With years of experience and a passion for helping clients achieve their financial goals, our team is committed to guiding you on your journey to credit recovery and financial success.
Reviewed By:
Ashley Davison
Ashley Davison
Editor
Ashley is currently the Chief Compliance Officer for Credit Saint, previously the Chief Operating Officer. Ashley got into the Financial world by working as a Logistics Coordinator at Ernst & Young. Coming from a previous career in education, she is eager to teach the world every...
It changes which doors are open — and what the terms look like on the other side.
Getting approved for a loan when your credit score is low is harder, but far from impossible. Lenders view lower scores as higher risk, so the loans available to you often come with stricter terms, higher rates, and more paperwork. The good news: several loan categories are specifically designed for borrowers in this situation, and there are concrete steps that can strengthen your application.
This guide walks through the types of loans available with bad credit, how to improve your chances of approval, and the warning signs of predatory lenders to avoid along the way.
Key Takeaways
A typical two-week payday loan with a $15 fee per $100 borrowed equates to an annual percentage rate (APR) of almost 400 percent — one of the clearest reasons to avoid this category when other options exist (CFPB, 2024).
Secured loans, co-signers, and credit builder loans generally offer more realistic paths to approval for borrowers with a FICO score below 670.
Under the FICO model, 580–669 is considered Fair and below 580 is Poor — both bands can qualify for bad-credit loan products, but terms will vary significantly.
If inaccurate negative items are holding your score down, Credit Saint’s team can review your credit reports and challenge questionable items through the proper dispute channels.
A FICO score below 670 is generally considered outside of “good credit” territory. On the FICO scale, 580–669 is labeled Fair, and anything below 580 is Poor. To a lender, these ranges signal a history that may include missed payments, high credit utilization, or other financial stress — all of which suggest a higher chance of default.
Here is what that perception typically means when you apply for a loan:
Higher interest rates: Lenders charge more to offset the added risk, which drives up the total cost of borrowing.
Lower loan amounts: You may not qualify for the full amount you requested, or may be capped below what you need.
Stricter terms: Shorter repayment windows, larger down payments, or more frequent payments are common.
Fewer lenders: Many traditional banks will decline applications below a certain credit threshold, leaving you with a narrower pool of options.
None of this means borrowing is off the table. It just means the rules of the game are different, and understanding what’s realistic is the first step.
Types of Loans Available with Bad Credit
Secured Loans
Secured loans require collateral — something of value the lender can claim if you stop making payments. Because the risk to the lender is reduced, approval is easier and rates tend to be lower than unsecured alternatives.
Common examples include:
Auto title loans: You pledge the title of your vehicle as collateral. Rates are still high and missed payments can result in vehicle repossession.
Secured personal loans: Your savings account or certificate of deposit (CD) acts as collateral, allowing banks and credit unions to extend credit at lower rates.
Home equity loans and HELOCs: If you own a home, your equity can be borrowed against — but defaulting puts your home at risk.
Loans with a Co-signer
A co-signer with strong credit adds their name — and their financial reputation — to the loan agreement. Lenders view this as a significantly lower risk, which often unlocks approval and better rates. The important caveat: your co-signer is legally responsible for the loan if you default, and late payments will damage both of your credit profiles.
Credit Builder Loans
Credit builder loans are designed specifically to help consumers establish or rebuild credit. Instead of receiving the funds upfront, the borrowed amount is held in a locked savings account while you make monthly payments. Once the loan is paid in full, the money is released to you. The on-time payments are reported to the major credit bureaus, gradually strengthening your profile.
These loans are widely available through credit unions and community banks, and they are one of the few borrowing products where the primary goal is credit improvement rather than immediate cash access.
Unsecured Personal Loans for Bad Credit
Some lenders specialize in unsecured personal loans for borrowers with low credit scores. Approval is possible, but expect higher interest rates and origination fees compared to prime-rate products. Online lenders and credit unions are usually the most realistic starting points — many credit unions offer “payday alternative loans” (PALs) capped at 28% APR by federal rule.
Payday Loans (Strongly Cautioned Against)
Payday loans are short-term, high-cost advances typically due on your next paycheck. The math is brutal: according to the Consumer Financial Protection Bureau (CFPB, 2024), a $15 fee per $100 borrowed equates to an APR of almost 400 percent on a typical two-week loan.
Many borrowers cannot repay the full balance in two weeks and end up rolling the loan over, accumulating fees that can exceed the original loan amount. Credit unions, nonprofit assistance programs, negotiated payment plans, and even some credit card cash advances typically cost a fraction of what a payday loan does. This category should be treated as a last resort.
Strategies to Improve Your Chances of Approval
Pull your credit reports first. You are entitled to a free report from each of the three major bureaus (Equifax, Experian, TransUnion) through AnnualCreditReport.com. Reviewing your reports before applying helps you understand what lenders will see — and whether any errors need to be challenged before you apply.
Dispute inaccurate items. If you spot late payments that were on time, accounts that are not yours, or outdated negative marks, those items can be formally challenged under the Fair Credit Reporting Act (FCRA). Credit Saint’s team handles every step of the dispute process on your behalf, which may help surface a more accurate credit profile before you apply for a loan.
Bring a co-signer. Adding a creditworthy co-signer to your application dramatically changes how lenders view the file.
Offer collateral. A secured loan structure is often the difference between a “no” and a workable approval at a tolerable rate.
Document stable income. Pay stubs, tax returns, and proof of consistent direct deposits help lenders see repayment capacity even when the score is weak.
Shop multiple lenders. Credit unions, online lenders, and community banks each use different underwriting criteria. Most allow pre-qualification with a soft credit pull that does not affect your score.
Lower your debt-to-income ratio (DTI). Paying down existing balances, especially revolving credit card debt, improves how much new debt a lender is willing to extend.
How to Spot and Avoid Predatory Lenders
When credit is tight, lenders who prey on urgency get bolder. Watch for these warning signs:
Legitimate lender
Red flags to avoid
Discloses APR, fees, and terms in writing before you sign
Guarantees approval without a credit check
Licensed to lend in your state
Pressures you to commit immediately
Clear origination fees and payoff terms
Asks for upfront fees before funding
Does not require giving up sensitive access (bank login, car title for a small loan)
Adds undisclosed fees after contract signing
If a lender’s offer feels off, it usually is. Walking away from a predatory loan is almost always the better financial decision, even if it means delaying your plans by a few weeks to explore other options.
Considerations Before Taking a Bad Credit Loan
Total cost of borrowing: The sticker rate is only part of the picture. Factor in origination fees, prepayment penalties, and any insurance add-ons to understand the true cost.
Monthly payment reality check: Can this payment fit into your actual budget, not just your projected one? A missed payment can worsen your credit situation significantly.
Impact on your credit profile: On-time payments on a new loan can help rebuild your score over time; late or missed payments will damage it further.
Alternatives worth exploring first: Credit union payday alternative loans, nonprofit credit counseling, assistance programs, negotiating a payment plan with a creditor, or borrowing from family or friends may all cost less than a bad-credit loan.
How Credit Repair Fits In
For many consumers, the fastest path to better loan terms is not finding a more forgiving lender — it is correcting the credit reports lenders are reading. Under the FCRA, you have the right to dispute any item that appears inaccurate, incomplete, or unverifiable.
Credit Saint’s team reviews all three of your credit reports, identifies items that may be eligible for dispute, and challenges them with the credit bureaus and data furnishers on your behalf. We handle every step of the process under the framework set by the Credit Repair Organizations Act (CROA). Credit Saint has been in business for more than 19 years, holds an A rating with the Better Business Bureau, and offers a 90-day money-back guarantee: if no negative items are removed from your credit reports during the first 90 days of active work, you can request a full refund.
If inaccurate items are affecting your score before you apply for a loan, Credit Saint’s team may be able to help. Get a free credit consultation and find out what options may be available for your specific situation.
Frequently Asked Questions
On the FICO scale, 580–669 is classified as Fair and anything below 580 is Poor. Most traditional lenders treat FICO scores under 670 as “bad credit” for prime loan products, though credit unions and some online lenders have more flexible thresholds.
It is possible, but the realistic options are secured loans, co-signed loans, or credit builder loans. A score of 500 is in the Poor FICO range, so expect higher rates, lower loan amounts, and stricter terms. Traditional unsecured personal loans are generally difficult to obtain at that score level.
For consumers looking to establish or rebuild a credit history, credit builder loans can be valuable. Because the loan amount sits in a savings account while you pay, you build both on-time payment history and a small savings cushion. They are commonly available through credit unions and community banks.
Realistic alternatives include federally capped payday alternative loans (PALs) from credit unions, small secured personal loans, negotiating a payment plan with the creditor behind the bill, nonprofit credit counseling, and borrowing from family. Even a credit card cash advance is typically far cheaper than a payday loan’s roughly 400 percent APR.
Most lenders offer pre-qualification with a soft credit pull that does not affect your score. A hard inquiry (a formal application) can lower your score by a few points, but multiple hard inquiries for the same type of loan within a short window — typically 14 to 45 days — are usually counted as a single inquiry by modern scoring models.
If your credit reports contain inaccurate or unverifiable negative items, those items may be holding your score down and driving up the rates lenders quote you. Credit repair challenges those items through the dispute process established under the FCRA. When questionable items are successfully corrected, your credit profile can reflect your actual credit behavior — which may lead to better loan terms.
Ready to take the next step? Start with a free credit consultation and find out what Credit Saint’s team may be able to do for your specific situation.
Reviewed By:
Ashley Davison
Editor
Ashley is currently the Chief Compliance Officer for Credit Saint, previously the Chief Operating Officer. Ashley got into the Financial world by working as a Logistics Coordinator at Ernst & Young. Coming from a previous career in education, she is eager to teach the world everything she knows and learn everything that she doesn’t! Ashley is a FICO® certified professional, a Board Certified Credit Consultant, a Certified Credit Score Consultant with the Credit Consultants Association of America, UDAAP certified, and holds a Fair Credit Reporting Act (FCRA) Compliance Certificate.
