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Consumer guide

Personal loans with bad credit

A personal loan is a lump sum you repay in fixed installments, and lenders can offer them even with bad credit, though the rate and terms depend on the lender. Review the cost example on this page for how the numbers work, know your rights under federal disclosure and collection rules, and compare cheaper options before you send a request.

Reviewed by the BadCreditMD Editorial Team on . Last updated .

How a personal loan works with bad credit

A personal loan gives you a fixed amount of money up front that you repay over a set repayment period through scheduled payments. Bad credit does not close the door on every personal loan, but it usually means a lender treats you as higher risk when it sets terms. Some lenders that work with borrowers who have damaged or thin credit look at income and other factors alongside a credit score. Because every lender sets its own terms, the only way to know what a specific personal loan would actually cost you is to look at a representative offer, not a general rule of thumb. That is why this page relies on the cost example component instead of a single number that would not reflect what any one lender offers. Before you commit to a personal loan, read the loan agreement closely, ask what the annual percentage rate covers, and confirm the number of payments and the total you would repay.

What a personal loan can cost you

The cost example on this page shows a representative annual percentage rate, repayment period, payment amount and total repaid for a personal loan, built to meet federal disclosure rules. Use it to see how the pieces fit together rather than relying on an advertised rate alone, since the rate a specific lender offers you depends on your credit history, income and the lender's own underwriting. A larger down payment or a shorter repayment period, where available, generally changes what you pay overall. Ask any lender for the annual percentage rate and the total finance charge before you sign, and compare that figure across more than one offer so you understand what you are agreeing to pay.

Your rights under federal disclosure and collection law

Under the Truth in Lending Act, a lender must disclose the finance charge on a closed-end personal loan expressed as an annual percentage rate, so you can compare offers on the same terms rather than guessing at the cost. If your personal loan is ever sent to collections, the Fair Debt Collection Practices Act bars a debt collector from threatening to take an action it cannot take or does not intend to take, which includes threats meant to pressure you into paying faster or more than what you owe. Keep every disclosure document a lender gives you, and keep records of any contact with a collector so you can point to what was said if a dispute comes up later.

Protections for service members and their families

Federal law sets a capped annual percentage rate on consumer credit, including many personal loans, extended to a covered member of the armed forces on active duty or active Guard and Reserve duty, or to that member's dependent. If you or a family member is a covered service member, tell the lender before you sign so the lender can confirm whether the loan falls under this protection and structure the terms accordingly. Keep a copy of any document the lender gives you describing this protection, and ask the lender to confirm in writing which terms it covers.

Risks and cheaper ways to borrow

A personal loan is not the only way to cover a shortfall. A credit union payday alternative loan, a credit-builder loan, a secured card, or a payment plan with the biller you owe can cost less than a personal loan aimed at bad credit borrowers, and some report your payment history to credit bureaus, which can help your score over time. Before you borrow, ask whether the shortfall is a one-time event or a sign of a recurring gap, since a loan does not fix a budget shortfall on its own. If you are unsure whether a personal loan fits your situation, nonprofit credit counseling can walk through the numbers with you at no cost, and legal aid can help if a collector is not following the rules described above.

How to check your options

BadCreditMD is not a lender or broker. A lending network partner shares requests with lenders. Lenders set their own rates and decide whether to lend. The request form tells you what kind of credit check happens before you send it, and lenders may respond, though a response is never promised. Start by reading the cost example on this page so you know what to compare, then use the request form to share your request with lenders and see what options fit your situation.

Key facts

  • APR disclosure requiredLenders must disclose the finance charge expressed as an annual percentage rate on closed-end personal loans under the Truth in Lending Act.[1]
  • Debt collector false representationThe Fair Debt Collection Practices Act bars a debt collector from threatening to take any action that cannot legally be taken or that is not intended to be taken.[2]
  • Military lending rate capFederal law bars a creditor from imposing an annual percentage rate above 36 percent on consumer credit extended to a covered member of the armed forces on active duty or active Guard and Reserve duty, or to a dependent (36%).[3]

Use the loan payment calculator to explore monthly payments and total cost using your own illustrative figures.

Common questions

Can I get a personal loan with bad credit

Bad credit does not automatically rule out a personal loan. Some lenders look at income and other factors alongside your credit history, but the rate and terms they offer depend on their own underwriting, so compare more than one offer before you decide.

What must a lender tell me before I sign a personal loan

Under the Truth in Lending Act, a lender must disclose the finance charge on a closed-end personal loan expressed as an annual percentage rate, so you can see the true cost and compare it against other offers.

What can a debt collector not say to me about a personal loan I owe

The Fair Debt Collection Practices Act bars a debt collector from threatening to take an action it cannot take or does not intend to take. If a collector makes a threat like that, write down what was said and consider contacting legal aid.

Does military service change my personal loan terms

Federal law caps the annual percentage rate on many types of consumer credit, including personal loans, extended to a covered member of the armed forces on active duty or active Guard and Reserve duty, or to a dependent. Tell the lender about your status before you sign.

What if a personal loan is not the right fit for me

Consider a credit union payday alternative loan, a credit-builder loan, a secured card, or a payment plan with your biller. Nonprofit credit counseling can help you compare these options against a personal loan at no cost.

Sources

  1. Cornell Law School Legal Information Institute. 15 U.S. Code 1638 - Transaction disclosures.
  2. Cornell Law School Legal Information Institute. 15 U.S. Code 1692e - False or misleading representations.
  3. Cornell Law School Legal Information Institute. 10 U.S. Code 987 - Terms of consumer credit extended to covered members and dependents.

Representative example

Amount borrowed
$1,000
Annual percentage rate (APR)
29.99%
Repayment
12 monthly payments
Payment
$97.48
Finance charge
$169.76
Total of payments
$1,169.76

Example: a $1,000 installment loan at 29.99% APR repaid in 12 monthly payments of $97.48 costs $1,169.76 in total, including a finance charge of $169.76. Illustration only; your lender will disclose your actual APR, payment schedule and total cost before you accept a loan.