Personal Loan Options With Limited Or Bad Credit

Are you a student just starting on your own? Or are you taking steps toward improving your credit? 

Finding a lender that will approve your request for a personal loan can be challenging, but it’s manageable. As a new borrower, you should be mindful of possible limitations, like fewer options, cosigner requirements, or steeper interest rates. However, with a strong plan, you can secure your first personal loan with reasonable terms. explains how.

Best Loan Options For No Credit

You can get be eligible for a broad range of personal loans if you have no credit without waiting to build your history first. Typically, however, lenders often necessitate a consigner, or someone with a good credit history who can cover payments if you are unable. 

Having a cosigner lowers your perceived risk of defaulting on the loan, which raises the likelihood the lender will not only approve your application but possibly extend fair interest rates and terms, too.

But what if you don’t have a cosigner? Then you might consider these alternatives instead. 

Secured Credit Cards

A secured credit card works the same as a regular credit card, but there are a few differences. The main one is that you need to pay an initial deposit to open a secured credit account. This amount varies, but it usually doubles as your credit limit. 

If you use your secured card responsibly, including paying your balance on time and in full every month, the lender may offer an upgrade to an unsecured card. When this happens, you may be able to apply for a personal loan.

Secured credit cards an excellent method to build a credit history, provided you follow the card issuer’s terms. When you pay your monthly balance off, you won’t have to deal with added interest payments, either. 

Credit-Builder Loans

The way credit-builder loans work deviates somewhat from traditional loans. Rather than offering you the money you borrow right away, the lender will hold the funds in a secured savings account. In the meantime, you make monthly installments until you pay the full amount.

While you pay, the lender will report your activity to the three major credit bureaus: Experian, TransUnion, and Equifax. Once you pay the funds in full, the lender will release the money to you. 

Unlike credit cards, you can’t prevent interest from accruing when you have a credit-builder loan. Fortunately, these types of loans generally have lower interest rates versus a personal loan with unfavorable terms.  

Loan Options For Poor Credit

If you have a limited credit history or one that is more established but riddled with negative activity, you might have trouble getting approved for a loan. However, like people with no credit, you still have options. A cosigner is one way to secure a line of credit, but not everyone has this option. 

Payday or auto title loans are two alternatives. They are easy to secure, come with massive interest rates, and only give you a short time to pay back the funds. Payday lenders are infamous for their predatory practices. It’s best to avoid these types of loans, no matter how badly you may need one. It’s never worth getting trapped in a cycle of debt.

Experian suggests the following options instead.

No-Credit-Check Personal Loans

Several online and physical financial institutions provide personal loans without requiring a hard credit inquiry. These places typically assess other information besides your credit score, like your bank account activity, to evaluate your ability to repay the funds you borrow.

Keep in mind, though, that these types of loans may come with interest rates in the triple-digits. While steep, it’s nothing like the rates you would have to pay on a payday or auto title loan. Make sure you do your homework when comparing lenders to find the best offer for your needs.

Payday Alternative Loans

Some credit unions offer payday alternative loans (PALs), which have shorter term limits, lower interest rates, and favorable repayment conditions than standard payday loans. These loans can be as small as $200 or up to $1,000, with repayment terms between one to six months. Additionally, the APR typically caps at 28%. 

To get a PAL, though, you must first join the credit union and possibly build a savings fund before you can apply. Because of this, a PAL may not be the right option if you need financing immediately. Check with credit unions in your area and ask what requirements you need to meet qualify for one.


  • Luthi, Ben. “How to Qualify for a Loan When You’re New to Credit.” Experian, Experian, 22 July 2020,