This type of loan will either put all your debts onto one card, which you can pay off monthly, or help you get a fixed-rate loan to pay all your debt, and pay off that loan monthly.
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