Having bad credit does not mean you cannot get a personal loan. However, it does mean you will face higher interest rates and stricter terms. In fact, millions of Americans with subprime credit scores secure loans every year. Therefore, this guide explains how to get a personal loan with bad credit in 2026.
This article covers loan options, approval tips, and how to avoid predatory lenders.
What Counts as Bad Credit?
FICO scores below 580 are considered poor. Scores between 580 and 669 are fair, and 670+ is good. If your score is below 580, most traditional lenders will either deny your application or charge high interest.
Loan Options for Bad Credit
1. Secured Personal Loans
These require collateral, such as a savings account or vehicle. Because the lender holds collateral, approval is easier and rates are lower.
- Pros: Easier approval, lower rates.
- Cons: Risk of losing collateral if you default.
2. Cosigner Loans
Adding a cosigner with good credit can dramatically improve your approval odds and lower rates. However, the cosigner shares responsibility for repayment.
- Pros: Better terms, higher approval chance.
- Cons: Cosigner risk if you default.
3. Credit Union Loans
Credit unions often have more flexible lending criteria than banks. If you are a member, you may qualify for a loan even with bad credit.
- Pros: Lower rates, personalized service.
- Cons: Membership requirements.
4. Online Lenders
Online lenders like Upstart, Avant, and OppLoans specialize in lending to borrowers with imperfect credit.
- Pros: Fast approval, flexible criteria.
- Cons: Higher rates, potential fees.
5. Payday Alternative Loans (PALs)
Some credit unions offer PALs — small loans with lower fees than payday loans. They are designed for borrowers with bad credit.
- Pros: Lower cost than payday loans.
- Cons: Small amounts, short terms.
How to Improve Your Approval Odds
- Check your credit report for errors and dispute inaccuracies.
- Lower your debt-to-income ratio by paying down existing debts.
- Add a cosigner with good credit.
- Provide proof of stable income.
- Apply with a credit union or online lender specializing in bad credit.
- Make a larger down payment if possible.
How to Avoid Predatory Lenders
- Avoid payday loans — they often carry APRs over 400%.
- Check the lender’s license and reviews.
- Read the fine print for hidden fees.
- Beware of lenders who guarantee approval before checking your credit.
- Never share sensitive information with unsolicited lenders.
Comparison Table
| Loan Type | Approval Difficulty | Typical APR |
|---|---|---|
| Secured Loan | Low | 6–18% |
| Cosigner Loan | Low | 5–15% |
| Credit Union | Medium | 8–18% |
| Online Lender | Medium | 15–36% |
| Payday Alternative | Medium | 28–36% |
FAQ
Q: Can I get a personal loan with a 500 credit score?
A: Yes, but expect higher rates and stricter terms.
Q: How much can I borrow with bad credit?
A: Usually $500–$5,000, depending on the lender.
Q: Will applying for a loan hurt my credit?
A: Yes, a hard inquiry may lower your score slightly.
Q: What is the best loan for bad credit?
A: A secured or cosigner loan often offers the best terms.
Q: How can I improve my credit before applying?
A: Pay bills on time, reduce debt, and check your report for errors.
Conclusion
Getting a personal loan with bad credit is possible with the right approach. By choosing the right lender, improving your credit, and avoiding predatory loans, you can secure financing without falling into debt traps. Remember, always read the terms carefully.