The Best Guide: Loans For People With Bad Credit!

When you have bad credit it can be very difficult to get an honest loan. Although there are many offers for no credit and bad credit loans, many come with exorbitant fees, high interest rates and bad terms.

It's very important that you find a lender who offers clear and honest information regarding fees and rates along with flexible terms that will help enable you to be successful in repayment of your loan.

In this guide, we will share some sound advice about choosing a good lender to help you get a loan and establish or reestablish your credit rating. Additionally, we will review some of the best lenders for bad credit loans. Read on to learn more.

Improve Your Credit & Receive Better Loan Offers

When you have bad credit, you can expect to pay a high annual percentage rate (APR). This is why it's a good idea to take some measures that will improve your credit before you start hunting for a loan.

SEE ALSO: How To Build Credit Fast

Here are a few smart tips on How To Get A Loan With Bad Credit:

1. Stay Familiar With Your Credit Report

You may think your credit rating is a lot worse than it really is. There are three main credit reporting bureaus in the US. They are:

You can get a free copy of your credit report from each of these annually. One good way to do this is to order a report from one, wait four months and then order a report from one of the others. In this way, you can check your general credit rating three times annually.

The reports vary somewhat because each credit bureau gives slightly different weight to the various factors that determine your credit rating. Getting a report from each at different times of the year will give you a good, general overview. You can get in touch with them using our 3 Credit Bureau Phone Numbers information page.

2. Pay Promptly & Pay More!

Naturally, paying your bills promptly will improve your credit rating. Paying more than the minimum amount due will, too. Additionally, paying early and paying more will save you money in interest in the long run.

3. Set Up Automatic Payments

If you just can't remember to make your payments, try setting up automatic payments through your checking or savings account. As long as you are sure to keep enough money in your account to cover your automatic payments, this method will save you time, headaches and fees and improve your credit score.

4. Save Your Available Credit For A Rainy Day

Just because you have credit doesn't mean you have to use it. Try not to use more than thirty percent of your available credit. If you can keep it down to ten percent or lower, that's even better. If you charge more than a third of your available credit, you will surely impact your credit rating negatively.

5. Keep Your Inactive Accounts Open

You might think it would be a good idea to close accounts you aren't using, but this really isn't true. Remember that you should only use about a third of your available credit. If you close unused accounts, you reduce your available credit and damage your credit rating.

Instead, keep inactive accounts open and use them to make small purchases or pay a bill occasionally. Pay that small amount off immediately.

These exercises are great for your credit rating. Following these 5 tips consistently for several months will help you get your credit rating in good shape in preparation for your loan search.

Types Of Loans For People With Bad Credit

If you have bad credit, your loan options may be limited, but you can probably still get a loan for things you need such as a home, a car or an emergency.

Unfortunately, your choices in these loans may have less favorable terms than if you had good credit, but there are still choices available and it pays to educate yourself before seeking a loan.

Here is a rundown of the types of loans that are typically available to people with bad credit.

Home Loans

How To Get A Home Loan With Bad Credit

The Federal Housing Administration (FHA): You may do well to go straight to the FHA when seeking a home loan even with very bad credit. FHA loans are backed by the federal government, so lenders are able to offer lower interest rates and general terms even to borrowers with very low credit scores (e.g. 580).

SEE ALSO: What is a Good Credit Score to Buy a House?

You will be required to make a minimum down-payment of 3.5%. This is quite a bit less than the usual 20% that is necessary when applying for a conventional mortgage. One thing you should keep in mind is that your mortgage insurance payments will be quite high.

Here is what REInvestorTV says​:

They suggest these 3 strategies:

  • 1. Work with a loan officer or mortgage broker that brokers to different banks (20+) and does high volume. Not all banks have the same requirements.
  • 2. Find a long standing credit repair company. They will challenge inquires and dispute problems in your credit report.
  • 3. Seller financing (rent to own, lease to own, etc.)

How To Get A Mortgage With Bad Credit

It is possible to get a mortgage even if you have very bad credit through a second chance loan.

Naturally, your choices and your terms will be quite limited; however, a good mortgage broker can help you sort through your options and find a loan that has the best possible terms for your situation.

For example, you may find qualification for an adjustable rate mortgage easier than for a fixed rate mortgage.

Mobile Home Loans

Mobile home loans for people with poor credit are fairly easy to obtain; however, interest rates are very high. Additionally, you need to remember that a mobile home is not comparable to a house in terms of return on investment.

The fact is, mobile homes depreciate in value, so you may end up paying out a great deal of money in the long term, never to see it again.

Vehicle Loans

Car Loans For People With Bad Credit

This type of loan is just like any other auto loan except that the terms may be alarmingly unfavorable. If your credit is bad, you may not be able to qualify for a very large loan, and you can expect to pay a high APR.

New Car Loan Application

When seeking a bad credit car loan, you must be very careful of being taken advantage of. Some bad-credit lenders are notorious for dishonest practices such as requiring the purchase of expensive add-ons and even lying about the borrower's credit rating in order to charge a higher APR.

If the lender you are working with tries to get you to sign a lengthy contract or pay an outrageously high interest rate, look elsewhere. Get a second opinion.

Auto Title Loans

An auto title loan is a secured loan using your car as collateral. These can be classified as no credit check loans which are an easier type of loan to get; however, the amount you can borrow is usually nowhere near the value of your car, and interest rates are very high.

An auto title loan is a short term loan (one month or less). The interest rate ranges from 84%-300% and can lead the borrower into an endless cycle of interest only payments. If you are never able to repay the principle amount and only make interest payments, you will never pay off your loan.

The end result is that you could end up renewing your loan over and over again and paying more than twice the amount of the original loan, all the while risking the loss of your car!

This is why title loans are illegal in many states and why they should be avoided altogether.

Personal Loans For People With Bad Credit

You may be able to go to a traditional credit union or bank to get a secured or unsecured personal loan. A credit union is a good choice because CUs are local and generally have more flexible terms than big banks and other types of lenders.

Failing that, you are sure to be able to find an online lender. The amount of money you can borrow will depend on a number of factors such as your credit rating and whether or not you are seeking a secured or unsecured loan.

Compare Personal Loans​

The following table is a general estimate of difficulty for each type of loan. There are a lot of variables for loan applications and this should not be used to determine your eligibility.

Loan Type


Interest Rates


Large Loans



Moderate / High













Peer to Peer










* Lender "Mixed" includes private, federal, and bank lending institutions.

Secured Loans

If are unable to qualify for an unsecured loan, a secured loan may be your only route. If you have something of value to put up as collateral (your home, car or money in the bank) this can make it easier to qualify and get good terms.

The main downside of this type of loan is that you stand a real chance of losing something essential if you do not comply with the terms of the loan.

Co-Signed Loans

Being rejected when applying for personal loans with bad credit history is not the end. If your credit is very bad, you may be able to get a loan if you can find a co-signer who is willing to risk his or her credit to your advantage.

This means that if you default on your loan, your co-signer will be responsible for making payments. It's best to avoid this situation at all costs because the risks are so great for all involved. Your co-signer is risking his or her credit rating, and you are both risking your relationship.

Peer-to-peer (P2P) loans

P2P loans are formal loans between individuals. This is different from an informal loan that you might get from a friend or family member. P2P loans are bankrolled by individuals or investors, usually at a high rate of interest.

These are high risk loans for the investor or individual lender and can be quite costly for the borrower; however, it is a possibility if all else fails.

Payday Loans

A payday loan can be a good one-time financial tool in an emergency if it is used correctly. Otherwise, you can count on it being a drain and a burden. A payday loan is usually a small (under $500), short-term loan.

The idea is that you borrow just enough money to handle a real emergency and you pay it back completely from your next paycheck. There is no credit check.

You just have to prove that you have a regular income that is direct deposited into your bank account. Usually, the lender will get your banking information and take the payment directly out of your account when your paycheck is deposited.

There are always high fees, but if you use this tool once to deal with a true emergency, it's worth it.

​Before going any further, let's look at an HBO special with John Oliver called "Predatory Lending"

Problems arise when you make a habit of taking out payday loans. If you take out a loan for the entire amount of your paycheck, you will be left with nothing to live on when your payment is deducted from your account. If you take out another payday loan to deal with this situation, you will step into an endless loop of debt.

Fees are high-as much as $30 for a $100 loan-so this situation can quickly spiral out of control. You may be interested in our article on how to prevent debt at Christmas so that you won't need to take out a payday loan.

In the end, you could find yourself paying the equivalent of 400% interest. This is why many states have placed strong regulations on payday lenders; however, there are still 32 states that have no such regulations. This is why you must be very cautious about taking out a payday loan at all.

Understanding the types of loans that may be available to you helps you act as a smart shopper. Always take time to think through your situation carefully and weigh the qualities, pros and cons of each type of loan that may be available to you before you begin your search.

Taking these careful steps will empower you to be selective and make the wisest choice.

The Best Bad Credit Lenders

When seeking out a bad credit lender, it's important that you understand that each lender will have a specific definition of bad credit. They all look at a variety of factors, including credit score.

The average credit score is 640, and bad credit lenders generally serve borrowers whose credit score falls between 580 and 640.

Bad credit lenders typically offer:

Best Unsecured Personal Loans


Avant Logo

Avant, formerly AvantCredit, offers the best in unsecured bad credit loans. If you have a credit score between 580 and 700, you may be eligible for a loan from Avant. This is not a peer-to-peer lender and does not require its investors to fund the loans.

The company funds loans itself, and this means that you can get your loan quickly. In some cases, Avant can provide same day loans. Additionally, this company does not charge loan origination fees and has quite a generous borrowing limit ($35,000).

Terms are flexible, and four-year loans are possible. With Avant, you may be able to get a low annual percentage rate, as their APR's begin at 9.95%.


NetCredit Logo

If your credit rating is quite low (550) NetCredit is a good possibility for unsecured, long-term loans in larger amounts. In fact, the company offers loans as high as $10,000 with flexible repayment options and term links.

Additionally, the company is very transparent about its terms, rates and fees. On the downside, the APRs offered are quite high, ranging from 35% to as much as 299%. This last is offered to those who have extraordinarily poor credit and need a very short-term loan.

Quick repayment will allow the borrower to avoid the 299% APR. Be advised that this is a new lender and does not yet have Better Business Bureau accreditation.

Best Secured Loans

SpringLeaf Financial

SpringLeaf Financial Logo

SpringLeaf Financial is a well-established company that has been in business since 1974. The company offers the very best in secured loans for bad credit. People with lower credit scores may have good luck applying for a secured loan with SpringLeaf Financial, which specializes in this type of loan.

The company also offers unsecured loans; however, if your credit score is quite low, a secured loan may be your best bet. Although, specific information about loan and APR amounts is a bit hard to find on their website, the average APR is 25.5%. Springleaf's online loan application process is quick and easy.

SpringLeaf is accredited with and has a good rating with the Better Business Bureau. The company has 800 offices in 27 US states.

Best Secured And Unsecured Loans

OneMain Financial

OneMain Financial Logo

OneMain Financial is one very solid company you can turn to for either a secured or unsecured loan is OneMain Financial. The company behind this lender has been in business since the early 20th Century.

Most borrowers who are approved for loans from OneMain Financial have credit scores of around 630. With over a thousand branches in forty-three states, the company is very accessible to most borrowers.

On the downside, it can be difficult to get details regarding APR and fees. Also, quite a few borrowers say that the customer service is lacking.

Best Peer-To-Peer Loans


Peerform Logo

PeerForm provides excellent P2P bad credit loans. This little-known company is quickly making a good reputation for itself by helping borrowers with bad credit secure peer-to-peer loans with very liberal credit standards.

If your credit score is 600 or above, the company will consider you for a loan up to $25,000. You will find clear and complete information and complete details regarding fees and APR's (7.12% to 28.9%) at the website.

On the downside, being a peer-to-peer lender means that you may need to wait for your funds. It may take as long as two weeks to secure your funds, and full funding from your investors is not guaranteed. This is the case with any peer-to-peer lender.

You should also be aware that PeerForm does charge fairly high fees and that it only has offices in 37 states. If a peer-to-peer loan is what you are seeking, PeerForm is definitely an excellent choice.

You should understand that the company does not have secured loans and has not been in business long. For this reason, it has not been accredited by the Better Business Bureau.

Smart Loan Search Techniques

Using good services can save you time and make the search for personal loans for bad credit applicants more efficient. You can also seek out personal lenders by filling out a single application

This service puts you in touch with an array of lenders who will contact you to offer you loans. This can be a very good way to go because these lenders are in competition for your business. This can mean more generous funding, more flexible terms, lower fees and a better APR.

Qualities To Look For In A "Good" Bad-Credit Loan

  • Good Better Business Bureau Rating (BBB)
  • Representation In Multiple States
  • Good Word Of Mouth Reputation
  • Good Reviews & Testimonials
  • Loan Limits Higher Than $1000
  • Flexible Terms Of Repayment
  • Transparency Regarding Fees
  • Reasonable Interest Rates
  • Reasonable Fees

A bad-credit lender is just like any other business. Good ones share certain qualities that make them stand out in the crowd. Look for these qualities in the lender you select:

Generally speaking, it is always best to go with a well-established business that has a long history of good dealings; however, there are a number of newer bad-credit lenders that a have proven themselves trustworthy and beneficial in a very short time.

Whether you go with an old, established lender or a newcomer, be sure to examine every aspect of the business and look for the good qualities listed here.

7 Signs A Loan Offer May Be A Scam

Personal Loan Scams Warning

In addition to good things to look for, there are also bad things to watch out for when seeking a bad credit loan. Be on the lookout for these red flags, and run the other way if you see them!

  • Intrusive Personal Information Requirements: Do not give out your personal information to a lender that calls you on the phone and asks for it. This is probably a phishing scam, and it's a good way to have your security breached. Always take the proactive approach to borrowing. If you get an interesting offer by email or by phone, go the extra mile to make contact with that company separately to verify the offer and provide your identifying information if you choose to.
  • Almost Familiar Names: Sometimes new or unscrupulous lenders will use a name that is very similar to that of an established lender with a good reputation. While riding on the coattails of the success of another may be harmless, it pays to do your homework and check the reputation of any company you do business with.
  • Pressure: If a lender doesn't want to give you time to comparison shop, something is wrong. Skip that one and look for one who values your business enough to respect your right to do your homework.
  • Hounding: If a company contacts you repeatedly by mail, phone or otherwise, just say "No!" A legitimate lender does not pursue potential borrowers.
  • Upfront Fees: A lender who charges you a fee to fill out a loan application is breaking the law. See Scam Alert
  • Guarantees: A legitimate lender cannot guarantee how you get a loan with bad credit without doing a complete credit check and asking your specific, pertinent questions. This falls under the category of "if it sounds too good to be true, it is!"
  • Long Repayments - Super long repayment plans are something to be very cautious of. It would make sense to repay your mortgage over 20 years, but not a vehicle for example.

For more red flags see Yahoo Finance and MoneyTalksNews.

Final Thoughts On Finding A Loan With Bad Credit

When seeking loans with bad credit, remember that you are the customer. Regardless of your bad credit status, you have the right to take your time, weigh your options and make a wise choice.

Take smart, proactive steps to get your credit rating in the best shape possible before you begin your search. Identify the type of loan you need and then take care to seek out just the right lender.

Taking out a bad credit loan can be a strong, positive step toward financial freedom or it can lead to wrack and ruin. The care you take and the smart choices you make will make all the difference in the outcome.