Our writers and editors used an internal natural language generation platform to assist with parts of this article, allowing them to focus on adding information that’s particularly useful. The article was reviewed, fact-checked and edited by our editorial team before publication.
Key learning points
-
Loans for people with bad credit typically have higher interest rates and fees than traditional loans.
-
Payday alternative loans and credit card cash advances are emergency loan options available to most borrowers, even with imperfect credit.
-
Payday and title loans are another option, but these are likely to be predatory, carry sky-high interest rates, and should be avoided whenever possible.
If something unexpected happens and you don’t have enough saved to cover the costs, you may need to borrow money. But if you have less than perfect credit, you’ll generally have to look beyond traditional personal loans to get the help you need.
Although there are bad credit loans available, they come with higher interest rates and fees than other loans. Weigh the pros and cons of each option before signing up to avoid financial problems later on.
Types of emergency loans for bad credit
Emergency loans for bad credit usually have higher than average interest rates and small limits. Short repayment terms are also very common, although there are some exceptions.
| Type of loan | Loan amount | Refund period | April | For whom it is good |
|---|---|---|---|---|
| Payday Alternative Loan | Up to $2,000 | 1-12 months | Up to 28% | Credit union members in need who need to borrow a small amount of money. |
| Credit card cash advance | 20 to 30 percent of the available credit limit | Until the bill is paid off | Almost 30% | Cardholders who need cash quickly and can afford to pay off their balance quickly. |
| Payday loan | Up to $500 | 15-30 days | 390% and above | Borrowers who cannot qualify for a loan anywhere else and are confident that they can repay the loan quickly. |
| Title loan | 25 to 50 percent of your vehicle’s value | 2-4 weeks | About 300% | Borrowers who need the money urgently and have no other options to borrow money. |
1. Alternative payday loan
Alternative payday loans are offered by select federal credit unions and offer amounts up to $2,000. These unsecured loans have repayment terms ranging from one to twelve months. While they may be easier to obtain than a traditional personal loan, borrowers still must pass a credit check for approval.
Because the interest rate is based on your credit score, people with bad credit typically get the highest rates. That said, these loans cap interest at 28 percent, which is lower than some credit cards and most other emergency loans. To qualify, you must be a member of a credit union that offers this loan product.
Advantages
- More competitive interest rates than payday loans.
- The registration fee may not exceed $20.
Cons
- Credit union membership required.
- Small loan amounts.
For whom it is good
Credit union members with lower credit scores who need a small loan and can’t get approved for a personal loan with competitive terms elsewhere.
2. Advances by credit card
Some credit cards have a cash advance feature that allows you to draw money from your credit limit. You can visit an ATM or a bank branch to withdraw the necessary funds up to the cash advance limit or available credit on your card, depending on the card issuer’s guidelines.
Credit card issuers charge a transaction fee, usually between 3 and 5 percent, to use this feature. Plus, you immediately accrue interest on the money you borrow since there is no grace period. Cash advances on credit cards are typically limited to 20 to 30 percent of your available credit limit.
Advantages
- Instant access to cash.
- No application or credit check required.
Cons
- Costs for withdrawing money from an ATM.
- Higher APR and no grace period.
For whom it is good
Cardholders with available credit who need access to a small amount of cash and can afford to pay it back quickly.
3. Personal loan
Payday loans are short-term, unsecured loans that provide on-the-spot financing. Most are limited to $500 and are due on the next payday or within two weeks. You likely won’t need to pass a credit check to get approved, making payday loans easily accessible to borrowers with bad credit.
That said, lenders charge high interest rates to take out a payday loan, and payment is often required upon ACH withdrawal. Not having the money when the loan matures often results in charges from your financial institution. While you may be able to get an extension to your due date if you live in a state that allows rollovers, it usually comes at a price that can put you in a vicious cycle of debt.
Some states have banned payday lending entirely. Others impose credit restrictions that set limits on interest rates and fees.
Advantages
- No credit check.
- Financing within a few hours.
Cons
- Triple-digit interest rates on some loans.
- High costs for rollovers.
- Usually does not help build credit.
For whom it is good
Consumers who have exhausted all other options and are confident that they can repay the loan in full by the due date.
4. Title loan
Title loans are secured and require you to hand over your vehicle’s title as collateral in exchange for cash. Most lenders allow you to borrow between 25 and 50 percent of the value of your car.
Like payday loans, title loans should also be used as a last resort for several reasons. You risk losing your vehicle if you can’t keep up with loan payments. These loans also have high interest rates and you may get a short repayment period that puts pressure on your wallet if the monthly payments are high.
Advantages
- Money available from the same day.
- Often accessible without a credit check.
Cons
- Risk of repossession.
- High borrowing costs.
- Does not report to the credit bureaus.
For whom it is good
Individuals who have no other alternatives to access the money they urgently need.
Non-loan alternatives for bad credit
If you’d rather not use credit to cover a financial emergency, these no-borrowing alternatives may work:
- Get help from a charity or local nonprofit: Call 211 to learn more about financial resources available in your area or through your state.
- Request an advance on your wages: If you have been at work for a while, ask your employer for an advance on your next paycheck.
- Ask a friend or family member for a loan: They may be willing to give you an interest-free loan, but make sure you put the agreement in writing.
- Make payment arrangements: If you need cash quickly to cover monthly debt obligations, contact the lender or creditor and request an extension.
- Borrow from your 401(k): Some 401(k) plans allow loans of up to $50,000 or 50 percent of the vested balance – whichever is less – and the interest you pay will be credited back to your account. Keep in mind that this route may impact your retirement savings, as there is a large tax deduction when withdrawing from your 401(k).
How to Avoid a Bad Credit Loan Scam
Financial emergencies can be stressful and overwhelming. Unfortunately, it’s common for scammers to target innocent consumers by offering illegal or predatory loan products that lead to even more financial problems. But you can avoid falling victim to these deceptive tactics by taking the time to carefully consider your options.
It is equally important to thoroughly research the lenders on your list. Conduct an online search to learn more about their reputation and check the Better Business Bureau website to view their status before signing up.
