If you have bad credit, it may be difficult to get loans with low interest rates. Make sure you compare lenders and read the terms carefully to avoid predatory lending practices.

Multiple types of loans exist for borrowers with poor credit, including unsecured personal loans and debt consolidation loans that use collateral. These loans typically have higher borrowing costs but may be helpful if you’ve been turned down for credit cards.

Personal Loans

Personal loans for bad credit can provide quick access to cash to cover emergency costs, pay off high-interest rate debt or fund a major purchase. However, borrowers should fully weigh the pros and cons of this type of financing before applying.

To qualify for a personal loan, you will need a steady source of income and excellent credit or a cosigner with better credit. In addition, you should check your credit report and score for errors before applying to ensure all information is accurate. If you find inaccurate items, dispute them at least 30 days in advance of your application to give the credit bureaus time to make corrections. Borrowers should also have a debt-to-income ratio that is no more than 40% and have a stable employment history. Applicants who work in a salaried position will have a higher chance of being approved than those with variable income from tips or self-employment.

While there are many lenders that offer personal loans for borrowers with bad credit, some stand out above others. For example, Investopedia’s top pick for the best bad credit loan, Upstart, uses a groundbreaking AI underwriting model that allows it to lend to more borrowers. Other notable lenders include OneMain Financial and Prosper. When evaluating lenders, borrower should note their funding speed, minimum APRs, origination fees and repayment terms. In addition, borrowers should also consider whether their lender offers a pre-qualification tool to check their creditworthiness without impacting their score.

Debt Consolidation Loans

A debt consolidation loan helps you reorganize multiple balances and combine them into a single one with a lower interest rate. The goal is to make it easier to manage monthly payments, reduce the amount of money paid in interest over time and improve your credit score.

You can find debt consolidation loans for bad credit at online lenders and some traditional banks. Some are secured, which means you put up an asset like a car or home to secure the funds. These loans are often available to borrowers with lower credit scores and offer more flexible terms than an unsecured loan.

When considering a debt consolidation loan, consider the fees and rates involved. A lender may charge an origination fee or capfin credit card balance transfer fee when you take out the new loan, and these can add up to a significant amount of money. You also need to consider how long it will take you to pay off the debt, and whether you can afford to keep up with your monthly payments.

In some cases, it can be more cost effective to negotiate with your creditors to settle what you owe instead of getting a debt consolidation loan. However, this comes with its own set of risks, including a hit to your credit and the possibility that some lenders will sue you for the money you owe.

Emergency Loans

Emergency loans can help pay for unexpected expenses when you don’t have savings or don’t want to max out a credit card. Unlike credit cards, which have variable rates and can lead to overextension, emergency loans are fixed-rate installment debts. They’re typically used to cover unexpected medical bills or auto repairs, but can also be used for personal tragedies like funeral costs or unplanned travel.

The best emergency loan lenders provide fast, easy applications with minimal paperwork and a decision in minutes. They also cap APRs to keep them affordable, and often consider multiple income streams when evaluating your application. For example, some lenders consider Social Security benefits and alimony as part of your monthly income when calculating your ability to repay an emergency loan.

To avoid taking on too much debt, look for a lender that offers flexible repayment terms and doesn’t charge prepayment penalties. You should also be aware of any other fees associated with the loan, which can add up quickly. For example, some lenders charge a fee to process an application, while others may charge origination fees, late payment penalties or other charges. Lastly, explore other ways to manage financial emergencies. For example, nonprofit credit counseling agencies can offer advice on budgeting and debt management, while side hustles or part-time work can help supplement your income.

Online Loans

Online lenders offer bad credit loans that you can pay off over time, often with no prepayment penalty. A reputable lender will dig into your finances, including your income and credit score, to determine whether you can afford the loan. Avoid lenders that promise no credit check or guaranteed approval and charge exorbitant rates.

Generally, lenders that specialize in bad credit offer more flexible terms and higher limits than traditional financial institutions. They may also consider factors other than your credit history to qualify you for a personal loan, such as your employment situation or educational background. You can find many of these lenders by doing a simple online search.

A good online lender can help you get a fast decision, typically within one business day. It can also provide options for you to save on fees and interest by choosing a shorter repayment term or using a lower loan amount.

A peer-to-peer lender, such as Prosper or Lending Club, is a good option for borrowers with bad credit because they may offer loans up to $50,000 and have rates that align with other bad credit lenders. These lenders may also allow co-borrowers and offer a quick turnaround. An unsecured personal loan can be used for many purposes, such as making large purchases or paying off high-interest credit card debt. It can also be used to help build a strong credit profile through on-time loan payments.