How to get a loan with bad credit

Having bad credit doesn’t automatically rule out every loan option. Many lenders consider more than your credit score, and some loans are designed for people with bad credit or limited credit history.

A loan that fits your budget may help address a financial need. Understanding your options can support an informed borrowing decision.

Here’s what to know about available loans, what lenders consider and how to prepare.

Can you get a loan with bad credit or no credit history?

Some borrowers with bad credit or limited credit history may qualify for certain loans, depending on the lender’s requirements and their overall financial profile.

Bad credit can result from factors such as missed payments or high debt, while having little or no credit history means there’s limited borrowing history to evaluate. Either way, options may include credit union loans, secured loans and co-signed applications.

Understanding credit score ranges

Knowing your credit score can help you understand your loan options. Credit scoring models vary, but FICO® Scores are widely used by lenders. The table below shows FICO’s score ranges and rating categories.

In general, higher credit scores can make it easier to qualify for loans and may help you get lower interest rates. Some lenders also have a minimum credit score requirement, but standards vary.

How bad credit can affect loan costs and approval odds

Bad credit can affect whether you’re approved for a loan and how much it costs to borrow. You may still qualify, but lenders may look more closely at your finances and charge a higher interest rate.

A higher interest rate can increase both your monthly payment and the total interest you pay. For example, a $10,000 personal loan with a 3-year term and a 10% annual percentage rate (APR) might have a monthly payment of about $323 and cost about $1,616 in total interest. The same loan with a 29% APR could have a monthly payment of about $419 and cost about $5,086 in total interest.

What do lenders consider besides your credit score?

Besides your credit score, lenders may also consider your income, debt-to-income (DTI) ratio and banking history when reviewing your application.

Income and employment stability

A steady income can show lenders that you can keep up with loan payments, even if your credit history isn’t perfect. Many lenders ask for pay stubs, W-2s or proof of other income, such as retirement pay or disability benefits. A stable job or steady self-employment income can also strengthen your application.

Debt-to-income ratio

Your DTI compares your monthly debt payments with your monthly income. A lower DTI usually works in your favor because it shows lenders you can more easily afford a new loan payment. Paying down debt before applying can improve your DTI and strengthen your application. For more tips, see our guide to managing debt with poor credit.

Banking relationships and other factors

Some lenders may consider account history or an existing relationship with a bank or credit union, which can help your approval odds, but how much those factors matter varies by lender. They may look at your account activity, average balances or length of your banking relationship. Every lender weighs these factors differently, so requirements vary.

What loan options are available if you have bad credit or no credit history?

You may have more loan options than you think. Options could include personal loans, secured loans, debt consolidation loans, co-signed loans and military-specific programs. Understanding the pros and cons of each can help you compare your choices.

Personal loans from banks, credit unions and online lenders

Personal loans may be an option for borrowers with lower credit scores, although eligibility and loan terms vary by lender and individual circumstances. Some lenders may consider your income, banking history and employment in addition to your credit score.

Pros:

• Funds can be used for many purposes, such as paying off debt, covering emergency expenses and paying for a major purchase.
• Fixed monthly payments can make budgeting easier.
• On-time payments may help you build credit over time.

Cons:

• Bad credit may limit your loan amount.
• High borrowing costs.
• Missing payments can further damage your credit and affect future borrowing options.

Secured loans

A secured loan uses something you own, such as a savings account or vehicle, as collateral for the loan. Collateral may affect a lender’s approval decision and pricing. Depending on the lender, the asset and your application, a secured loan may be available at a lower rate than an unsecured loan.

Pros:

• Using collateral may improve your chances of approval.
• Because collateral reduces the lender’s risk, you may qualify for a lower interest rate.
• You may be able to borrow a larger amount.

Cons:

• You could lose the asset used as collateral if you don’t repay the loan.
• The amount you can borrow may depend on the value of the collateral.
• Not all borrowers have an eligible asset to use as collateral.

Co-signed and joint loans

A co-signer or joint borrower may strengthen your application by adding their income, credit history or both. Their roles can differ: A co-signer generally agrees to repay the loan if the primary borrower doesn’t. Joint borrowers apply for the loan together and share responsibility for repayment. Review the lender’s terms to understand each person’s responsibilities before signing.

Pros:

• A stronger application may improve your chances of approval.
• Additional income may help you qualify for a larger loan amount.
• Payment activity may affect the credit of each person obligated on the loan.

Cons:

• Each person may be responsible for repayment, depending on the loan agreement.
• Missed payments may affect the credit of the borrower and any co-signer or guarantor, depending on how the loan is reported to the credit bureaus.
• Financial disagreements can strain personal relationships.

Debt consolidation loans

A debt consolidation loan combines multiple debts into one monthly payment. This can simplify your finances and may lower your monthly payment. Before consolidating, use a debt consolidation calculator to estimate monthly payments and compare total borrowing costs.

Pros:

• A fixed payment schedule can make budgeting easier.
• Fewer payment due dates can reduce the chance of missing payments.
• Consolidating may lower your monthly payment.

Cons:

• A longer repayment term may increase the total interest paid.
• Savings depend on the new loan’s rate and terms.
• A debt consolidation loan doesn't reduce the amount you owe on its own.

Military-specific loan options, including VA loans

Servicemembers, Veterans and military families may have access to loan options designed for military life. VA loans often offer competitive rates and no down payment for eligible homebuyers. Active Duty Servicemembers and their dependents may qualify for Military Lending Act protections.

Pros:

• Competitive rates may be available for eligible borrowers.
• No down payment may be required for eligible VA loan borrowers.
• Military borrowers may qualify for special protections under the Military Lending Act.

Cons:

• Eligibility requirements apply to military-specific loan programs.
• Not all Servicemembers, Veterans or family members qualify for every program.
• You may need to provide military service records or other documentation to verify eligibility.

3 steps to take before applying for a loan

Before you apply, review your credit, gather financial documents and compare loan offers. These steps can help improve your approval odds.

1. Check your credit report and fix errors

You can check your credit report for free at AnnualCreditReport.com. Reviewing it before you apply can help you identify and correct errors.

Common errors include accounts that aren’t yours, incorrect balances or payments marked late by mistake. If you spot an error, you can dispute it directly with the credit bureau. Fixing errors may help improve your credit before you apply.

2. Gather proof of income and financial information

Most lenders ask for proof of income during the application process. This often includes pay stubs and W-2s.

If you have other income, such as retirement pay, disability benefits or self-employment earnings, gather that documentation, too. Having documents ready can speed up the application process.

3. Use prequalification tools to compare loan offers

Many lenders offer prequalification tools that use a soft credit check to show potential rates and terms. Before proceeding, confirm whether the lender will use a soft or hard credit inquiry. Because a soft credit check doesn’t affect your credit score, you can compare offers from multiple lenders.

Comparing prequalification results can help you find a loan that may be right for you before you apply. Keep in mind that prequalification is different from a loan application.

A formal application may involve a hard credit inquiry, which can affect your credit score. The impact varies by scoring model and credit profile. If you’re considering a Navy Federal Credit Union credit card, you can check whether you prequalify.

How can you improve your loan approval odds?

You can improve your loan approval odds by focusing on a few key factors. Reducing debt, borrowing only what you need, maintaining a steady income and considering a co-signer or co-borrower can help strengthen your application.

Reduce debt when possible

Paying down balances, even a little, can lower your debt-to-income ratio. If you’re carrying credit card balances, start with the highest-interest ones. Small, consistent payments can make a difference over time.

Demonstrate stable income and ability to repay

A steady income can help strengthen your loan application. Lenders often consider your income, employment history and debt. Having proof of income ready can make the process easier.

Borrow only what you need

It can be tempting to apply for a larger loan amount. But borrowing only what you need may improve your approval odds and make the loan easier to repay. Before applying, calculate exactly how much you need rather than rounding up “just in case.”

Consider applying with another person

Depending on the lender and type of loan, applying with a qualified co-borrower or adding a co-signer may help you qualify or obtain better terms. The other person may also become legally responsible for the debt. Because the responsibilities of co-borrowers, co-signers and guarantors can differ, make sure everyone understands their obligations before applying. Late or missed payments may also affect the credit of individuals whose obligation is reported to the credit bureaus.

How to compare loan offers and lenders

Comparing loan offers can help you find a loan that fits your budget. Before you apply, take time to review loan costs and lender requirements.

Comparing loan costs and terms

When comparing offers, look at the APR, any origination fee and the repayment term. The APR includes certain fees, giving you a clearer picture of the loan’s total cost.

When possible, compare prequalified offers because soft credit checks typically won’t affect your credit score. Look beyond the monthly payment. A lower payment could mean a longer repayment term and more interest paid. Compare the total cost of each loan, not just the monthly payment.

Banks vs. credit unions vs. online lenders

Each type of lender has its own strengths. The right choice depends on your borrowing needs and financial goals.

• Credit unions may offer personalized service and flexible terms for members.
• Banks may offer a wide range of loan products, but eligibility and underwriting requirements vary by lender and loan type.
• Online lenders often have fast, convenient application processes and options for borrowers with different credit scores.

Compare multiple offers when possible to find the best fit for your situation.

How to avoid and spot predatory loans

You can avoid predatory loans by learning the warning signs and reviewing loan offers carefully. Comparing lenders and reviewing loan terms can help you avoid costly mistakes.

Red flags that may signal a predatory loan

Review rates, fees and repayment terms carefully. Be cautious of lenders that:

• charge extremely high APRs or excessive fees
• pressure you to borrow or sign quickly
• do not provide clear loan costs or repayment terms
• guarantee approval regardless of your credit history

A reputable lender should give you time to review the terms and ask questions before you decide.

The risks of payday and title loans

Payday loans and title loans may provide quick access to cash, but they often come with very high costs and short repayment periods.

• Payday loans typically require repayment within a few weeks and can be difficult to repay on time.
• Title loans use your vehicle as collateral, which means the lender may repossess your vehicle if you fail to repay the loan as agreed.

Before choosing one of these options, consider alternatives such as personal loans from banks or credit unions, secured loans, or other potentially lower-cost credit options.

Can a loan help you build credit?

If the lender reports the account to the credit bureaus, making on-time loan payments may help you build credit over time. Payment history is one of the most important factors in your credit score.

A strong credit profile may help you qualify for lower rates, higher loan amounts or more favorable terms. However, approval and loan terms depend on the lender’s requirements and your overall financial profile.

A stronger loan application starts here

Getting a loan with bad credit may take extra planning. Focus on affordability and total cost first. If the lender reports the account and you pay as agreed, the loan may also support your credit history over time. Understanding your options and preparing before you apply can improve your chances of approval and help you make a confident decision.

To keep moving forward, use a loan calculator to estimate payments and compare borrowing costs. You can also explore MakingCents credit-building resources and learn more about Navy Federal’s personal loan rates and options.