8 Types of Loans You Can Get With Bad Credit

Qualifying for a loan can be difficult when you have bad credit. Lenders usually use your credit to determine how likely you are to repay a loan, and some may not want to loan you money if your credit shows financial bumps. Fortunately, there are loans for people with bad credit and lenders willing to give funds to borrowers with bad credit scores. Nevertheless, these types of loans often come with exorbitant interest rates and less favorable terms. Here are eight common types of bad credit loans.

1. Payday loans

A payday loan is a short-term loan, usually for $500 or less, often meant to be paid off on your next payday. Depending on your federal or state regulation, payday loans can be available through a direct lender for bad credit or online.

Since most lenders don’t rely on a credit check, payday loans have high-interest rates that average an annual percentage rate (APR) of more than 400%. Lenders usually make up for the increased credit risk by charging exorbitant interest rates and more charges.

2. Cash advances

A cash advance loan is a short-term loan designed to offer quick cash to borrowers who require emergency cash. Although these loans generally have high-interest rates and fees, they are attractive to borrowers since they feature fast approval and quick financing. You can also get a cash advance with bad credit, which is a great advantage that draws many borrowers. The most common types of cash advances are offered by credit card agencies, and most companies charge a fee of up to 5% of the amount you get from a credit card cash advance.

Cash advances usually have no interest grace period, which means interest will start to accrue immediately after taking out the loan. Always read the fine print to understand all the costs involved before you take out the loan.

3. Unsecured personal loans

Unsecured personal loans are popular for funding day-to-day things such as debt consolidation, home improvements, a new car, or vacation. Most lenders offer unsecured loans from as little as $1,200 to $1,800 to be repaid over 18 to 60 months.

While obtaining unsecured personal loans might be a bit challenging if you have a shaky credit history, most lenders work specifically with bad credit borrowers. However, these loans usually have higher interest rates since lenders take on more risk as the loans are not backed by collateral. Your lender can’t seize your property if you default on the loan.  

4. Secured personal loans

Secured personal loans are a popular loan option for people in need of a big and long-term loan, such as over five years. You get up to $120,000, which can help you in your home remodeling project or in the purchase of a new vehicle or home. However, these loans require collateral to secure, usually in the form of a car or home.

When looking at a secured loan vs unsecured loan, the latter will have lower interest rates and more flexible repayment terms. Nevertheless, the risk of losing your vehicle or property is higher if you fall behind or default on your loan. That means the lender can sell your asset if you fail to keep up with repayment to recover their money.

5. Car title loans

A car title loan is a short-term loan that might particularly appeal to individuals with bad credit. However, you must own a car outright and be comfortable using it to get money quickly. The more value your car has, the more the loan amount you may get on a car title loan.  

When you borrow a car title loan, you exchange your title for a lump sum. However, you must repair your credit, and you often have 15 to 30 days to repay the loan principal and any interest charges. The lender can repossess and sell your car to recover losses if you fail to repay your loan.

6. Home equity loans

Home equity loans allow property owners to borrow against the equity in their homes. Most lenders are also willing to offer a home equity loan to borrowers with bad credit and at a lower interest rate than a conventional loan. The amount of money you get will be determined by the difference between the current market value of the property and your due mortgage balance.

When taking a home equity loan NY, your property will act as collateral on the debt. Unlike a first mortgage, home equity loans are a second hold on the property. However, it’s important to note that home equity loans have a huge risk. Since your property acts as security, the lender might, in the end, foreclose on your home if you fail to pay off the loan, leaving you without a home to live in.

7. Joint personal loans

Joint personal loans aren’t certainly a type of loan but a process of co-borrowing money and sharing equal responsibility for repayment with another person. Borrowers usually use a joint loan when they can’t qualify for a big loan on their own or when they have bad credit scores and can’t qualify for a loan. Since there can be more income and collateral to consider when there is more than one borrower, lenders may view two borrowers as less risky than one alone.

While joint personal loans can be a great way to secure the cash you couldn’t get on your own, they come with some risks. Missing payments might risk your financial health, and it could also damage your close relationship.  

8. Student loans

If you are a college student, you can get a federal loan with poor or no credit. Apart from federal Direct PLUS loans, student loans offered by the federal government involve no credit check. While you must meet the eligibility criteria and fill out a Free Application for Federal Student Aid (FAFSA), your credit score may not affect the amount of money support you get.

Federal student loans often come with lower interest rates than private student loans. They also come with various protections, including loan forgiveness, income-based repayment, and deferment or forbearance options. Federal student loans are undoubtedly your best option when borrowing money for college.


While getting a loan with bad credit might be challenging, it’s indeed possible. Numerous online lenders, banks, and credit unions typically offer loans designed for people with bad credit. With that being said, securing these types of loans can be more expensive than with a good credit score. Research and compare multiple lenders to ensure you get the best rate possible.