Best Bad Credit Personal Loans of 2020

Before resorting to a cash advance or payday loan, take the time to check your credit score and educate yourself on all your options before deciding on a loan. To help you out with that, we’ll cover everything you need to know about getting a personal loan with bad credit. First, we will look at the steps to take before applying for a loan, and then, we will go over the best bad credit personal loans of 2020.

Check Your Credit Score

Many different apps will track your credit score for free, and your current bank may partner with one of them, such as CreditWise. Two of the more popular credit checking apps are Mint and Credit Karma. Both apps will do much more than just help you improve your credit. Mint provides a full suite of budgeting and money management options, while Credit Karma is more focused on your score but also provides a variety of other benefits.

Once you have an app to check your credit, you should be able to find quick tips on improving your score. Take the time to do the easy steps to improve your score before you go hunting for a personal loan. The amount of interest you must pay on your loan is directly tied to how high or low your score is.

Also, if you are in the market for a personal loan, hold off on any other unnecessary purchases on a credit card. Make sure you are paying off as much of your statement balance as you can each month. And if you cannot pay off the full statement balance, make sure that you have an automatic payment scheduled on every card so that you avoid late fees and keep a clean payment history.

On-time payments are a significant component of your credit score, so even if you are paying the minimum $25 each month, it will still help to improve your score.

Have a Plan to Pay Back the Loan

A loan is no good if you can’t pay it back. Securing a personal loan without a plan to pay it back is a surefire way to dig yourself a deeper hole financially. Whatever it is that you need, you must have a way to pay for it in the future.

Look for Loans that Offer Prequalification

Once you’ve improved your credit score as much as you can in the short term, look for loans you can prequalify for. The advantage of prequalification is that you can see whether you would qualify for the loan without putting a hard credit check on your report.

Anytime you apply for a credit card or a loan, the lender will make a hard check on your credit, which will impact your credit score. Too many hard checks in a short amount of time will reduce your score. These checks also take a couple of years to come off your report. So anytime you can avoid a hard inquiry, you should.

Types of Bad Credit Loans

There are two main types of bad credit loans: secured and unsecured.

A secured loan is backed by collateral, usually your house or car. If you were to default on a secured loan, the lender would have recourse to claim a portion of your collateral. Secured loans offer better rates because the lender has less risk. A secured loan also has a higher loan limit. If you have bad credit, you will be more likely to qualify for a secured loan than an unsecured loan.

On an unsecured loan, the interest rate will be based almost entirely on your credit score. An unsecured loan typically has lower loan limits and higher interest rates, as they are not secured by any collateral.

Best Bad Credit Loans of 2020

What is considered bad credit? To the credit companies, a score below 670 is regarded as bad credit. Although, technically, a score between 580 and 669 is considered fair, while a score between 300 and 579 is deemed to be poor.

The reason that a score below 670 is considered “bad” is that many credit card companies will deny your application in this range. However, many other lenders will be happy to offer you a loan with the caveat of a higher interest rate. The better your score is, the better your interest rate will be.

Best Bad Credit Loans

  • Very Poor Credit: Upstart
  • Secured Loan: Peerform or Home Equity Loan
  • Unsecured Loan: Avant


Upstart factors in more than just your credit score, taking into account your education and job history. The APR ranges from 6.27% to 35.99%, with payback terms ranging from 24 to 60 months. Loans can range from $5,000 to $30,000.


Peerform gets its funding from investors, and applying for a loan is simple. The APR ranges from 5.99% to 29.99%, and the payback term goes up to 36 months. Loans can range from $4,000 to $25,000.


Avant features a mobile application that makes applying for a loan simple. The APR can range from 9.95% to 35.99%, with payback terms between 24 and 60 months. Loans can range from $2,000 to $35,000.

Home Equity Loans

If you have bad credit but have accumulated equity in your home, a home equity loan, or a HELOC (home equity line of credit) may be the perfect option. Even if you have bad credit, the equity you’ve built up in your home will typically be enough for you to get the loan.

Other Types of Bad Credit Loans

While these loans are not recommended, they remain options if you need a quick loan but cannot qualify for one of the loans above.

Cash Advances

A cash advance is offered by credit card companies, and you can find the details of available cash advances on your card member agreement. Your current credit limit on your card will determine how much is available for a cash advance. For example, if you have a $10,000 credit limit, your cash advance limit could be around $1,000.

When you take a cash advance, it does not count against your credit limit. It stays as a separate loan that must be repaid. A cash advance will typically come with a higher APR than your credit card does, so try to pay back a cash advance as soon as possible.

Payday Loans

A payday loan is to be avoided at all costs due to the extraordinarily high effective interest rates they charge.

The advantage of a payday loan is that the lender will not pull a credit check. But the disadvantage is an effective interest rate that could approach 300%.

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