While having poor credit can feel inhibitive, online bad credit loans can be instrumental in helping to repair and build credit scores. Bad credit online loans are best for borrowers who don’t have a lot to their credit history or made a few financial mistakes in the past and are now paying for it. A bad credit score is determined to be below 579.
We rated and reviewed the best online bad credit personal loans using our SimpleScore method to compare lenders’ rates, loan size, terms, support and fees.
The best bad credit online loans of 2020
Best bad credit online loans at a glance
|Brand||APR||Terms||Loan Amount||Credit Score Requirement||SimpleScore|
|RISE Credit||50%–299%||4–26 months||$300-$5,000||NA||2.5/5.0|
|PersonalLoans.com||5.99%–35.99%||90 days–72 months||$500-$35,000||NA||4.25/5.0|
|BadCreditLoans.com||5.99%–35.99%||3–36 months||Up to $10,000||NA||3.6/5.0|
|NetCredit||34.00%–155%||6–60 months||Up to $10,000||None||3.2/5.0|
Rates accurate as of December, 2020, and exclude autopay discounts
[ Read: Is a Personal Loan My Best Option? ]
What is a bad credit online loan?
Bad credit online loans are loans specifically geared toward borrowers with bad and poor credit or need to build their credit history. You can apply online for these types of loan and they come in the form of secured or unsecured. A secured loan requires collateral — like a house or vehicle. Unsecured loans do not require collateral but can be more difficult to attain as a result. Interest rates, fees and loan terms depend on the individual lender and the borrower’s credit score and financial history. The type of credit score lenders accept also vary depending on how strict the loan requirements are.
How bad credit loans work
When you decide on a lender for your online bad credit loan, you’ll need to apply on the lender’s website. While applying, you may need information such as identification, employment verification, pay stubs, proof of address and tax documents. The good news with online bad credit loans is that the process tends to be quick. Once you’re approved for the loan, it can take anywhere from a matter of 24 hours to a few days to receive your loan, depending on the lender.
There are also a few individual concepts you should be aware of when applying for an online bad credit loan.
While it isn’t impossible to obtain a loan with poor credit, you’re not going to qualify for good APR if you’re taking out a bad credit online loan. At least, not until that credit score comes up a bit. Borrowers with poor credit (300-579) will get an estimated APR of 28.5%–32% while an individual with a fair credit score (580-669) will receive an estimated APR of 17.8%–19.9%.
Depending on the type of loan you get and the lender, your repayment period could last anywhere from 90 days to three years. Online bad credit loans tend to have shorter terms which means higher payment amounts, but in those cases you’ll have paid your loan off faster and avoid the stress of having a long-term loan hanging over your head for years. On the other hand, you’ll want to be sure to budget to make sure you can afford a short-term loan. Short repayment plans tend to have higher rates than longer repayment periods.
How to get an online loan with bad credit
- Regularly check your credit score. You can do this by downloading a free credit report from AnnualCreditReport.com.
- Get your finances organized and budgeted to make sure you’re in a position to pay off a new loan.
- Organize any financial documents that will help streamline the loan application process including identification, employment documents, tax information and verification of income.
- Do your research — there are a variety of bad-credit personal loans. Pick a lender that works for you by paying attention to the terms and conditions as well as customer reviews.
- Think about bringing in a trusted co-signer. A cosigner with good credit can help you get loans with lower interest rates. However, cosigners will be required to take responsibility for the loan if you fall behind on payments.
- Consider applying for secured loans which tend to be easier to acquire for those with less than ideal credit because it requires collateral.
- Check for prequalification options — some lenders offer the chance to see if you qualify for a loan by performing a soft pull on your credit so as not to negatively impact your credit score.
- When you submit your application for an online, prepare for a hard credit check, which can impact your score.
Pros and cons of bad credit loans
- Helps rebuild credit
- Quick cash
- Longer terms than payday loans
- Fees may apply
- High interest rates
- Possible collateral requirements
[ Read: How to Get a Loan with Bad Credit ]
Things to consider when getting a bad credit online loan
- Predatory lenders: Beware of predatory lenders and scammers who may try to take advantage of you. Predatory lenders tend to charge exorbitant interest rates — sometimes up to 400%, charge unnecessary fees, require gratuitous insurance or apply balloon payments so after a short amount of time you’ll be required to pay off the remaining loan balance in one sum.
- Hard credit check: While some bad credit online loans offer a soft pre-qualification check, when you officially apply for the loan, a hard credit pull will be done that could impact your credit score.
- Repayment terms: Consider what type of repayment terms you would prefer when taking out online bad credit loans. A longer repayment period will mean smaller payments. A shorter term repayment period will require larger payments, but your loan will be paid off more quickly.
How to improve your bad credit
- Paying your bills on time will help positively build up your credit history and keep you from getting reported to the credit bureaus.
- Be sure to download a free credit report and check for any inaccuracies that might have been placed by a company. If you find a mistake on your report, dispute the claim and the credit bureau will remove it an investigation finds it was made in error.
- An important tip in improving your bad credit is to keep your monthly loan or credit card balance lower than 30% of your total credit line. This is because credit bureaus tend to see those who keep a low credit utilization ratio as responsible borrowers because of their distance from the spending cap.
We welcome your feedback on this article and would love to hear about your experience with the online bad credit loans we recommend. Contact us at email@example.com with comments or questions.