Key takeaways
- Lenders who offer loans for people with low credit may accept FICO scores as low as 560 or may not require a credit score at all.
- Every lender has different borrowing requirements and maximum loan amounts.
- Upstart, Avant and LendingPoint are three of the best lenders for poor credit due to their lending models, APR ranges and repayment terms.
A poor credit score is a FICO score below 670 or a Vantage score below 661. No matter the credit scoring model you prefer, a less-than-stellar score can make qualifying for a loan and getting the amount you need difficult.
However, there are lenders that cater to subprime borrowers that offer loan amounts ranging anywhere from $1,000 to $50,000. Keep in mind that the maximum amount offered will vary based on your creditworthiness and the lender’s underwriting criteria.
How lenders determine how much you can borrow
Each lender has its own set of eligibility guidelines that determine whether you qualify, your APR and how much you can borrow. Lenders that cater to those with poor credit often have relaxed eligibility criteria, which makes it easier to get approved.
Lenders will conduct a hard credit check to look at your credit report when deciding your eligibility. Your credit report houses all of your repayment information and credit history, including any missed payments, open accounts and your debt-to-income ratio.
Credit score and history
Your credit score is undoubtedly one of the most important factors to lenders when you apply for a loan. Most take a deep dive into your credit history to get a feel for how you manage debt obligations. They also evaluate your credit score to gauge your creditworthiness — the higher, the better.
If you apply with a lender offering bad credit loans, you could get approved with a score as low as 560 or no credit score at all. Still, a higher credit score could mean access to more funds. For example, Earnest has a maximum borrowing cap of $250,000 for those with excellent credit of 800 and above.
Eligibility specifications
Each lender will have differing criteria when assessing eligibility and default risk, but lenders may look at different financial factors when it comes to loans for poor credit. If the loan is specifically advertised to those with bad credit, it’s likely that the lending institution will look at factors other than just credit score.
Upstart, for example, offers unsecured loans up to $50,000 and doesn’t have a credit score requirement. It does have a minimum income requirement of $12,000 though, so that will be considered over your credit score. LendingPoint is another lender that also bases eligibility on a number of factors, rather than looking strictly at score.
Debt-to-income ratio
Your debt-to-income (DTI) ratio is the percentage of how much you owe monthly versus your gross monthly earnings. To calculate your DTI, add up all of your monthly debt payments, such as student loans, auto loans, mortgage payments and credit card balances and divide that number by your gross monthly income.
Ideally, most lenders prefer DTIs under 36 percent, but some will accept ratios as high as 50 percent. The lower your DTI, the more trustworthy you appear to a lender, which may give you a better chance of getting the funds you need.
If your DTI is well over 50 percent consider dedicating time to paying down your existing debt before taking out another loan. If you need the cash immediately, look for lenders that don’t have a DTI specification or accept high ratios.
3 best lenders for bad credit
| Lender | Best for | APR range | Loan amount | Loan term | Minimum credit score |
|---|---|---|---|---|---|
| Upstart | Borrowers with little or no credit history | 6.40%-35.99% | $1,000-$50,000 | 36 or 60 months | 300 or no credit score |
| Avant | User-friendly mobile app | 9.95%-35.99% | $2,000-$35,000 | 12 to 60 months | 550 |
| LendingPoint | Fast funding times | 7.99%-35.99% | $2,000-$36,500 | 24 to 72 months | 600 |
Even when you have a poor credit score, there’s several different lenders to consider, making it important to shop around and find the best loan terms possible. Here are some of the best lenders for bad credit.
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Upstart considers more than just credit history when reviewing an application. It also factors in an applicant’s job history, educational background and even area of study. If approved, loan proceeds are disbursed and as little as one day. And if you plan to consolidate debt, Upstart will pay your creditors directly.
Pros
- Accessible to borrowers with low or no credit score
- Funding in as soon as one business day
- Attractive APR for borrowers with excellent credit
Cons
- Origination fee
- Some states have higher minimum loan amounts
- Only two repayment periods to choose from
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Avant provides loans to applicants whose credit score is as low as 600. It also offers online prequalification so you can view potential rates without impacting your credit score. Plus, applicants may be able to report other household members’ income to help qualify for a loan.
Pros
- User-friendly mobile app that simplifies account management
- Loans funded as soon as the next business day
- No early repayment penalties
Cons
- High minimum APR
- No co-borrowers or co-signers
- Not available in all 50 states
LendingPoint
Rating: 4.6 stars out of 5
4.6
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LendingPoint uses a proprietary technology that was designed to establish a more complete picture of applicants, one that looks beyond credit score. It offers lower borrowing amounts, as little as $2,000, which gives individuals with poor credit the opportunity to take minimal loans and use them to improve credit through responsible repayment.
Pros
- Rapid approvals and funding timelines
- Lengthy repayment periods
- Potentially secure a better rate after six months of timely payments
Cons
- No co-borrowers or co-signers
- Loan origination fee of up to 10 percent
- High maximum APR
How to get a loan with bad credit
Getting approved for a personal loan with bad credit may be difficult, but it’s not impossible. Look for lenders that specialize in poor credit loans or use a qualifying co-signer to increase your chances of getting approved.
While it may seem tempting to apply as soon as you find a lender you qualify for, read the terms and conditions first to check for any hidden fees or requirements not advertised on the primary website. Also, if the lender offers prequalification, take advantage of it before starting an application.
Prequalificaiton allows borrowers to check their eligibility odds and predicted terms with no credit impact. Since loans for those with a thin credit history often come with higher rates and unfavorable terms, it’s best to prequalify and compare potential offers before making a final decision.
How lenders measure eligibility
To determine how much you can borrow — and your general approval odds — the lender will use a process known as underwriting. An underwriter’s job is to access the nitty-gritty of your financial history to let the lender know how risky it could be to take you on as a borrower.
When an underwriter looks at your credit report, they’re generally looking for good credit and a low possibility of default. However, when it comes to loans with bad credit the default risk will still be assessed, but the underwriting specifications may be more focused on factors like income and education when determining risk.
To increase your chances of getting offered the maximum amount, conduct a thorough review of the lender’s qualifications and your finances. If you meet all of the requirements, you’re more likely to be approved or offered a larger loan amount.
