What Is a Personal Loan for Bad Credit?

Bad-credit personal loans can help consumers with low scores break up major expenses into smaller monthly payments. Learn what a personal loan for bad credit is and what to expect if you get one.

A bad-credit personal loan is one that’s offered to consumers with credit scores below 630 and can be used to consolidate debt or cover a large expense. These loans are often unsecured, meaning they don’t require collateral to qualify, but some lenders offer both secured and unsecured loans for bad credit.

Bad-credit loans are primarily offered by online lenders, but you may be able to get a personal loan with a low credit score at your local bank or credit union. Loan amounts are usually $1,000 to $50,000, repayment terms are one to seven years, and annual percentage rates are 6% to 36%. Generally, borrowers with poor credit are offered low loan amounts and high rates. Credit scores below 500 are unlikely to qualify for a personal loan.

Personal loan borrowers with bad credit are likely to get a rate on the high end of a lender’s APR range. In 2024, the average personal loan rate for borrowers with scores below 630 is about 18% to 26%, according to aggregate, anonymized data from users who pre-qualified for a personal loan through NerdWallet.

Bad-credit loans also tend to be smaller than loans offered to good- or excellent-credit borrowers (with credit scores above 689). For example, if a lender offers loan amounts from $1,000 to $50,000, a bad-credit borrower may not qualify for the maximum $50,000 amount.

While good- and excellent-credit personal loan terms can extend to seven years or more, bad-credit loan terms are likely to be five years or less. Even if a lender offers repayment terms of six or seven years, bad-credit borrowers are likely to be approved for a shorter term.

Scammers and predatory lenders seek out consumers with bad credit who need money and may take advantage of them. Here are four signs of a safe bad-credit lender.

1. A good online reputation: Do an online search for the lender and check consumer reviews on forums like Reddit, professional review websites like NerdWallet, the Consumer Financial Protection Bureau’s complaint database and the Better Business Bureau. Look for lenders with positive reviews, few complaints with the CFPB and no actions from regulators like the Federal Trade Commission.

2. Loan information on display: A bad-credit loan website should include information like the APR range, repayment term options and loan amounts. This information is sometimes on the loan product page or in the site’s footer.

3. Requires a credit check: If you have bad credit, the thought of a credit check could be troubling, but a hard credit check is a sign the lender wants you to repay the loan. Promises of approval with no credit check may be a sign of a personal loan scammer or a lender that charges exorbitant interest rates.

4. A clear loan agreement: After you’ve chosen a lender and requested a loan, the lender will ask you to sign a loan agreement. This document should include the loan’s APR and any fees the lender charges.