The Best Personal Loans for a Credit Score of 580 or Lower

Nearly 15% of Americans have bad credit (a FICO Score below 580), according to credit reporting bureau Experian.

A low credit score can keep you from getting approved for a traditional loan or receiving favorable rates. But there are lenders who will work with borrowers with weak credit, especially credit unions and online companies.

CNBC Select has named the best lenders for applicants with a credit score of 580 or below, based on rates, terms, fees, flexible repayment options and other factors. For more about how we made our choices, read our methodology below.

Who’s this for? Upstart approves borrowers with credit scores as low as 300 (the lowest possible), as well as applicants with no credit history. The AI-driven platform considers factors beyond credit, including education, employment and income.

Standout benefits: You can apply for as little as $1,000 or as much as $75,000. While there are origination and late fees, there is no prepayment penalty.

Who’s this for? Part of Upgrade, Universal Credit is one of the few lenders that approve personal loans for business purposes. It’s a great fit for cash-strapped entrepreneurs who can’t qualify for a standard business loan.

Standout benefits: Universal Credit approves loans of up to $50,000 and offers terms of 36 to 60 months.

Who’s this for? If you need money in a pinch, Avant‘s easy online application lets you get funding as early as the next business day.

Standout benefits: If you’re facing financial hardship, Avant may temporarily lower your interest rate for 3 to 12 months.

Who’s this for? While most lenders start at $1,000 or more, Oportun approves loans for as little as $300, making it ideal for borrowers who don’t need much.

Standout benefits: Oportun accepts low-income and no-credit borrowers, with secured loan options in some states. Its online application only takes about ten minutes and you can pre-qualify with a soft credit check.

• Get prequalified: Getting prequalified gives you a good idea of whether a lender will approve you for a loan and the rate they’d offer you, without damaging your credit score. You’ll need to provide basic personal and financial information, including your full name, Social Security number, address, income and the desired loan amount.
• Consider alternative lenders: Fintechs, credit unions and peer-to-peer platforms like LendingClub and Prosper are often more willing to work with a borrower with poor credit.
• Add a co-signer or co-borrower: If someone has good credit and is willing, you can ask them to be a co-signer or co-borrower on your loan. Both agree to repay the loan if you default, but co-borrowers have access to the funds and loan payment information.
• Use collateral: Some lenders will approve a loan if it’s secured by assets like a car or home. They can claim those assets if you default, however, making secured personal loans more risky.
• List additional income: Lenders can allow you to add non-employment income on your application, such as Social Security payments, alimony or child support. A higher income will improve your chances of getting approved.
• Request a smaller loan amount: If your credit score is too low for a larger loan, consider asking for less or applying for a credit-builder loan.

It’s easy to focus on your monthly payment, but look at the annual percentage rates (APRs) lenders are offering, too. That includes fees and is a better indicator of the true cost of borrowing for the year. Try to get the lowest APR possible, ideally below 30%.

Check for hidden fees

Not all lenders list fees on their website, but you should get a detailed rundown before agreeing to any loan. They can significantly increase the amount you repay overall, so always ask for the total cost of the loan (not just the interest) and compare with other lenders.

Common fees include:

• Application fee: While uncommon, a lender may charge a fee just to review your application, even if you are ultimately turned down.
• Origination fee: This fee covers administrative, processing and underwriting costs associated with the loan, usually 1% to 10% (although for borrowers with bad credit, it may be as high as 12%).
• Late payment fee: Depending on the lender, this may be a flat rate (usually $5 to $30) or a percentage of the amount owed (often 3% to 5%). There may be a grace period of 7 to 15 days before the late fee is assessed and your credit score is impacted.
• Prepayment penalty: Some lenders will tack on a charge if you pay the loan off early because you’re depriving them of additional interest. A prepayment fee can be a flat dollar amount, a percentage of your loan balance or the amount of interest you would have paid.

See what loan terms you’re offered

A longer term means smaller monthly payments, which may seem more manageable. But you’ll pay much more in interest in the long run. A shorter term means larger monthly payments, but it will lower the overall cost of borrowing.

People with bad credit are usually offered shorter terms so they can repay faster and reduce the odds they’ll default. You may be offered a longer term, however,  so that the monthly payments look more manageable. Keep in mind that will make it much more expensive in the long run.

Consider the lender’s reputation

If you’re in a financial jam, especially if you have bad credit, it may be tempting to take the first offer you’re given. But you could end up paying for it, literally and metaphorically, for years to come.  Predatory lenders may disguise high rates and fees, pressure you to sign immediately, or guarantee approval without running a credit check.

Look for FDIC-approved lenders that clearly outline APR and fees, have solid third-party reviews and positive Better Business Bureau scores. You may also want to check for judgments and regulatory complaints with the Consumer Financial Protection Bureau.

1. Check your credit history. Get a copy of your credit score and credit report to see exactly where you stand and to look for any errors or signs of identity theft that may be skewing your score.
2. Compare lenders. Many lenders offer prequalification, letting you know whether you’re a good candidate for approval without a hard credit pull. Loan clearinghouses like Upstart or LendingTree allow you to view multiple offers at once.
3. Decide on the best offer. Pick the lender with the best interest rate, monthly payment and timeline for your budget. Be sure to consider how much the loan will cost you over the full term.
4. Submit your application and wait for approval. Have your Social Security number, bank statements, pay stubs and other supporting documents ready. Approval could take just a few minutes up to 10 days, depending on the lender and your circumstances. To expedite the process, apply during normal business hours and submit the required documents immediately.
5. Accept the loan, receive the funds and start making payments. Review the loan agreement before you sign to make sure the loan amount, fees, rate, term and other features are accurate. Funds may be available the same or next day or take several days, depending on the lender and the information you provided.

With a debt consolidation loan, it may take some time for the funds to be sent directly to your creditors.

Some credit unions approve smaller loans (under $2,000) without credit checks for members in good standing. Often called short-term assistance or payday alternative loans (PALs), they’re positioned as a safer alternative to high-interest payday lenders.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every personal loan list is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of personal loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best personal loans.

To determine which personal loans are the best for consumers with a credit score of 580 or lower, CNBC Select analyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions. When possible, we chose loans with no origination or sign-up fees, but we also included options for borrowers with lower credit scores. Some of those options have origination fees.

When narrowing down and ranking the best personal loans, we focused on the following features:

• Fixed-rate APR: Variable rates can fluctuate over the lifetime of your loan. With a fixed-rate APR, you lock in an interest rate for the duration, so your monthly payment is predictable.
• Loan amounts/terms: All the lenders on this list offer a variety of financing options.
• Fees and penalties: The lenders on our list do not charge borrowers for paying off loans early.
• Application process: We considered whether lenders offered same-day approval and a fast online application. 
• Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
• Fund disbursement: The lenders on our list all disburse funds quickly, either by wire or paper check. In the case of debt consolidation loans, some lenders will pay your creditors directly.
• Discounts: We noted which lenders reward borrowers for enrolling in autopay with a 0.25% to 0.5% APR discount.

We also considered CNBC Select audience data when available, such as general demographics and engagement with our content and tools.

Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.