Getting a Personal Loan With Low Credit Score

If your credit score isn’t great, it is not easy to get a personal loan from a bank. However, there are still ways to get the money you need! There are a few tips for getting a personal loan when your credit score is less than perfect. According to the Consumer Financial Protection Bureau (CFPB), millions of Americans have subprime credit scores that limit their borrowing options, but alternative lending paths remain available.

Get Help From Credit Unions

Credit unions are non-profit organizations that offer financial services to their members. Because they are not-for-profit, they often have lower interest rates and fees than traditional banks like Chase or Bank of America. And because they are member-owned and focused on serving the needs of their community, they may be more willing to work with you to get a loan, even if your credit score is low. The National Credit Union Administration (NCUA) oversees more than 4,700 federally insured credit unions across the United States, many of which offer payday alternative loans (PALs) capped at 28% APR for members with poor credit. So if you’re considering a personal loan, be sure to check with your local credit union first. They may be able to help you get the financing you need – even if your credit isn’t perfect.

Consider Getting A Co-signer On Your Loan

A co-signer is someone who agrees to take joint responsibility for a loan with you. Co-signers can be friends or family members, but they should be someone who trusts you and knows that you’re financially responsible. When you have a co-signer on your loan, the lender will look at their credit score instead of yours — this is sometimes called a “co-signed loan” or a joint personal loan in the terminology used by lenders like SoFi and Discover. It can help you get approved for a loan when you wouldn’t be able to do so independently. According to Experian’s co-signing guidance, the co-signer’s debt-to-income ratio (DTI) is also evaluated by lenders, so choose someone with a manageable debt load. Just make all of your payments on time, as missing even one payment can damage your co-signer’s credit score. If you’re considering getting a co-signer for your loan, choose someone who is financially responsible and whom you trust. Doing so can help you get approved for a loan when you otherwise wouldn’t be able to do so.

Look Into Peer-to-peer Lending Platforms

When your credit score is low or non-existent, getting approved for loans or new credit lines can be difficult. One alternative option to explore is peer-to-peer lending platforms. These platforms connect borrowers with individual lenders, allowing you to get the funds you need without going through a traditional bank. Platforms such as LendingClub and Prosper have become well-established options that are regulated and monitored by the FDIC and state financial regulators. Each platform works a little differently, but generally, you’ll have to create an account and submit basic information about yourself, including your income and credit history. Once your application has been approved, you will have one or more individual lenders review your loan request in detail and decide whether they want to make an offer on your behalf. Loan amounts on these platforms typically range from $1,000 to $40,000, with terms between 36 and 60 months. So if you’re struggling with poor credit or no credit at all, consider exploring peer-to-peer lending to get the financial help you need.

Talk To Your Boss Or Apply For A Cash Advance

It is worth talking to your boss or applying for a cash advance, as you may be able to get approved if you have a good explanation for why you need the money. When you talk to your boss, be honest about your financial situation and explain that you need the money to cover an unexpected expense. If you can demonstrate that you are responsible for your finances and that you will be able to repay the money quickly, your boss may be willing to give you an advance on your salary. As for taking out a cash advance on your credit card, be aware that the CFPB warns that credit card cash advances typically carry APRs of 25%–30% and begin accruing interest immediately with no grace period. You can also try asking for a limit increase on your credit card, which may give you more room to work with when taking out cash advances. If all else fails, there are always other options for getting extra money.

Set Up A Payment Plan With Creditors

If you have bad credit, the first step in taking control of your finances is to set up a payment plan with your creditors. It will help keep your debts from growing, and it can also help you rebuild your credit score over time. There are a few different factors that you should take into account when setting up a payment plan with your creditors. You will need to contact each of your creditors individually, either by phone or online. Next, you will need to communicate your financial situation, including how much money you currently make and how much debt you have accrued. The CFPB’s debt management tools can help you organize your creditor contacts and understand your rights under the Fair Debt Collection Practices Act (FDCPA). With these considerations in mind, implementing a payment plan can be an effective way to regain control over your finances and build a stronger financial future.

Ask For Help From Friends Or Family Members

When your credit score is poor, it is important to remember that asking for help from friends or family members is always an option. There are several reasons why this may be a good choice. For one thing, these trusted individuals can offer you valuable advice and insight on how to improve your score. They may also have connections or resources that could help you get back on track financially. If a friend or family member does lend you money, financial advisors recommend drawing up a simple written agreement to protect both parties — a practice endorsed by the National Foundation for Credit Counseling (NFCC). Additionally, having the support of loved ones can be critical in helping you through this difficult time and keeping you motivated as you work towards building better credit. So if your credit needs some improvement, reach out to the people who care about you and ask for their help today!

Borrow From Your 401k

Borrowing from your 401(k) when your credit score is poor may seem like a desperate move, but it can be a smart financial decision. Here’s why: when you borrow from your 401(k), you’re essentially taking out a loan from yourself. The interest rate on a 401(k) loan is usually set at the prime rate plus 1%, which as of April 28, 2026, is significantly lower than the average APR charged to bad-credit borrowers by online lenders. According to IRS guidelines on retirement plan loans, you can typically borrow up to 50% of your vested account balance or $50,000, whichever is less. In addition, the money you borrow from your 401(k) is not counted as income for tax purposes, so you won’t have to pay taxes on it as long as you repay the loan on schedule. And finally, if you borrowed money from your 401(k) to pay off high-interest credit card debt, you’ll be doing yourself a favor by reducing the interest you’re paying every month. So if you’re struggling with debt and have a low credit score, borrowing from your 401(k) may be worth considering — though you should weigh the long-term impact on your retirement savings before proceeding.

Using Collateral To Secure Your Loan

Collateral is an asset that is used to secure a loan. If you default on the loan, the lender can take possession of the collateral and sell it to recoup their losses. The most common type of collateral is a home or vehicle. Other assets, such as jewelry or art, can also be used. Secured personal loans are offered by lenders including Regions Bank and OneMain Financial specifically for borrowers with low FICO Scores who might not qualify for unsecured products. According to Federal Reserve consumer credit release data, secured loan rates for subprime borrowers can be 5–10 percentage points lower than comparable unsecured loans. The downside is that you could lose your asset if you default on the loan. Therefore, it is important to consider whether using collateral is right for your situation. If your credit score improves, you may no longer need to use collateral to get a loan.

Personal Loan Options for Bad Credit: Comparison

The above tips can help you get a personal loan even if your credit score isn’t great. By following these tips, you can improve your chances of getting approved for a loan and get the money you need to consolidate debt, make a large purchase, or cover unexpected expenses. So don’t let bad credit hold you back – start taking steps to improve your credit today!

Frequently Asked Questions

What is the minimum credit score needed to get a personal loan?

Most traditional banks require a FICO Score of at least 670 to qualify for an unsecured personal loan. However, lenders like OneMain Financial and certain credit unions will approve borrowers with scores as low as 560–580, and 401(k) loans require no credit check at all.

What is considered a bad credit score for a personal loan?

According to Experian’s FICO Score scale, any score below 580 is considered “poor,” and scores between 580–669 are considered “fair.” Both ranges will limit your options and typically result in higher APRs. Lenders use these ranges, along with your debt-to-income ratio (DTI), to assess risk.

Can I get a personal loan with a 500 credit score?

Yes, but your options are limited. Lenders like OneMain Financial and some credit unions will work with scores in the 500 range, usually requiring collateral or a co-signer. Expect APRs near the upper end of their range — often between 25% and 36% — to compensate for the increased lending risk.

How does a co-signer help me get a personal loan with bad credit?

A co-signer with good credit — typically a FICO Score of 700 or higher — allows the lender to evaluate their creditworthiness alongside or instead of yours. This can get you approved for loans you’d otherwise be denied for and may lower your interest rate significantly. The co-signer becomes equally responsible for the debt if you fail to pay.

What APR should I expect on a personal loan with bad credit?

As of April 28, 2026, borrowers with credit scores below 580 typically see APRs ranging from 25% to 36% on unsecured personal loans. Secured loans or loans through credit unions can carry lower rates — sometimes as low as 10.99% APR. The Federal Reserve’s consumer credit data shows that rates have remained elevated due to persistent monetary policy adjustments through 2025 and early 2026.

Is borrowing from my 401(k) a good idea when I have bad credit?

It can be, but only as a last resort. The interest rate is typically the prime rate plus 1% (approximately 8.50% as of April 2026), and you pay the interest back to yourself. The major risk is that if you leave or lose your job, the outstanding loan balance may become immediately taxable income, plus a 10% early withdrawal penalty if you are under age 59½, according to IRS rules.

How does peer-to-peer lending work for people with low credit scores?

Peer-to-peer (P2P) platforms like LendingClub connect borrowers directly with individual or institutional investors who fund the loans. Your credit history, income, and DTI are reviewed, and investors decide whether to fund your request at a quoted rate. Minimum credit score requirements (typically around 600) are lower than most banks, making P2P a viable option for fair-to-poor credit borrowers.

Will applying for a personal loan hurt my credit score?

Yes, a hard credit inquiry — which occurs when a lender formally reviews your credit to make a lending decision — will temporarily lower your FICO Score by about 5–10 points. However, many lenders like SoFi and LendingClub offer prequalification with a soft inquiry, which does not affect your score. The CFPB recommends shopping for loans within a 14–45 day window so that multiple inquiries count as a single event.

What is the difference between a secured and unsecured personal loan for bad credit?

An unsecured personal loan requires no collateral and is approved based on your creditworthiness alone. A secured personal loan requires you to pledge an asset — such as a car, savings account, or home equity — which the lender can claim if you default. Secured loans are easier to qualify for with bad credit and typically carry lower APRs, but you risk losing your asset if you miss payments.

How can I improve my credit score quickly to get a better loan rate?

The fastest methods include paying down credit card balances to reduce your credit utilization ratio below 30%, disputing any errors on your credit report through Experian, Equifax, or TransUnion, and making all upcoming payments on time. According to myFICO, payment history accounts for 35% of your FICO Score, making it the single most impactful factor you can actively control.