Where can I get a bad credit loan?

It can be difficult to get a loan from a traditional lender if your credit score is low. However, that doesn’t mean you’re out of luck if you need money fast. Other options to consider for securing the funds you need include online lenders, some banks and credit unions, payday lenders, and title lenders. Some may be better suited to your finances than others, so it’s important to understand how they work to make an informed decision.

Online lenders

Several online lenders offer bad credit personal loans. The application process is generally streamlined and you can get a loan decision within minutes. If approved, some lenders also offer same-day or next-day financing.

You can also use an online lending network to view and compare offers from multiple lenders with one app. Generally, you can see the quotes without affecting your credit, as it only results in a slight increase in credit. Some online lenders also offer pre-qualification tools on their websites that don’t hurt your credit score.

But there is a downside with online lenders. You will likely get a high APR if your credit score is low because you pose a high risk to the lender. Loan origination fees should also be taken into account (if applicable) as they represent 1-8% of the loan amount.

Who is it best for: People who prefer to obtain a loan without having to go to a local branch.

Advantages The inconvenients
  • Simplified application process and quick loan decision
  • Financing available same day or next day
  • High borrowing costs
  • Loan origination fees (if applicable)

Bank or credit union

Traditional banks are also an option for getting a personal loan with bad credit. However, they may not be the best choice because most loan decisions are based solely on your creditworthiness and income. Thus, a lower score may equate to an automatic rejection if it does not reach the minimum threshold.

Credit unions are a bit more lenient than banks. They also assess credit scores and income to decide if you are a good candidate for a loan. The advantage of working with a credit union is the relationship factor. Credit unions are member-driven, which gives you an edge and possibly helps you get approved, even with a lower credit score.

Who is it best for: Banks or credit unions are ideal for borrowers who are also account holders and want to leverage their relationship with the financial institution when seeking approval.

Advantages The inconvenients
  • Longer wait times for approvals
  • Established account holders could be approved with lower credit scores
  • Rigorous qualification criteria
  • Higher APRs than online lenders

Payday lenders

Payday lenders offer small, short-term loans of up to $500. Even if you have bad credit, these loan products are easy to get approved, but there is a significant downside. You’ll pay a high interest rate, often up to 400%, and only have a small window to pay off what you owe.

Many borrowers cannot repay the loan on the due date, which is usually your next payday. Unfortunately, this leads to even more fees and a perpetual cycle of debt that is virtually impossible to escape. So, despite their convenience, these loans should only be used as a last resort.

Who is it best for: Borrowers who have exhausted all other options.

Advantages The inconvenients
  • Excessive APRs and high fees
  • Short repayment period

Securities lenders

Securities lenders also cater to borrowers with poor credit ratings. Car title loans are installment loans that are relatively easy to qualify for. You will make equal monthly payments over a fixed period of up to six months in most cases. You might also get a slightly lower interest rate than you would with a payday loan.

Yet, these loans are risky because they use your vehicle as collateral. And if you’re behind on payments, your car could be seized to collect what’s owed to the lender.

Who is it best for: People who can afford to repay their loans in a timely manner.

Advantages The inconvenients
  • Better interest rates than personal loans
  • Easy to qualify with bad credit
  • Requires warranty to be approved
  • Collateral is at risk of seizure

At the end of the line

Before applying for a bad credit loan, consider the pros and cons of each option. Also, get quotes from a few lenders and analyze the numbers to make the best decision for your financial situation. You may find that it is better to explore other alternatives, such as a credit card or a loan. Or you can borrow the funds from a relative or rework your budget to meet your short-term cash flow needs.