If you have poor, bad, or damaged credit, it can be difficult to find a personal loan that will work for you. This is a real problem. There are a lot of companies out there but not all of them would be good to work with. So, I am going to walk you through the best personal loan companies for people with bad credit.
Note, all of these companies are high cost lenders. Before borrowing from any of them, you should shop around for a lower cost. Also, make sure you understand the total cost of borrowing before you take any loan.
Challenges of borrowing when you have bad credit
Before I get into the best lenders, I do need to give you a little background on personal loans for people with bad credit.
State regulations
Many of the companies that lend to people with bad credit do so under state regulations. Very few offer loans through a bank partner. That means that what you can borrow will depend on which state you live in. Your state will also impact the cost of the loans and the kinds of fees that can be charged.
Bad credit loan amounts
In this part of the lending market, the amount you need to borrow can also have huge implications on the kind of loan you can get…and how much that loan would cost you. For instance, if you are looking for a small-dollar loan–say, something under $500–the APR can be 2, 3, or 4 times higher than for larger loans. That is a very different kind of loan than if you need a $2,000 loan over 3 years. For short-term lending, pay close attention to the total interest paid and not just the APR.
Cost of personal loans for bad credit
Personal loans for people with bad credit can be very expensive. Why? Well, they have to compensate for people who default on their loans. The truth is that a vast majority of borrowers will not default and will pay off their loans. But even a small percentage of people defaulting creates heavy cost to the lender which must be balanced by the cost of the loan. If the lender could predict who will repay the loan and who won’t, they could lower the price for everyone. But, that is much harder to do than it sounds.
People with bad credit are the most vulnerable to bad loans. Don’t take the first loan you apply for. Shop around! Every lender has a different criteria for deciding who to lend to. You can check up to 40 lenders at once at TheYukonProject. Pick a lender and apply. We will check your rates with other lenders and then bring you the best offers we can get for you.
What is “Bad Credit”
“Bad credit” is a broad term that doesn’t have a literal definition. Most people use this as a way to say you’ve had some credit issues in the past. But that doesn’t always mean you have bad credit. For the purposes of this article, bad credit can be considered a credit score less than 620 and does not include people with no credit score. Often, people credit score above 620 will likely find a lender with rates better than any of those listed below. Having a credit score below 620 does not mean you cannot find a better loan than those below, and you should still look. These lenders are the ones I think are the best at lending only to be people with bad credit.
Online lenders for people with bad credit
Let’s start with online-only lenders:
NetCredit
NetCredit offers unsecured loans up to $10,000 and for as long as 5 years. Their interest rates cap out at 100%, which is still pretty high. That interest rate is pretty punishing if you hold a loan for several years. NetCredit charges a 1-5% origination fee and charges fees on late payments.
Opploans
Opploans offers unsecured loans up to about $4000. Their interest rates are over 160%, but their loans are only designed to last 6-18 months. So, that interest rate will feel rough for the first several months, but if you make your payments or make extra payments, you should be able to get free of the loan before too long. They don’t charge any other fees like origination fees or even late fees.
Rise Credit
Rise offers loans for up to 3 years an a maximum amount of $5,000, although new customers are unlikely to be approved for that top amount. Rise’s top interest rate is an eye-watering 299%, but also has ways for customers to lower their interest rate over time. Their lowest interest rate is one of the lowest in the bad credit space. They don’t charge origination or late fees.
Storefront lenders for people with bad credit
There is another group of lenders who have store fronts. They have a slightly different business model that allows for a lower interest rate, but often makes additional money selling add-on services. So, the APR looks lower, but the cost of the loan may still be high.
One Main Financial
One Main has the lowest stated APR of any of the companies on this list. That’s a good thing, of course, but there is a lot to be cautious of with them. They are not transparent with their fees. They often try to upsell you and you must complete your loan in person. They can have intrusive collections practices. Perhaps the biggest concern that I have with One Main is that you might need to put up your motor vehicle as collateral to get a loan.
World Finance
World Finance has a lower APR, but they have a half a dozen different kinds of credit insurance they will push you to buy. For them, it just raises revenue because only a small portion of the money they collect on insurance premiums are ever issued as claims. They are not transparent about the cost of their loans and only tell you what it will cost after you apply. Over 70% of their loans are just refinanced loans to existing customers. So, beware that it is clearly harder to pay off than it looks.
Advance America
Advance America has one of the highest stated APRs of any lenders on this list. They lend up to $3,000, but only do so for very short periods, like six months. As a company, they were once payday lenders, but have branched out a bit. You have to be really careful that you would actually be able to pay off the loan in the time period. Otherwise, you may need to roll over the loan and then the costs get out of hand quickly.
Conclusion
These are the best lenders for people with bad credit. But, the best lender for you will depend on the terms offered. Always apply to more than one lender. And, if you have damaged credit, consider other ways to clear your current financial hurdle. If you can negotiate payment terms for other bills, it may be a much better solution for you.
