Type of Loans Available to Those with Bad Credit Scores

We go over some of the popular types of loans that are available to those with bad credit scores. These loans can help you get your financial life on track.

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If you’re in the need of a quick cash to pay off debt, to pay for unforeseen expenses, or to cover the price of a personal or family emergency, chances are good that you are considering taking out some kind of a loan. If you have had financial trouble in the past, or haven’t been the most responsible borrower, you might be dealing with a less-than-ideal credit score. That will most likely make it rather hard for you to obtain funding from types of loans that require good or excellent credit scores.

So, what are your options?

It depends on several factors, such as what you have that can be used as collateral, what you plan on using the loan for, and more. To learn more, let’s go over some of the popular types of loans that are available to those with bad credit scores.

Bad Credit Car Loan

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Unsurprisingly, this type of loan for those with bad credit scores is only available to those who are planning to use the loan to buy a new car. Bad credit loans are available through car dealerships that have decided to partner with subprime lenders who are more than happy to work with people with less than stellar credit history.

Simply, a subprime loan is a type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official cutoff score for prime loans versus subprime loans, but the borrower’s credit rating typically has to fall below a score of 620 to be considered subprime.

It is important to keep in mind that these loans come with a cost. Specifically, these loans come with added expenses than traditional ones. That is due to their higher interest rates – something that is common with loans for those struggling with bad credit. Interest rates for subprime auto loans usually range between 11 percent and 17 percent. They may also come with prepayment penalties if the borrows chooses to pay off the loan early. It isn’t all bad news, however.

Not only you will get the opportunity to get a loan for the car that you want, a bad credit auto loan can give you the opportunity to actually improve your credit score. If you take out one of these loans and are able to make your payments in full and on time, you will be doing quite a lot to help improve your credit score and show other potential lenders a history of responsible borrowing tactics.

Bad Credit Personal Loans

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Personal loans are typically thought to only be available to those with good to excellent credit, but that does not have to be the case. Some online lenders cater specifically to people with bad credit. These companies take your credit scores and history into account, but tend to be more flexible than banks or other more traditional personal loan lenders.

Another source of personal lending that you can look to are credit unions. They are can be more helpful and offer better rates than even the most reputable online lender.

As you might expect, the downside of these loans is that the interest rates can be quite high. For credit scores ranging from 630 and 689, interest rates can be as high as 21.8 percent. For bad loans that range between 300 and 629, you can expect an interest rate as high as 27.2 percent. That makes it quite the hefty price for some cash up front. It also makes it more likely that you will end up defaulting on the loan, which will only hurt your credit score going forward.

Car Title Loan

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Another potential source for fast cash at your disposal even if you have bad credit is a car title loan. That is, of course, if you are in possession of your lien-free car’s title.

Car title loans are really quite simple. Basically, a car title loan means you are borrowing from a lender based on the value of your car. For many lenders, they’ll only consider lending to you if you have already paid off your car in full and own it outright. While some lenders do allow you to borrow on a car that you are still paying off, it is not entirely common.

Once the value of your car has been established, the lender will decide how much they are willing to lend you. Car title loans typically range between $100 and $5,500. They can, however, go much high and depending on your car, you could qualify for a loan up to $50,000.

While the amount you can borrow is based on the equity that you have in your car and the value of that car, do not expect to get a loan that is equal to the actual worth of the car. Lenders want to make it as likely as possible that they’ll be getting their money back, so they will lend you only what they can get quickly and easily in exchange for your car in the event that you default on your loan. The vast majority of lenders will offer you a loan equal to the trade-in-value of your car, that is typically between 25 percent and 50 percent of your car’s actual value.

As long as we are talking about the possibility of a default, it is important to note that some lenders will require you to give them a key to your car or install a GPS tracking device on your car so that they can easily locate and retrieve your car in the event of a default and subsequent repossession.


Now that you know some of the most popular loans available to those with bad credit scores, it is up to you dictate what kind of loan is best to help you pay for what you want or need. Taking out loans are always a risk. That fact is even more true when they come with the interest rates and risks typically attached to loans meant for borrowers with bad credit.

If you believe you are up to the challenge of paying these loans back, however, they could be just what you need to get your financial life back on track.

Brian Meiggs
Brian Meiggs
Brian Meiggs helps you discover clever ways to pay off student loans, make extra money, save money, be resourceful and stay curious. With over 10 years of experience in the financial industry, Brian has developed a reputation for his in-depth knowledge and practical approach to personal finance. He holds a bachelor's degree in Finance and has been recognized by several industry organizations for his contributions to the field. Brian is passionate about educating people about personal finance and has been featured in several national media outlets, including Insider, AOL, Discover, and Yahoo! Finance. With his unique perspective and proven track record, Brian Meiggs is a trusted voice in the world of personal finance.