Loan Education
Best Personal Loans for Bad Credit: Options & Advice
With bad credit, the best personal loan is one with a clearly disclosed APR you can afford, no upfront fees, and a lender licensed in your state — often found through credit unions, secured loans or adding a creditworthy co-borrower. Rates for lower credit scores are usually higher, so first consider whether an alternative or a few months of credit building would serve you better.
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Where people with lower credit scores often look
| Option | Why it may help | What to watch |
|---|---|---|
| Credit unions | Often consider your full relationship; federal credit unions face a rate cap | Membership required |
| Payday alternative loans (PALs) | Small, short-term loans from some federal credit unions with capped costs | Limited loan amounts |
| Secured personal loans | Collateral can improve approval odds and pricing | You can lose the collateral |
| Co-signed or joint loans | A co-borrower's credit can help you qualify | They're equally responsible for the debt |
| Online lenders | Some consider factors beyond credit score | Rates and fees vary widely |
What to compare
- APR — a much clearer measure than the interest rate alone.
- Total cost — payment × months, plus fees.
- Origination fee — and whether it's deducted from your funds.
- Prepayment penalty — avoid it if you can.
- Reporting to credit bureaus — on-time payments can help rebuild your credit.
Use our Loan Comparison Tool to compare offers you receive.
Loans to avoid
- Payday loans — short-term loans that can carry extremely high costs and often lead to repeat borrowing.
- Car title loans — risk losing your vehicle over a small loan.
- "Guaranteed approval" offers and any lender asking for upfront fees or gift cards.
- Unlicensed lenders — check with your state's financial regulator.
Safer alternatives
- Ask creditors or medical providers for a payment plan or hardship program.
- Contact a nonprofit credit counselor.
- Explore local assistance programs (dial 211 in most of the U.S.).
- Use a secured credit card to rebuild credit for a few months before borrowing.
Improve your chances
- Check your credit reports for errors and dispute them.
- Pay all bills on time for several months.
- Reduce credit card balances to lower utilization.
- Prequalify with soft credit checks to compare without affecting your score.
Read Tips for Improving Your Credit Score for a full plan.
Our approach to lender listings
We don't currently rank individual lenders. If we add listings in future — which may include affiliate partners — we'll explain our criteria, disclose any commercial relationship, and focus on transparency and responsible lending. SmartPath Finance is not a lender and does not make credit decisions.
For the fundamentals, see Understanding Personal Loans.