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If you have a bad credit score, you might believe you’re out of options when money is tight — but that doesn’t have to be the case.

You’re not relegated to predatory payday loans and high-interest credit cards. Lots of lenders have options that let you borrow money through personal loans at relatively low cost — some of them even cater specifically to borrowers with low or no credit scores.

In this guide, we share some of the best bad credit loans available for all types of financial situations. Compare your options to see potential interest rates, loan amounts, credit scores and repayment terms — and keep an eye out for lenders with alternative assessment criteria that could help you get approved.

Types of Loans for Bad Credit

Often, the loans and credit available to borrowers with bad credit are less abundant than those for borrowers with good or excellent credit. But you do have options!

Look into these types of loans for bad credit:

Debt consolidation loan. This is a type of personal loan where the loan proceeds go to your creditors instead of directly to you. Debt consolidation or refinancing is a way to pay off high-interest debt like credit cards and pare down your monthly obligations to a single payment. Secured loan. A secured personal loan is one where you put up collateral, like a car (title), boat, jewelry or something else of value. If you don’t repay the loan on time, the lender will own the collateral. These types of loans are usually easier to get when you have bad credit, because your collateral reduces the lender’s risk of losing money if you don’t repay. Unsecured loan. An unsecured personal loan is one without collateral to back it. Typical lenders require good or excellent credit for an unsecured loan, but the lenders in this list make these loans available to borrowers with lower credit scores. Home equity loans. If you have a low credit score but you’ve paid off a lot (or all) of the mortgage for a home you own, you could take out a loan based on how much your home is worth. These loans tend to come relatively easily, because they’re backed by your home, which is an incredibly valuable asset. Credit builder loans. These loans, from lenders like SeedFi, may be structured as personal loans or something else, but they function similarly. They often come in low amounts so you have low monthly payments, and part of the loan might be withheld in a savings account as collateral until you repay. Payday loans. If you can’t qualify for a traditional personal loan, payday lenders are lying in wait to get you money in an emergency. Payday loans are meant to carry you between paychecks, and you qualify based on your expected income rather than your credit score. They come with effective interest rates of around 400% — or about $15 to $10 for every $100 you borrow — which can compound quickly if you’re unable to repay within two weeks.

Loan Risks to Consider

When you take out a personal loan for any reason, consider the potential risks in two main categories: the cost to you and the effect on your credit score.

The main cost you’ll pay on a loan is the interest, but look out for all these common costs:

APR. Annual percentage rate is the annualized amount you’ll pay over the amount of your loan. Bad credit personal loan rates tend to fall between 9% and 35%. The lower your credit score and the longer your repayment period, the higher your rate will likely be. Origination fees. Most lenders charge a fee out of your loan right up front, typically as a percentage of the loan amount. An origination fee could lop off around 2% or 3% of your loan before you receive it, so count that in when you figure out how much to borrow. Late fees. If any monthly payment is late, some lenders charge a late fee that’s a percentage of the payment due or a flat fee. Those fees get added to your loan balance and then accrue interest, so they can add up over time. Prepayment penalties. Some lenders charge you a fee if you repay ahead of schedule. This is as silly as it sounds, so it’s becoming pretty rare. But it’s an option, so keep an eye out for prepayment fees in your loan agreement, and plan your repayment accordingly.

Taking out a personal loan can affect your credit score in these major ways:

Application for credit. When you apply for credit — a loan, a new credit card, a mortgage, etc. — lenders typically report the request to credit bureaus. Any request for credit can briefly knock your credit score down, and multiple requests in a short period can have a serious impact in the short term (because lenders don’t want to lend to someone taking on a bunch of debt all at once). A soft credit check for prequalification doesn’t get reported, so comparing rates doesn’t hurt your score. Debt-to-income ratio. Your monthly loan payment gets added to your debt-to-income ratio (DTI), the difference between how much you make each month and how much you owe in debt payments. A high DTI, above 35% to 45%, can hurt your ability to get additional credit or loans, including a mortgage. Payment history. Make on-time payments, and your credit score will likely improve! Just make sure the lender reports payments to all three credit bureaus (they usually mention that on their site or in their FAQs, or you can ask customer service). If you make late payments or don’t repay the loan in full, that’ll be a negative mark on your credit report.

Who Can Take out a Loan With Bad Credit?

Many lenders have a minimum credit score requirement, but your score isn’t the only factor that determines your eligibility for a loan. You may be able to take out a loan with bad credit if any of these factors are favorable:

Minimum credit history. Lenders might have a low or no credit score requirement, but they could still have a minimum credit history — how long you’ve had activity on your credit report. The minimum is usually three years, but consult each lender to learn theirs. Debt-to-income ratio. Lenders consider the other debt you’re repaying when assessing your ability to repay their loan. Your DTI tells them how much room you have to add an extra debt payment to your bills each month. Income. With any credit score, lenders look for a stable source of regular income to make sure you have a way to make monthly payments. This number could be even more important if you have a low credit score, because some lenders lean more heavily on this factor to determine your eligibility. Education. Some lenders look at your education to assess the likelihood you’ll earn the money necessary to repay a loan. This can be especially helpful for recent grads with a short credit history or no credit score. Bill pay history. Companies often report delinquent bills to credit bureaus, which are reflected in your credit score. But a positive payment history for everyday bills and rent don’t traditionally help your score. Some lenders use alternative assessment methods that include positive payment history, and you can sign up for third-party platforms that’ll report your history to credit bureaus to help your score.

How to Get a Loan If You Have Bad Credit

Follow these steps to get a personal loan with a low credit score:

Consider your options. Ask whether a personal is the best way to cover your costs. Maybe you could avoid the debt and instead delay the purchase or negotiate an expense you’re facing. Review your finances. When you review loan offers, you’ll want to know what you can comfortably pay each month for a few years. Check your credit score. Applying for a loan dings your credit report, so you don’t want to apply for loans you aren’t confident you’ll qualify for. Check your score first, then find lenders that match your situation. Compare lenders. Check reviews like this to compare loan offers side by side. This lets you see lender options and requirements to find the ones that align with your needs. Get pre-qualified. This is how you find out whether you’re likely to get accepted by a specific lender based on your specific financial information. Give a little information to go through a soft credit check that won’t affect your score, and see pre-qualified offers. Then you can decide whether it’s worth applying in full. Review the loan details. Before you put in an official application, check the details of the offer carefully. Do the repayment period and monthly payment fit with your financial plan? Complete an application. Once you choose a loan, fill out an application with the lender. They’ll do a hard credit check and — if you were accurate and honest on the initial check — likely approve you for the loan. Receive the funds. If you’re using a loan to pay off debts, the funds usually go directly to your other lenders. If you’re getting funds for yourself, they’ll be deposited directly into your bank account, usually within one to three business days with online lenders. Set up a payment plan. Stay on top of payments, and this loan can help you improve your credit score. If it fits your circumstances, set up automatic payments, which can help you pay on time and usually comes with an interest rate discount. If you’re paying back other debts at the same time, use a repayment method like the debt snowball or avalanche to determine where to direct your money whenever you’ve got extra to put toward your financial goals.

Where to Get a Bad Credit Loan

You don’t have to rely on the bank down the block. You can find a bad credit loan through several types of platforms, including:

Banks and credit unions. Institutions in your town or online could make personal loans and let you keep all of your finances in one place, including banking, credit cards, investing, loans and insurance. Online lenders. These companies (all of the lenders in our list above) usually only offer loans and credit but not other banking or financial services — though there are some exceptions that focus on lending but also offer other services. Marketplaces. Online marketplaces like Fiona, AmOnee or OppLoans aggregate offers for all types of loans and credit cards so you can see pre-approved rates with a single soft credit check. They often work with partner lenders that prefer good or excellent credit borrowers, so you might come up with nothing if you have a low credit score. But they can be a way to quickly assess your options without checking a bunch of lender sites.

Frequently Asked Questions (FAQs) About Getting a Bad Credit Loan

Contributor Dana Miranda is a Certified Educator in Personal Finance® who has written about work and money for publications including Forbes, The New York Times, CNBC, Insider, NextAdvisor and Inc. Magazine. 

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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