Where To Get A Bad Credit Loan & Types To Avoid

If you need to get a loan with bad credit, you still have options — but where you go matters. Some lenders are more willing to work with low-credit borrowers and offer flexible terms, while others may charge excessive fees or use your situation to push predatory products.

The best bad credit loans come from reputable sources like online lenders, credit unions and community banks. These institutions often provide more transparent terms at lower costs than payday and title loans.

Where to get a bad credit personal loan

When researching the best places to get a personal loan with bad credit, consider these lender types. Each comes with its own pros and cons based on speed, cost and eligibility.

• Online lenders: Fast funding, soft credit checks.
• Credit unions: Low APRs, payday alternative loans.
• Community banks: Local lending, potential for personal relationships.

Online lenders

Best for: Fast approvals and fully digital experience.

Many online lenders specialize in working with bad credit borrowers. These lenders allow you to prequalify with a soft credit check, letting you compare rates without affecting your score. Once approved, funding can happen as soon as the same day.

Credit unions

Best for: Lower interest rates and payday alternative loans.

Federal credit unions are not-for-profit institutions, which often means lower APRs and borrower-friendly terms. Some offer Payday Alternative Loans (PALs) — smaller loans with APRs capped at 18 percent and no predatory fees.

Community Banks

Best for: Borrowers who value local service or already bank with the lender.

Smaller regional banks may approve personal loans based on your full financial picture — not just your credit score. This is especially helpful if you have existing relationships with the bank.

Pay advance apps

Best for: Short-term cash boosts for W-2 employees.

Pay advance apps let you access part of your paycheck early. These are not traditional loans — there’s no interest — but they do often come with subscription fees or requests for tips.

On top of any potential fees, keep in mind that you’ll be drawing from your future income when you use a pay advance app. This means you’ll receive a smaller paycheck on your next payday, potentially setting yourself up to need to borrow again in the future.

Bad credit loans to avoid

Some bad credit loans can be predatory with unreasonably high interest rates and extremely tight payment timelines. These options should only be used as a last resort, or you risk being trapped in a cycle of debt.

Even in the most dire financial situations, Bankrate loans expert and senior writer Denny Ceizyk says to avoid any bad credit loan secured by your home or car.

“Shelter and a vehicle to get to work should be protected at all costs,” Ceizyk says.

Payday loans

Payday loans are small, short-term financial options, typically offering up to $500. It’s easy to get approved for these products even if you have bad credit, but there are significant drawbacks:

• APRs potentially over 400 percent.
• Due on your next payday — often just two weeks’ time.
• Can lead to perpetual high-interest debt cycle.

Title loans

Car title loans are tailored for borrowers with poor credit scores and are relatively easy to qualify for because they use your car as collateral. You must own your car in full — meaning you don’t have an auto loan — to qualify.

In most cases, you’ll make equal monthly payments over a set period, usually up to six months. This type of loan is risky since it uses your vehicle to secure it. If you fall behind on your payments, your lender could repossess your car. And although the APR may be lower than a payday loan, it is still much higher than other loans for bad credit.

High-interest installment loans

Generally, a 36 percent APR is seen as the dividing line between an affordable loan and an unaffordable one. Some installment lenders impose APRs of 200 percent or more on borrowers with bad credit.

For example, OppLoans features a maximum APR of 160.00 percent, while an APR from RISE may be as high as 60.00 percent. While these loans are less risky than a payday loan because of the extended repayment period, you’ll pay a hefty price.

Let’s say you need to borrow $3,000, and you’re approved for a loan with an APR of 199 percent. Your monthly payment will be $531, and over the 18-month repayment term, you’ll pay $6,559 in interest in addition to the initial loan amount. Your $3,000 loan will cost a whopping $9,559 in the end.

How to qualify for a loan with bad credit

Traditional personal loans may be hard to qualify for, but getting a personal loan with bad credit is possible. To put yourself in a good position, check lender requirements and consider waiting if you can.

• Improve your credit. If your borrowing needs aren’t urgent, focus on repairing your credit score. Enhancing your credit profile before applying can boost your chances of approval and secure you a better interest rate.
• Apply with a cosigner or co-borrower. Asking a creditworthy cosigner or co-borrower to apply with you can improve your eligibility and help you qualify for an affordable interest rate. But keep in mind that if you mismanage the loan, it will negatively affect their credit and potentially damage your relationship.
• Consider a secured loan. Secured loans are backed by assets, such as a savings account or property, reducing the risk to the lender. This makes secured loans easier to qualify for, and this form of financing typically has significantly lower rates.
• Shop around. To secure the best rate and terms possible, take the time to compare at least three different lenders, as offers can vary significantly. While researching personal loan lenders, pay close attention to rates, terms and fees to get the best deal possible for your financial situation.

Bottom line

Bad credit doesn’t mean you’re out of options — but it does mean you’ll need to be more cautious. Avoid payday and title loans, which can trap you in a debt cycle, and instead focus on reputable lenders, like credit unions.

Always compare at least three offers, focus on APR and understand the full cost of borrowing before you sign. Depending on the loan terms, you could be better off cutting expenses to free up funds, applying for a credit card or finding other bad credit loan alternatives.

Frequently asked questions about bad credit loans

• What types of bad credit loans are available?
  

  Common types of bad credit loans include traditional personal loans, loans with a cosigner, secured loans and payday advances.

• How do I qualify for a bad credit loan?
  

  Lenders typically look for a steady income and may also require collateral or a cosigner. Prequalification can help you get a clearer sense of where you stand.

• Are there any risks to getting a bad credit loan?
  

  Yes — borrowers often face higher fees and interest rates. Some loans may also require collateral, increasing your risk if you can’t pay.

• What type of loan is easiest to get with bad credit?
  

  Secured loans and payday alternative loans from credit unions tend to be the most accessible. Some online lenders also specialize in bad credit lending.