Qualifying for a loan can be difficult when you have bad credit. Lenders check your credit as part of the application process to determine if you’re likely to repay the loan. Many (if not most) lenders will not be willing to lend to you if your credit reflects derogatory marks or if you don’t have a credit history yet.

Wondering how to borrow money with bad credit? There are many options available to choose from. However, many of these options may come with a high annual percentage rate (APR), which can trap you in a debt cycle.

Before you apply for a loan, it’s crucial to do your research, read the loan terms, check the minimum credit score requirements of different lenders, and only borrow what you truly need to avoid any unnecessary high-interest debt.

9 Loan Options for Bad Credit Borrowers

Finding affordable bad credit loans may be challenging, so it’s important to compare the interest rates and terms before you sign a loan agreement. Here are nine different types of loans for you to explore, along with their pros and cons.

1. Payday Loans

Payday loans are short-term loans that you can use to cover your needs between pay periods. The amount you borrow must be paid back when you receive your next paycheck.

Payday loans are repaid in a lump sum, so there isn’t an interest rate attached. Instead, the cost is charged as a flat fee per loan term, which is usually no longer than 30-31 days in most states.  These fees can be anywhere from $10 to $30 for every $100 borrowed, which often translates to an APR of 391% to 600%, depending on state laws.

In comparison, the average interest rate for personal loans for borrowers with bad credit is 22.20%. Because of the predatory lending practices of payday lenders and the exorbitant costs involved, we recommend avoiding payday loans unless you have no other options and need money urgently.

Pros

  • Easy to qualify with a bad credit score
  • Quick access to cash, usually within one business day
  • Wide choice in lenders

Cons

  • High interest rates and late fees
  • Short repayment period
  • Risk of getting trapped in a cycle of debt
  • Predatory lending practices

“While there is no legal definition of what constitutes a payday loan, due to their high rates of financial abuse in the past, payday loans are currently illegal in the states of Arizona, Arkansas, Connecticut, Georgia, New Jersey, New York, North Carolina, Pennsylvania, and Vermont,” explains Brad Reichert, the founder and managing director of Reichert Asset Management LLC. 

“In addition, out of the remaining states that allow them, all but a handful of these states have passed laws that limit the term length of a payday loan, the fees (or effective interest) charged on the loan, and/or the maximum amount of money lent, whenever they’re issued,” adds Reichert.

Top 3 Payday Loans

  1. Green Dollar Loans: Loan amounts- $100 to $5,000, Repayment terms- 3 to 24 months, APR 5.99% to 35.99%
  2. Viva Payday Loans: Loan amounts- $100 to $5,000, Repayment terms- 2 to 24 months, APR 5.99% to 35.99%
  3. CashUSA: Loan amounts- up to $10,000, Repayment terms- 90 days to 72 months, APR 5.99% to 35.99%

2. Secured Loans

If you’re wondering how to borrow money with bad credit, applying for a secured loan is perhaps the easiest option. A secured loan is money borrowed against an asset, such as a savings account, a car, jewelry/artwork, and other collectibles, or a home.

The interest rates for secured loans are usually more favorable because there’s collateral backing your loan. However, this also means that if you fail to repay the loan, your asset can be seized.

Pros

  • Easy to qualify
  • Favorable interest rates vs other loan alternatives
  • Larger borrowing limits vs other loan alternatives

Cons

  • Requires a valuable asset to be put up as collateral
  • Risk of losing the asset, in case you go past due on payments.

Top 3 Secured Loans

  1. Best Egg: Loan amounts- $2,000 to $50,000, Repayment terms- 36 to 84 months, APR 5.99% to 29.99%
  2. Digital Credit Union (DCU): Loan amounts- depend on your savings account balance, Repayment terms- up to 120 months, APR starting at 3.50%
  3. Upgrade: Loan amounts- $1,000 to $50,000, Repayment terms- 24 to 84 months, APR 8.49% to 35.99%

3. Credit Union Loans

If you’re a member of a credit union, it may be easier to qualify for a loan. Because they are owned by their member customers, most credit unions are willing to lend money to borrowers and look beyond their credit history. The biggest benefit of borrowing a loan from a credit union is the 18% interest rate ceiling, which remains the same whether you have good credit or not.

For borrowers with bad credit, credit unions offer an affordable way to get access to money. However, membership requirements can often be quite strict. You can use the funds for debt consolidation, medical expenses, or any other purpose.

Pros

  • Easy to qualify for most loans
  • Lower interest rates vs banks and other traditional lenders

Cons

  • Must be a member with an active checking or savings account to qualify 
  • Membership eligibility requirements may be strict

Top 3 Credit Union Loans

  1. Navy Federal Credit Union: Loan amounts- $250 to $50,000, Repayment terms- up to 60 months, APR 8.99% to 18%
  2. PenFed Credit Union: Loan amounts- up to $50,000, Repayment terms- up to 60 months, APR 7.99% to 17.99%
  3. First Tech Federal Credit Union: Loan amounts- $500 to $50,000, Repayment terms- 2 to 7 years, APR from 7.99%

4. Family and Friends

Another option to borrow money with bad credit is to ask family members and friends for help. This may help you find easy repayment terms, flexible borrowing, and low loan rates. However, it may also damage your personal relationship if you don’t follow through on repayment as agreed.

If you decide to go this route, it’s crucial to have clear communication and treat it like borrowing money from a stranger. It’s best to have a written agreement specifying the amount borrowed, the interest rate you’ll pay, and the length of the repayment term.

Pros

  • No need for a credit inquiry
  • Lower interest rates (or even zero interest)
  • Flexible repayment terms

Cons

  • It may damage personal relationships
  • It won’t help you build credit

5. Hardship Loans

If you find yourself in a financial emergency, one option is to take out a hardship loan. Hardship loans, aka emergency loans, are unsecured personal loans that can help you cover the cost of unexpected expenses like medical bills or home repairs. You’ll typically be able to prequalify online, so it’s easier to compare loan offers.

Loan requirements for hardship will vary by lender. However, you’ll typically need to show you have a steady income and a good debt-to-income ratio. You can use the loan funds for any purpose and repay the funds over a fixed period of time, just like with other installment loans.

Pros

  • Flexible use of funds
  • Quick access to cash, in most cases

Cons

  • High interest rates vs. other loan alternatives
  • Low loan amounts vs other loan alternatives

Top 3 Hardship Loans

  1. Upstart: Loan amounts- $1,000 to $50,000, Repayment terms- 36 to 60 months, APR 5.20% to 35.99%
  2. OneMain Financial: Loan amounts- $1,500 to $20,000, Repayment terms- 24 to 60 months, APR 18% to 35.99%
  3. Avant: Loan amounts- $2,000 to $35,000, Repayment terms- 12 to 60 months, APR 9.95% to 35.99%

6. Medical Bill Assistance Loans

If you need to pay for a medical procedure, a medical loan can be a viable option. Just like with other unsecured loans, you may have to pay a higher interest rate if you have poor credit. Be sure to compare loan offers from different financial institutions before you commit to a loan. A pre-qualification is an easy way to check what rates you qualify for.

Another option to deal with medical expenses is with the help of nonprofit organizations that help cover the out-of-pocket costs, such as the Patient Advocate Foundation. You may also want to ask the hospital if they offer payment plans to spread the cost out over time.

Pros

  • Easy application process
  • Quick funding

Cons

  • High interest rates vs. other loan alternatives
  • You may have to pay origination fees

Top 3 Medical Loans

  1. Universal Credit: Loan amounts- $1,000 to $50,000, Repayment terms- 36 to 60 months, APR 11.69% to 35.99%
  2. Upgrade: Loan amounts- $1,000 to $50,000, Repayment terms- 24 to 84 months, APR 8.49% to 35.99%
  3. Avant: Loan amounts- $2,000 to $35,000, Repayment terms- 12 to 60 months, APR 9.95% to 35.99%

7. Buy Now, Pay Later

If you want to finance large purchases, buy now, pay later (“BNPL”) plans are an option many retailers offer. This is an installment debt where you’ll be able to split your purchase into equal payments over several months, without fees or interest in many cases.


Most large retailers also have buy now, pay later apps. It’s important to remember that while this can be an attractive option, it may also push you deeper into debt if you spend money on multiple large purchases and can’t afford the loan payments later. 

In addition, while each BNPL plan will handle credit checks and credit reporting differently, most of these loan issuers are starting to report BNPL balances and payment histories to the three major credit reporting bureaus: Equifax, TransUnion, and Experian. If you make a payment that is 30+ days late, it may affect your credit score.

Pros

  • Often no or low interest
  • Fast approval
  • Most BNPL plans will only run a “soft inquiry” on your credit report or may not even check your credit at all
  • Convenient way to pay for large purchases

Cons

  • Late payments can result in penalties
  • Returns can be difficult
  • Easy to overextend your finances
  • May be reported to your credit reports and affect your FICO scores in the short term

Top 3 Buy Now, Pay Later Options

  1. Afterpay: Loan amounts- from $500, Repayment terms- 4 installments over 6 weeks, APR 0%
  2. Affirm: Loan amounts- up to $25,000, Repayment terms- up to 84 months, APR 0% to 36%
  3. Splitit: Loan amounts- Varies, Repayment terms- 2 to 24 installments, APR 0%

8. Cash Advance Apps

A cash advance is a loan borrowed against your credit card line in the form of cash. If you need funds urgently, it’s one of the fastest ways to get cash, as you can often get an advance at any ATM, as long as you have your credit card’s PIN number. 

However, it’s also a very risky solution due to the heavy interest charges, which usually range from 17.99% to 29.99%, starting right from the day you borrow your cash advance. There is no interest-free grace period for credit card cash advances, unlike when you make a traditional purchase with your card. In addition, most ATMs and cash advance services charge a cash advance convenience fee of 3%-5% of the amount advanced on your card.

If you already have a lot of credit card debt or other high-interest debt, it’s best to avoid this option.  Some credit card issuers have been known to view frequent cash advances (e.g., one or more each and every month) as a potential sign of significant financial stress and may elect to reduce their credit limit, depending on their overall credit profile.

Pros

  • No credit check
  • Fast access to cash anywhere there is an ATM
  • Convenient way to access your credit limit

Cons

  • High fees and interest rates make this an expensive loan alternative
  • Limited borrowing limits

Top 3 Cash Advance Apps

  1. Varo: Loan amounts- $20 to $250, Repayment terms- up to 4 weeks, Fees- $0 to $15
  2. MoneyLion: Loan amounts- $10 to $500, Repayment terms- next paycheck, Fees- up to $8.99 and suggested tip
  3. Earnin: Loan amounts- up to $100/day and $750/pay period, Repayment terms- next paycheck, Fees- up to $4.99 and suggested tip

9. Peer-To-Peer Lending Platforms

Peer-to-peer lending is an online lending platform where you can borrow money with bad credit directly from other individuals. You can post a loan listing on the website with details of the amount you need and what you need it for. Investors on the platform review the listings and choose the borrowers they want to fund.

Pros

  • Quick and convenient process
  • Ability to borrow smaller amounts
  • Flexible use of funds

Cons

  • High fees and interest rates
  • Lack of regulation

Top 3 Peer-To-Peer Loans

  1. Prosper: Loan amounts- $2,000 to $50,000, Repayment terms- 24 to 60 months, APR 6.99% to 35.99%
  2. Happy Money: Loan amounts- $5,000 to $40,000, Repayment terms- 2 to 5 years, APR 11.72% to 24.67%
  3. LendingClub: Loan amounts- $1,000 to $40,000, Repayment terms- 2 to 5 years, APR 9.57% to 35.99%

There Are Options Available to Borrow Money Even With Bad Credit

Even if your credit report is less than perfect, there are options available if you need to borrow money. However, not all of them are good options. Look closely at the options we’ve listed above and carefully compare them before you send in a loan application.

Once you know how to borrow money with bad credit and have chosen the right online lender or credit union, be sure to have a plan in place to repay it. On-time payments can help you build a positive payment history and improve your credit score.

Set up Autopay to ensure you don’t miss payments. Create a budget, stick to the payments, and contact the lender if an unexpected event makes it difficult for you to keep up with monthly payments. Get a free credit report from all three credit bureaus periodically to keep track of your progress and check for errors.