Unsecured Loans for Bad Credit: How and Where To Borrow Without Collateral

Unsecured loans for bad credit allow you to borrow money without pledging an asset. This means that you won’t need to provide collateral to get the loan. Lenders will instead use your credit score, income, debts, and other financials to approve your loan application.

“Taking out an unsecured loan when having bad credit is a good way to help you improve your credit,” says Teresa Dodson, a debt expert and the founder of Greenbacks Consulting. “Just make sure it's a small enough amount that you are able to make the payments,” she adds.

If you have bad credit and are looking for a cheaper borrowing option, consider prequalifying and comparing multiple loan offers. Review our top five unsecured loan recommendations below to get started.  

What Are Unsecured Loans?

An unsecured loan is a loan that doesn’t require collateral. These loans are offered by online lenders, credit unions, and banks, and the funds can be used for any purpose, such as debt consolidation, home improvement, and paying medical bills. If you have good credit or excellent credit, you may qualify for the lender’s lowest loan rates.

Unsecured personal loans for bad credit typically come with repayment terms of two to seven years, and borrowing amounts can range from a few hundred dollars to $50,000.

Since there’s no collateral involved, the personal loan lender can’t seize your assets if you default on the loan. However, not paying monthly installments can result in late fees and damage to your credit score.

5 Best Unsecured Loans For People With Bad Credit

We reviewed 15 unsecured bad credit loans based on factors such as loan amounts, repayment terms, annual percentage rates (APRs), eligibility requirements, prequalification options, and customer reviews, to pick our top five recommendations.

1. Upstart

• Loan Amounts: $1,000-$50,000
• APR: 6.40%-35.99%
• Repayment Terms: 36-60 months
• Minimum Credit Score: 300

Upstart is a lending platform that matches borrowers with credit unions and banks. There are no options for secured or co-signed loans, but the loan approval and funding are fast. Another major benefit is that the minimum credit score requirement is only 300.  

2.Upgrade

• Loan Amounts: $1,000-$50,000
• APR: 8.49%-35.99%
• Repayment Terms: 12-84 months
• Minimum Credit Score: 580

Upgrade is a good option for borrowers with bad or fair credit. While you’ll need to pay a one-time origination fee of up to 9.99%, the flexible repayment terms and higher maximum loan amounts make it an attractive option.

3. Avant

• Loan Amounts: $2,000-$35,000
• APR: 9.95%-35.99%
• Repayment Terms: 12-60 months
• Minimum Credit Score: 550

Avant offers secured and unsecured loans for bad credit with easy qualification requirements, a convenient online application process, same-day approvals, and you’ll typically get funds in your checking account on the next business day. Avant also allows you to prequalify online without hurting your credit score.

4. Best Egg

• Loan Amounts: $2,000-$50,000
• APR: 8.99%-35.99%
• Repayment Terms: 36-60 months
• Minimum Credit Score: 600

Best Egg offers unsecured and secured loans for bad credit. It’s an online lender that also specializes in debt consolidation loans, with the option of sending funds directly to creditors. However, you’ll also pay an origination fee when you borrow a loan.

5. OneMain Financial

• Loan Amounts: $1,500-$20,000
• APR: 18%-35.99%
• Repayment Terms: 12-60 months
• Minimum Credit Score: 500

While the APRs on OneMain Financial’s bad credit loans are higher than competitors, it’s also easier to qualify for due to lower credit score requirements.

With repayment terms starting at 12 months, borrowers also have the option to take out a short-term loan for bad credit to keep overall interest charges lower.  

Are You Eligible for an Unsecured Loan When You Have Bad Credit?

While there’s no standard minimum credit score requirement when it comes to personal loans, most lenders require a credit score of 580 or more. If you have a lower credit score, you may need to have stronger finances to qualify, such as a lower debt-to-income ratio and stable employment.

Income and Employment Requirements

When you fill out a loan application for an unsecured loan for bad credit, you’ll need to provide details about your employment and income. The lender will also require you to submit documents like pay stubs, income tax returns, and proof of employment.

To qualify for a personal loan, most lenders will require you to have stable employment. Lenders want to ensure that you’ll be able to repay the loan, so there may be minimum income requirements.

Lenders will also evaluate your debt-to-income ratio, which measures your current monthly income to your current debt obligations. Ideally, your DTI ratio should be under 36% to improve your chances of qualifying for the loan. Consider paying down some of your credit card debt or other debt to lower your DTI ratio.

Age and Citizenship Requirements

Lenders will also ask you to provide government-issued identification, such as your driver’s license, to ensure you meet their age and citizenship requirements.

To qualify for any type of traditional or online personal loan, you must be at least 18 years old and a legal citizen of the United States.

Types of Unsecured Loans for People With Bad Credit

There are several types of unsecured loans for bad credit you may qualify for. Compare the loan terms, repayment options, fees, and interest rates for each type of loan to make an informed decision.

Unsecured Personal Loans

Unsecured personal loans don’t require collateral, but you’ll need to provide details about your credit history, income, employment, and debts to prove your creditworthiness. While these loans are widely available, borrowers with poor credit will pay high interest rates, so it’s crucial to ensure you’ll be able to cover the loan payments.

Personal loans may also come with additional fees, such as prepayment penalties, origination fees, and late payment fees, which may drive up the borrowing costs.

Unsecured Loans From Direct Lenders

Direct lenders are financial institutions that lend money directly to borrowers. Since there are no third parties involved, these installment loans are usually quicker to fund. If you’d like to work directly with the lender you’re borrowing funds from, this may be a good option.

Guaranteed Unsecured Personal Loans

Guaranteed unsecured personal loans are usually no-credit-check loans where the lender will only do a soft credit check instead of a hard credit inquiry. These loans come with higher interest rates compared to traditional loan options, but the rates are lower than payday loans.

It’s easier to qualify for guaranteed loans for bad credit. However, keep in mind that applying for the loan doesn’t “guarantee” that you’ll qualify. The lender will still consider other factors to determine your creditworthiness before deciding to approve your loan application.

The Bottom Loan on Getting an Unsecured Loan With Bad Credit

Getting an unsecured loan with bad credit means you’ll have to be more vigilant about the rates and fees you’ll pay before you sign the loan agreement. While the terms aren’t as favorable, it’s still possible to find the best personal loan by prequalifying.

You can also improve your chances of getting a lower interest rate by applying with a co-signer or co-borrower or offering collateral. Making on-time payments on the loan will help you improve your payment history over time so you may be able to secure better personal loan rates in the future.