How to Get a Personal Loan With Bad Credit or No Credit History

Quick answer: with bad credit or no history, your best options are often credit unions, a cosigner or a secured loan. Borrow only what you need, compare the APR and total cost, and avoid payday loans and any lender that asks for money up front.

Needing money with bad credit or no credit history is tough — and that’s exactly where the most expensive loans and scams show up. The good news: there are reasonable options if you know where to look.

First: how expensive is “expensive”?

Many consumer advocates consider a 36% APR the reasonable maximum for a personal loan. Above that, costs skyrocket. Payday loans can exceed 300% or 400% APR. See why to avoid payday loans.

6 ways to get a loan

1. Credit unions

Often the best option with low credit: they look at your full situation (income, membership history), not just your score. Many federal credit unions offer Payday Alternative Loans (PALs), with a maximum APR of 28% (usually after at least a month of membership).

2. A secured loan

You use your savings, a certificate of deposit or your car as collateral. Lower risk means a lower rate. Careful: if you don’t pay, you lose the collateral.

3. A co-signer

Someone with good credit signs with you. It greatly improves your odds and your rate — but if you don’t pay, the debt becomes theirs and hurts their credit.

4. Online lenders for fair credit

Some consider your income, employment or bank activity. Prequalify with several (a soft inquiry that doesn’t affect your score) and compare APR and origination fees.

5. A loan from your own bank

If you’ve had an account for a while and managed it well, your own bank may be more flexible.

6. Alternatives to borrowing

A payment plan with whoever you owe, a pay advance from your employer or community assistance can cost less than any loan.

How to improve your odds

• Borrow only what you need. Smaller amounts are easier to approve.
• Prove your income: pay stubs, bank statements, tax returns.
• Lower your debt-to-income ratio by paying down some card debt before applying.
• Check your credit report and fix errors (how).
• If you can wait, raise your score for a few weeks first (how to raise it fast).

Loans to avoid

• Payday loans: sky-high costs and debt cycles.
• Car title loans: you can lose your car.
• “Guaranteed approval” offers: no legitimate lender guarantees approval without checking anything.
• Anyone asking for an upfront fee to “release” the loan: it’s almost always a scam.

Before you sign

1. Compare the APR (not just the monthly payment).
2. Check the origination fee and whether it’s deducted from the money you receive.
3. Confirm there’s no prepayment penalty.
4. Make sure the payment fits your budget (50/30/20 budget).

If the loan is to pay off cards, also compare a balance transfer or a debt consolidation loan.

What a $2,000 loan costs at different rates

Here’s the same $2,000 loan paid over 12 months at three example APRs:

The higher rate costs about $211 more for the same money. That’s why a few weeks spent comparing lenders or improving your score can pay off. Any origination fee would add to these costs, so always compare the APR.

FAQ

Can I get a loan with no credit history? Yes, though with fewer options. Credit unions, secured loans and co-signers are the most common routes.

Does shopping around for loans lower my score? Prequalification uses soft inquiries, which don’t affect it. Only a formal application creates a hard inquiry.

Can a personal loan improve my credit? Yes, if you always pay on time: it adds positive payment history and a different credit type.

This article is for educational purposes only and is not financial advice. Rates and requirements depend on each lender and your state’s laws. Read our Disclaimer.