Getting a personal loan with bad credit in the USA can feel challenging, but it’s not impossible. Many lenders now provide flexible options for borrowers with less-than-perfect credit scores. In this detailed guide, we’ll explain how you can qualify for a personal loan, what lenders look for, the best loan options available in 2025, and strategies to improve your chances of approval.

What is Considered Bad Credit?
Credit scores in the USA are typically measured using the FICO Score system (ranging from 300 to 850).
- Excellent Credit: 750 – 850
- Good Credit: 700 – 749
- Fair Credit: 640 – 699
- Bad Credit: 300 – 639
If your score falls below 640, most traditional banks may consider you a risky borrower. However, alternative lenders, credit unions, and online loan providers offer solutions for individuals in this range.
Steps to Get a Personal Loan with Bad Credit
1. Check Your Credit Report
- Obtain a free credit report from AnnualCreditReport.com.
- Review for errors or inaccuracies that might be lowering your score.
- Dispute incorrect information to improve your score quickly.
2. Evaluate Your Financial Situation
- Calculate how much you need to borrow.
- Check your income, monthly expenses, and debt-to-income (DTI) ratio.
- Lenders prefer DTI below 40%.
3. Research Lenders Who Accept Bad Credit
- Not all lenders are strict about credit scores.
- Focus on credit unions, online lenders, and peer-to-peer platforms.
4. Consider a Co-Signer
- A co-signer with good credit can boost approval chances.
- However, both you and the co-signer are responsible for repayment.
5. Offer Collateral
- Secured loans use assets like a car or savings account as security.
- These loans often come with lower interest rates even for bad credit borrowers.
6. Prequalify Before Applying
- Many online lenders allow you to check eligibility with a soft credit check.
- This avoids hurting your score with multiple hard inquiries.
Best Loan Options for Bad Credit Borrowers in 2025
1. Upstart
- Uses AI and alternative data (employment, education, income) for approval.
- Loan Amounts: $1,000 – $50,000
- APR Range: 6% – 35.99%
- Best For: Borrowers with limited or poor credit history.
2. Avant
- Designed for fair-to-bad credit borrowers.
- Loan Amounts: $2,000 – $35,000
- APR Range: 9.95% – 35.99%
- Best For: Flexible repayment options.
3. LendingClub
- Peer-to-peer lending platform.
- Loan Amounts: $1,000 – $40,000
- APR Range: 8.3% – 36%
- Best For: Consolidating debt.
4. OneMain Financial
- Offers secured and unsecured personal loans.
- Loan Amounts: $1,500 – $20,000
- APR Range: 18% – 35.99%
- Best For: In-person support via physical branches.
5. Oportun
- Focuses on helping underserved communities.
- Loan Amounts: $300 – $10,000
- APR Range: 12% – 35%
- Best For: Small loans and first-time borrowers.
Tips to Improve Loan Approval Chances
- Improve Your Credit Score: Pay bills on time, reduce debt, and fix errors.
- Apply for Smaller Loan Amounts: Easier approval with lower risk.
- Show Stable Income: Lenders want assurance of repayment ability.
- Avoid Multiple Applications: Too many hard inquiries can drop your score.
Alternatives to Personal Loans
- Credit Builder Loans – Offered by credit unions to improve your score.
- Payday Alternative Loans (PALs) – Small, short-term loans from credit unions.
- Borrowing from Family/Friends – Zero interest but should be documented.
- Using a Secured Credit Card – Helps rebuild credit for future loan eligibility.
Risks of Bad Credit Loans
- Higher interest rates compared to prime borrowers.
- Shorter repayment terms.
- Risk of predatory lenders—always verify lender legitimacy.
Conclusion
While having bad credit can limit your options, it doesn’t mean you can’t get a personal loan in the USA. By choosing reputable lenders like Upstart, Avant, or LendingClub, considering secured loans, or applying with a co-signer, you can increase your chances of approval. Most importantly, use the loan responsibly and work toward rebuilding your credit score for better opportunities in the future.