Loans for bad credit: your real options
With a low credit score you can still borrow, but the price climbs steeply as you move from credit unions to high-cost lenders. Knowing the order to try them in can save hundreds of dollars on a small loan.
The short version
- Credit unions and secured loans are the cheapest bad-credit options.
- Lenders that advertise to bad credit charge the highest rates.
- No legitimate lender approves everyone; a promise of approval is a warning sign.
- On-time payments on a reported loan can rebuild your score.
On this page
What “bad credit” means to a lender
Scores below about 580 are generally treated as poor. Lenders that serve this range rely less on the score and more on income, existing debts and your bank account history. They charge more because more of their borrowers default.
Options, cheapest first
| Option | Typical APR | Who it suits |
|---|---|---|
| Credit union payday alternative loan | Up to 28% | Members who need $200 to $2,000 |
| Secured or share-secured loan | 5% to 18% | Anyone with savings or a paid-off asset |
| Co-signed personal loan | Based on the co-signer | Borrowers with a trusted co-signer |
| Cash advance app | Fees instead of interest | Shortfalls under $250 |
| Online installment loan | 36% to 300%+ | Larger amounts, where state law allows |
| Payday or title loan | 300% and up | Last resort |
The truth about “approval for everyone”
Search results are full of offers that sound certain. They are not. Every lender verifies identity, income and a bank account, and turns some applicants down. The Online Lenders Alliance, the industry’s own trade group, tells its members not to advertise that way. Treat any site that promises a loan before reviewing your details as a lead generator or a scam, and read our scam guide.
How lenders check you
Many short-term lenders skip the three major credit bureaus and use specialty reporting agencies that track payday and installment borrowing. That is a soft check from the perspective of your main credit report, but it is still a review. Personal loan lenders usually begin with a soft inquiry for a rate quote and run a hard inquiry only when you accept.
Keeping the cost down
- Borrow the smallest amount that solves the problem.
- Choose the shortest term you can afford.
- Compare the total of payments from at least two lenders.
- Decline optional insurance and add-ons.
- Set up reminders so you never pay a late fee.
Rebuilding while you borrow
A loan only improves your score if the lender reports payments to the credit bureaus. Credit unions, credit-builder loans and secured cards do; most payday lenders do not. You can review your reports for free at AnnualCreditReport.com and dispute errors that are dragging the score down.
Five questions to ask before you apply
- Are you licensed to lend in my state, and under which license?
- What is the total of payments in dollars, and what is the APR?
- Do you report on-time payments to the credit bureaus?
- Is there a penalty for paying the loan off early?
- If a payment fails, what fee applies and how many times will you retry the debit?
A lender that will not answer these in writing before you sign has answered a different question: whether to trust it.
Where to go next
Check your state’s rules, compare installment loans with payday loans, and see the alternatives that cost less than either.
Common questions
Can I get a loan with a 500 credit score?
Often, yes, from credit unions, secured lenders and high-cost lenders. The lower the score, the more it matters to compare the total cost.
Is there such a thing as guaranteed approval?
No. Every legitimate lender reviews applications and declines some of them. A promise of approval is a marketing line at best and a scam at worst.
Will a bad credit loan hurt my score?
A hard inquiry can lower it by a few points for a short time. Missed payments do far more damage. On-time payments help only when the lender reports them.
What is the easiest loan to get with bad credit?
Cash advance apps and payday lenders have the loosest requirements. They are also the most expensive per dollar borrowed, so try a credit union first.
Does Northlight lend money?
No. Northlight is an information site. We explain costs and state rules; we do not make loans or credit decisions.
Check the rules where you live
Whether you can borrow, how much, and what a lender may charge all depend on your state.
Sources
Keep reading
- Borrow moneyNeed to borrow money now? Compare apps, credit unions, cards, installment and payday loans by speed and total cost before you choose one.
- Tribal loansTribal lenders are owned by Native American tribes and claim immunity from state rate caps. Learn what that means for cost, rights and risk.
- Cash advance appsCash advance apps lend $20 to $500 against your next paycheck. See how tips, express fees and subscriptions add up, and how to compare apps.
- Title loansA car title loan can cost about 25% a month and put your vehicle at risk. See how title loans work, what they cost and what to try first.
- Cash advanceCash advance can mean a payday loan, an app advance or a credit card withdrawal. Compare the cost of each in dollars and APR before you choose.
- Same day loansSame day loans depend on the lender, the payment method and your bank's cut-off. See which options are truly fast and what speed costs.