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How to get a personal loan with bad credit



Banks offer personal loans, typically ranging from $1,000 to $100,000. These loans have low interest rates and can come with perks for existing customers. Though not all banks offer personal loans, those that do are a smart first stop for borrowers.

Getting a loan from a bank can seem overwhelming if you’ve never done it before. These five steps will guide you through the process.


1. Check whether you qualify for a bank loan

Before applying for a bank loan, you’ll want to know whether you qualify. Most banks require applicants to have good to excellent credit (a 690 credit score or higher), though some banks may accept applicants with fair credit (a 630 to 689 credit score).

Banks may also evaluate your debt-to-income ratio and whether you have enough cash flow to take on new debt. Though most banks don’t disclose a maximum requirement, 36% or lower is generally considered a good DTI. 

One of the best ways to check your eligibility is to pre-qualify with the bank. Pre-qualifying takes a few minutes and involves filling out a preliminary application to see what rate, loan amount, and repayment term you may be eligible for. Pre-qualifying won’t hurt your credit score.

Not all banks offer this option, though. If your bank doesn’t, call customer service and ask about eligibility criteria. Try to get as much detail as you can, including any minimum credit score and income requirements.

Some banks only lend to current customers by invitation or require you to have an open checking account for a certain amount of time before you can apply for a personal loan.

2. Compare rates on bank loans

Even if you have a bank in mind, it’s still important to compare loans from different lenders to ensure the one you choose best fits your needs.

The annual percentage rate, which includes interest and any fees, is the best way to compare a loan’s cost. Finding the lowest APR can mean significant savings.

For example, if one bank offers a $20,000, four-year loan at 12% APR, you’ll make monthly payments of $527 and pay $5,280 in interest. But if another lender offers the same loan at a 10% APR, you’ll make monthly payments of $507 and pay $4,348 in interest.

Many banks list their APR ranges on their websites.

You may also want to pre-qualify with a few online lenders. Almost all online lenders will show you personalized rates and terms with a soft credit check, so you’ll have more options to consider with no risk to your credit score.

As you compare rates, also determine what repayment term and monthly payment best fit your budget. The longer your repayment term, the smaller your monthly payment, but the more you’ll pay on interest.

Use NerdWallet’s personal loan calculator to estimate your monthly payment by plugging in different loan amounts and terms.

3. Submit your application for a bank loan

Once you’ve checked eligibility, compared rates, and selected the best option, it’s time to apply.

Some banks may require you to apply at a local branch if you’re a new customer, but most applications are online.

The application itself will vary by bank, but you’ll likely need to submit:

  • Personal details, including name, address, phone number, date of birth, and Social Security number.
  • Loan details include the desired loan amount, loan purpose, and repayment term.
  • Proof of employment and income.
  • Information about current debts.
  • Information about monthly expenses, including housing costs.

Once you submit the application, you’ll undergo a hard credit check, which temporarily lowers your credit score by a few points. Depending on the bank, you could hear whether you’re approved or denied within minutes, while some banks may take a few days.

4. Review the loan agreement

Once approved for the loan, you’ll receive the loan agreement. Some banks may require you to sign the agreement at your local branch, but most will let you sign electronically.

Make sure to read the loan agreement carefully to confirm that the loan amount, repayment term, APR, and monthly payment amount are correct.

Also, pay close attention to any fees, including late payment fees.

5. Receive your funds

Once you’ve signed the loan agreement, you should receive the funds in a lump sum within a week, though some banks promise the same or next-day funding after you’re approved. You can have the funds directly deposited in your personal checking account, or a check may be mailed to you.

Once you receive the money, make a plan to repay your loan. Most banks offer an automatic payment option, which could help you avoid late fees, and some banks will even discount your rate for opting in to autopay.

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