Overall, around one-quarter of Americans have credit scores in the 300 to 649 range. Generally, that means lenders view them as having poor credit. Among individuals with poor credit scores, around 74% said in a LendingTree survey that their credit scores prevented them from accessing financial products. As a result, aspiring borrowers in that group often look to loans for bad credit borrowers as a potential solution.
Bad credit loans are explicitly designed with borrowers who have poor credit histories in mind. While the market is reasonably large, not all lenders in this category are considered equal. Here’s a look at some of the best loans for bad credit in 2023.
Rocket Loans
Generally, the minimum credit score at Rocket Loans is in the 610 to 640 range, depending on other factors. Additionally, same-day funding is possible in some cases, which can be beneficial during an emergency. You can also get an interest rate discount if you select autopay, which can save you a significant amount of money over the life of the loan.
However, the origination fees are a bit high with Rocket Loans, and there aren’t many different loan terms available. Additionally, you won’t find any ability to add a co-signer or have a joint account.
Avant
Most of the borrowers that get approved for a loan by Avant have credit scores in the 600 to 700 range, though it’s possible to qualify with a lower score in some cases. The company offers both secured and unsecured loan options, which can improve accessibility for borrowers with bad credit or may lead to a better interest rate.
While the starting APR isn’t ideal for borrowers with excellent credit, as it’s higher than many alternatives, it’s competitive for those with bad credit. Just keep in mind that there’s an upfront administrative fee and that co-signer options aren’t available.
Upstart
When it comes to loans for bad credit, Upstart is a solid choice. The company only requires a credit score of 300, which means anyone with enough credit history to end up with a score is potentially eligible. However, there are many other requirements, such as a 45% or 50% debt-to-income ratio (not including mortgage or rent payments) depending on where you live, no reported bankruptcies in the past 12 months, and more.
Upstart also lets you perform a soft credit check — which doesn’t negatively impact your score — to determine if you potentially qualify before moving forward. You can also select your own preferred payment due date. However, the origination fees are high, and there are no secured or co-signer options, so keep that in mind.
Tips for Comparing Lenders
Generally, when you’re comparing lenders, start by examining each lender’s reputation. Being known for providing exceptional customer service and not pulling tricks matters, as it enhances your experience.
Next, compare the various costs associated with the loan. Interest rates, origination fees, prepayment penalties, and similar expenses add up quickly. By looking at them collectively, it’s easier to determine which lender is genuinely offering you the best deal.
Finally, consider a lender that reports to all three credit bureaus. That way, any positive borrowing activity — such as making ongoing on-time payments — can boost your score across the board.
