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Getting a loan when you have bad credit, or no credit history, can be a challenge, which is why most financial experts recommend you build credit early.
However, having a good credit score and an fully funded emergency account is not always that simple. So if a sudden event takes you by surprise — such as a high medical bill, an out-of-the-blue car repair or a last-minute family emergency — and you have less-than-perfect credit, you still may qualify for a personal loan that can deliver cash to your bank account in a matter of days.
Just make sure you do a little homework before you apply. If your credit score is less than 670, your options may be a bit more limited, and the loans may come with higher fees and interest rates. That doesn’t mean it’s impossible to get a personal loan with a fair or poor credit score. It just means you need to read the fine print closely (like we should always do, anyway).
The credit score cutoff for most reputable lenders is usually around a 580 FICO score, but this can sometimes be lower if your application is strong in other ways. Factors like income, debt-to-income ratio, your educational background and whether you secure the loan with collateral all affect your application. (Read more about secured vs. unsecured loans.)
Here is how lenders classify fair and poor credit scores:
- Very poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Excellent: 800 to 850
- Very poor: 300 to 499
- Poor: 500 to 600
- Fair: 601 to 660
- Good: 661 to 780
- Excellent: 781 to 850
Companies that don’t perform a credit check, or lend to people with scores in the “very poor” range, often charge sky-high interest rates (sometimes upwards of 120%), among other fees. Payday loans, for example, are a fast way to get cash, but they can quickly throw you into debt that’s hard to get out of.
Before you apply for a personal loan
A bit of preparation is essential before you apply. That can help you feel more confident that the loan you’re taking out will help you in the short-term without putting you at long-term financial risk. First, consider whether you actually need the loan in to begin with. You may be able to find easier, cheaper ways to access the cash you need.
For starters, ask yourself if you can earn the money. Try to pick up a side gig or look around your home for items to sell. Another option is to ask your creditor, whether it’s a medical office, auto mechanic or landlord, if you can pay over time with an installment plan, which could buy you the time you need to earn the extra cash.
If you’re struggling to pay a medical bill, you might be able to negotiate it down by calling your provider’s billing office. A recent survey found that nearly everyone (93% of the respondents) who tried to negotiate a medical bill got it reduced or dropped altogether.
You may also have trusted family members or friends with extra cash that you can borrow. Offer to pay them back with interest, which may help them trust you’re taking their financial health as seriously as your own.
If you’ve exhausted all options for fast cash, it may be time to turn to a personal loan. Proceed with caution: Lenders often charge higher interest rates or tack on origination fees, early payoff penalties and late fees for borrowers with low credit scores. It’s important to do your research ahead of time so you’re comfortable with the terms of the loan. (Learn what to consider before agreeing to take on a loan.)
The best personal loans for bad credit
Select rounded up the top personal loans for bad credit, looking at fees, interest rates and flexible repayment options for different credit scores. We tried to prioritize loans with no origination or sign-up fees, but since this list is for borrowers with lower credit scores, many of the loans you see below come with added costs.
Read more about our methodology below.
How to apply for a personal loan
When you’re ready to apply, follow these steps to make sure you protect your credit and only borrow what you can afford.
Step 1: Decide how much you need
The smallest personal loans begin at around $500 (from a lender like credit union PenFed), but it’s more common to see minimums around $1,000.
Step 2: Prequalify and compare offers
Take the time to shop around. Go to different lenders’ websites, and submit your information to see what you prequalify for. That way, you’ll avoid hard inquiries until you’re absolutely ready to apply. Consider using a lender marketplace service (such as Upstart or LendingTree) to view multiple offers at once.
Similarly, budgeting and credit monitoring services like Mint or WalletHub also let users submit one prequalification application to receive multiple offers from different lenders. Keep in mind, the better your application, the more prequalified offers you’ll get.
You’ll need the following information to check for offers:
- Your name, date of birth, address and (for most lenders) social security/tax ID number
- Annual income (including salary, wages, tips, bonuses and other forms of income)
- Basic financial information (rent/mortgage payment, other major bills)
- Requested loan amount and ideal term length
Step 3: Submit a formal application
Review your available offers and pick the one that works best for your timeline and budget. Once you make a decision, submit a full application. Ideally, you do this only once because it’s a hard inquiry on your credit report, which can have a negative impact on your credit score.
The necessary documents will vary according to your lender, but typically you need proof of income and monthly expenses. Documents might include:
- Recent paystub(s)
- Checking account statements for past three to six months
- Photo ID
- Proof of address
- Education history (including highest level/degree achieved)
- Other financial information (retirement account statements, outstanding debt, investment assets, etc.)
- Preferred bank account for direct deposit
Read over the terms carefully one last time, then submit your documentation.
Step 4: Wait for approval and funding
Approval could take just a few minutes, an hour or up to 10 days. To facilitate a speedier approval, apply during normal business hours and submit the required documents in a timely fashion.
If your application is approved, expect to see the cash, less any origination fees, deposited in the bank account you listed for direct deposit in up to 10 business days (though sometimes it can be faster than that). If you don’t sign up for direct deposit, your lender will mail you a paper check.
Plan on making your first payment on the loan within 30 days of your funds hitting your bank account. (This may vary depending on the lender.) Sign up for autopay so you don’t miss a bill. (You might even get an interest rate discount if you do.) Remember: On-time payments are important to keeping your credit score in good shape.
To determine which personal loans are the best for consumers with bad credit, Select analyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions. When possible, we chose loans with no origination or sign-up fees, but we also included options for borrowers with lower credit scores on this list. Some of those options have origination fees.
When narrowing down and ranking the best personal loans, we focused on the following features:
- Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan’s term, which means your monthly payment won’t vary, making your budget easier to plan.
- Flexible minimum and maximum loan amounts/terms: Each lender provides more than one financing option that you can customize based on your monthly budget and how long you need to pay back your loan.
- No early payoff penalties: The lenders on our list do not charge borrowers for paying off loans early.
- Streamlined application process: We considered whether lenders offered same-day approval decisions and a fast online application process.
- Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
- Fund disbursement: The loans on our list deliver funds promptly through either electronic wire transfer to your checking account or in the form of a paper check. Some lenders (which we noted) offer the ability to pay your creditors directly.
- Autopay discounts: We noted the lenders that reward you for enrolling in autopay by lowering your APR by 0.25% to 0.5%.
- Creditor payment limits and loan sizes: The above lenders provide loans in an array of sizes, from $1,000 to $100,000. Each lender advertises its respective payment limits and loan sizes, and completing a preapproval process can give you an idea of what your interest rate and monthly payment would be for such an amount.
The rates and fee structures advertised for personal loans are subject to fluctuate in accordance with the Fed rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee your interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness. To take out a loan, many lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.