Best loans for bad credit, plus expert advice on finding your best option

In today's economic climate, many Americans continue to face financial challenges. While today's inflation rate is lower compared to recent peaks, consumer goods prices remain elevated, straining millions of people's budgets. And, while the Federal Reserve has conducted multiple rate cuts in recent months, interest rates are still relatively high overall, increasing the cost of borrowing. 

These factors have led some to rely on credit cards for essential expenses, resulting in a notable increase in credit card debt. Recent data indicates that the average cardholder now owes about $8,000 at a time when credit card interest rates are sitting at a record high. Accumulating substantial credit card debt and missing timely payments — which 1 in 5 cardholders has done recently — can severely impact your credit score, thereby restricting your financial flexibility in the future. 

However, borrowing options still exist, even for those with less-than-ideal credit scores. If you need funds but are concerned about how your low credit score might affect your ability to secure a loan, specific credit products are designed for situations like yours. Here are some of the best loan options available for those with bad credit scores.

Find out more about your top personal loan options online now.

Here are some of the best bad credit personal loans to get, broken down into six categories.

• Best overall: Upgrade
• Best for low rates: Upstart
• Best for fast funding: One Main Financial
• Best for secured loans: Oportun
• Best for unsecured loans: Avant
• Best for low (or no) fees: PenFed

Best overall: Upgrade

Upgrade offers both secured and unsecured personal loans with fixed interest rates. Loan amounts go up to $50,000, loan terms range from 24 to 84 months and the funds are often available within a day of closing. There are even several rate discount opportunities available through this lender. 

Best for low rates: Upstart

Upstart considers alternative factors like education and employment when determining rates, which can be beneficial for those with lower credit scores. Loan amounts go up to $50,000 with three- or five-year terms. Current rates start at just 7.4% (as of January 22, 2025), among the lowest available.

Learn more about Upstart here.

Best for fast funding: One Main Financial

If you're looking for fast access to cash, One Main Financial is a great option. For some borrowers, funding happens as quickly as just one hour after closing. Loan amounts go up to $20,000, and there are both secured and unsecured options available. Terms range from two to five years.  

Best for secured loans: Oportun

If you're comfortable with a secured loan, Oportun offers loans of up to $18,500 when using your car title as collateral. According to the lender, costs are two to four times less than traditional title and payday loans, and loan terms range from two years to 53 months.

Best for unsecured loans: Avant

Avant specializes in unsecured loans, allowing you to borrow up to $35,000 without risking assets like your car or home. Loan terms range from one to five years, with lending decisions typically made within minutes and funds available within one business day of closing.

Best for no (or low) fees: PenFed

PenFed is a good option if you're looking to minimize fees. There's no origination fee (which is unusual for this type of borrowing), no early payoff fees and no balance transfer fees with this lender. There are no fees for appraisals, closing or title searches either, though late fees apply for missed payments.

Learn more about PenFed's personal loan options here.

What qualifies as a bad credit score?

A bad credit score typically falls below 600 on the FICO scale, which ranges from 300 to 850. Specifically, scores between 580 and 669 are considered fair, while anything below 580 is firmly in the poor or bad credit category. Lenders use these scores to assess your creditworthiness and determine your risk level as a borrower.

"The better your credit score, the lower your rate on a personal loan," says certified financial planner Spencer Betts, a financial advisor at Bickling Financial Services. 

Different lenders have varying thresholds for what they consider "bad credit," however. Some may work with borrowers with scores as low as 500, while others might draw the line at 600 or higher. Credit unions and online lenders sometimes have more flexible requirements than traditional banks, making them worth exploring if your credit isn't stellar.

Remember that a bad credit score isn't permanent. With consistent on-time payments, reducing debt and responsible credit management, you can begin improving your score in as little as a few months, though significant improvements typically take 12-24 months of sustained good financial habits.

Will applying for a bad credit loan impact your credit score?

Yes, applying for any personal loan, including those designed for bad credit, will typically affect your credit score in both short- and long-term ways. When you apply, the lender performs a hard inquiry on your credit report, which can temporarily lower your score by a few points. This impact is relatively minor and usually recovers within a few months.

Multiple loan applications within a short period can compound this effect, as each hard inquiry adds up. However, credit scoring models usually count multiple loan inquiries within a 14- to 45-day window as a single inquiry, recognizing that you're comparison shopping rather than trying to open multiple credit lines. To minimize the impact, it's best to research lenders and focus your applications within a concentrated timeframe.

If approved, the new loan affects your credit mix and increases your total debt, which can initially cause a slight dip in your score. However, making regular, on-time payments on your new loan creates a positive payment history. Over time, this responsible repayment behavior can significantly improve your credit score, potentially outweighing the initial negative effects.

Before applying, consider using prequalification tools offered by many lenders that use soft inquiries which don't affect your credit score. These tools can give you an idea of whether you'd be approved and what rates you might qualify for without the commitment of a full application, helping you avoid unnecessary hard inquiries for loans you're unlikely to get.

Do any personal loans for bad credit offer instant approval?

"The main benefit of a personal loan is the speed and simplicity at which they can be completed," says Daniel Milan, managing partner at Cornerstone Financial Services. But while many lenders advertise "instant approval" personal loans for bad credit borrowers, it's important to understand what this actually means. True instant approval where you receive final loan approval seconds after applying is rare, especially for those with credit challenges. What most lenders offer is instant pre-approval based on basic information, followed by a more thorough review process.

Online lenders typically provide the fastest approval processes, with some delivering preliminary decisions within minutes and final approvals within hours. And, some companies specialize in bad credit lending with streamlined digital applications and accelerated approval timelines. However, even with these lenders, verification of income, employment and identity still needs to occur before funds are disbursed, which can take several days in some cases.

Be wary of payday lenders or cash advance services that promise truly instant approval with minimal verification. These options often come with extremely high interest rates and predatory terms — and can trap borrowers in cycles of debt. A slightly longer wait for approval from a reputable lender typically results in much better loan terms and significantly lower interest rates, even for those with bad credit.

For the fastest legitimate approval process, prepare all necessary documentation beforehand (proof of income, identification and bank statements) and choose lenders that specialize in digital applications and rapid processing. Many credit unions and community banks also offer same-day decisions for existing customers, making them worth considering if you already have an established relationship.

The bottom line

When you're getting a loan, it's important to always compare at least several lender options. This is especially true if you have bad credit, as interest rates can vary widely from one lender to another. 

You can also use an online loan marketplace to get several quotes at once. Just make sure you're comparing apples to apples and that you look at outside factors — like customer reviews, funding time, repayment options and other non-cost-related details that matter, too.

Aly Yale contributed to this report.