Getting a personal loan when your credit score is less than ideal may seem impossible—but in 2025, it’s more achievable than ever. With more inclusive lending platforms, fintech innovations, and alternative approval models, borrowers with bad credit still have options. The key is knowing where to look and how to prepare.
Traditional banks may still turn you away if your FICO score is under 580, but many online lenders and credit unions have adapted their criteria to serve riskier applicants. These lenders consider income, employment, and other financial behaviors—not just your credit history. It’s a shift that benefits borrowers in tough situations.
But beware: bad credit loans often come with higher interest rates, stricter terms, and additional fees. Still, when used responsibly, they can be a helpful lifeline. Let’s explore how you can successfully get a personal loan with bad credit in 2025—and what to watch out for.
What Counts as Bad Credit in 2025?
In 2025, most lenders still follow FICO credit scoring models, where a score below 580 is generally considered “poor.” Some categorize scores between 580 and 669 as “fair,” which may open more doors. If your score falls below that, it’s crucial to understand how lenders view your application.
Bad credit can be caused by various factors: missed payments, high credit utilization, bankruptcies, or a short credit history. But lenders are increasingly using alternative data—like rent payments, utility bills, and bank account activity—to assess your financial behavior.
This shift means that even if your score is low, you’re not automatically disqualified. Lenders now ask: Can you afford the loan? Are you managing your income responsibly? This opens new possibilities for applicants who can demonstrate financial stability despite a low score.
Where to Look for Bad Credit Personal Loans
Not all lenders are created equal when it comes to bad credit loans. Online lenders like Upstart, Avant, and OppLoans specialize in serving borrowers with lower scores. Many of these platforms use machine learning to assess risk beyond just credit reports.
Credit unions are also worth considering. Unlike banks, they’re nonprofit institutions and often more willing to work with members who have blemished credit. Some even offer credit-builder loans, designed specifically to help improve your score while borrowing.
Another place to look is peer-to-peer lending platforms, where individual investors fund your loan instead of institutions. These sites often have more relaxed requirements and personalized underwriting decisions. However, their rates can vary widely, so compare offers carefully.
Tips to Improve Approval Odds
Even with bad credit, there are strategies that can boost your chances of getting approved. First, check your credit report and fix any errors. Disputing inaccuracies could raise your score enough to push you into “fair” credit territory, unlocking better loan terms.
Second, apply for the right loan amount—not more than you realistically need. Lenders are more likely to approve smaller loans with manageable repayment plans. Demonstrating a steady income and low existing debt also helps build lender confidence in your ability to repay.
Third, consider adding a co-signer if the lender allows it. A co-signer with good credit can significantly increase your approval chances and even lower your interest rate. Just remember: both parties are equally responsible for repayment, so this is a big ask.
Understanding Loan Terms and Costs
When applying for a bad credit loan, it’s vital to read the fine print. These loans often come with high interest rates, ranging from 18% to over 36% APR, depending on the lender and your risk profile. In some cases, payday lenders charge even more—avoid those at all costs.
Other fees to look out for include origination fees, which are deducted from the loan amount before you receive your funds, and prepayment penalties if you pay off the loan early. Some lenders also charge late fees or non-sufficient fund (NSF) penalties.
The loan term (length of repayment) also impacts cost. Longer terms mean lower monthly payments but more interest paid over time. Use a loan calculator to estimate your total repayment amount and be sure you can commit to the monthly obligation before signing.
Best Loan Types for Bad Credit Borrowers
Not all personal loans are structured the same way. For bad credit borrowers, certain types of loans offer better safety and flexibility. Secured personal loans, which require collateral (like a car or savings account), often come with lower rates and higher approval odds.
Credit-builder loans are another smart option. These don’t give you money upfront. Instead, you make fixed payments into a savings account, and the funds are released to you at the end. All your payments are reported to the credit bureaus, helping to raise your score.
For emergency needs, installment loans from reputable online lenders are better than payday loans. While still costly, installment loans have fixed payments over several months and more transparent terms. Always choose lenders that report to all three major credit bureaus to help you rebuild your credit over time.
Red Flags and Scams to Avoid
Unfortunately, bad credit borrowers are often targets for scams and predatory lenders. Be on alert for any lender who guarantees approval without checking your credit or income. Reputable lenders always assess your ability to repay.
Avoid any lender who asks for upfront payments, especially in the form of gift cards, cryptocurrency, or wire transfers. These are classic scam tactics. Always verify a lender’s state license and check their reviews with the Better Business Bureau (BBB) or Consumer Financial Protection Bureau (CFPB).
Also, steer clear of payday loans and title loans, which can trap borrowers in cycles of debt. These types of loans often come with APRs of 300% or higher and can quickly spiral into financial disaster. No matter how urgent your need, safer alternatives do exist.
Rebuilding Your Credit After Getting a Loan
A personal loan, even with bad credit, can be a stepping stone to financial recovery if used wisely. Making on-time payments every month builds positive history on your credit report. Over time, this can raise your credit score significantly.
It’s also an opportunity to show lenders you’re committed to turning things around. Use this chance to monitor your budget, avoid new debt, and make smarter financial choices. Many borrowers who start with bad credit loans find themselves qualifying for better terms within a year or two.
Some platforms even offer credit tracking tools, monthly score updates, and budgeting resources as part of your loan account. Take full advantage of these tools—they’re included to help you move forward, not just borrow money.
Conclusion
So, is it possible to get a personal loan with bad credit in 2025? Absolutely—but it requires careful planning, smart lender selection, and financial discipline. Today’s lending landscape is more inclusive, with options tailored to those working to rebuild their credit.
By choosing reputable lenders, understanding the terms, and keeping your expectations realistic, you can secure the funds you need without falling into a debt trap. A personal loan can be the first step on your journey toward financial stability.
Bad credit doesn’t mean no options—it just means you have to be smarter, more cautious, and more strategic. In 2025, with the right approach, a better financial future is well within reach.
