Personal Loans for Credit Scores Under 600: Options and Considerations

If you have a credit score under 600, you may think obtaining a personal loan is out of reach. While it can be more challenging to qualify for loans with poor credit, there are still options available. This guide will explore personal loans for credit scores under 600, including types of loans, lenders to consider, ways to improve your chances of approval, and important factors to keep in mind.

Understanding Personal Loans for Bad Credit

Personal loans for borrowers with credit scores under 600 are often referred to as “bad credit loans.” These loans typically have higher interest rates and fees to compensate for the increased risk to lenders. However, they can provide access to funds for those who may not qualify for traditional loans.

According to Experian, credit scores below 580 are considered “very poor,” while scores between 580-669 are “fair.” Lenders often view scores under 600 as higher risk, but many still offer loan options.

Key Features of Bad Credit Personal Loans:

Higher interest rates (often 20-35% APR or more)
Shorter repayment terms (typically 1-5 years)
Lower loan amounts (usually $1,000-$10,000)
May require collateral or a co-signer
More stringent income and employment requirements

Types of Personal Loans for Credit Scores Under 600

Several types of personal loans are available for borrowers with credit scores under 600:

1. Secured Personal Loans

Secured loans require collateral, such as a car or savings account, which the lender can seize if you default. Because they’re less risky for lenders, secured loans often have lower interest rates and higher borrowing limits.

2. Unsecured Personal Loans

Unsecured loans don’t require collateral but typically have higher interest rates and stricter qualification requirements. Some online lenders specialize in unsecured loans for bad credit borrowers.

3. Payday Alternative Loans (PALs)

Offered by some credit unions, PALs are small, short-term loans designed to provide an alternative to predatory payday loans. They often have more favorable terms than traditional payday loans.

4. Co-signed Personal Loans

Adding a co-signer with better credit can improve your chances of approval and potentially secure better loan terms. However, the co-signer becomes equally responsible for repaying the loan.

Top Lenders for Personal Loans with Credit Scores Under 600

While options may be limited, several lenders specialize in personal loans for borrowers with credit scores under 600:

Lender	Minimum Credit Score	Loan Amounts	APR Range
Avant	580	$2,000 – $35,000	9.95% – 35.99%
OneMain Financial	No minimum	$1,500 – $20,000	18.00% – 35.99%
Upstart	300	$1,000 – $50,000	6.70% – 35.99%
LendingPoint	585	$2,000 – $36,500	7.99% – 35.99%

These lenders often use alternative data beyond just credit scores to evaluate borrowers, such as income, employment history, and education.

How to Improve Your Chances of Approval

If you have a credit score under 600, consider these strategies to increase your likelihood of qualifying for a personal loan:

1. Check Your Credit Report

Review your credit report for errors and dispute any inaccuracies. Even small improvements to your credit score can make a difference.

2. Provide Collateral

Offering collateral can make you a more attractive borrower and potentially secure better terms.

3. Find a Co-signer

A creditworthy co-signer can significantly improve your chances of approval and loan terms.

4. Demonstrate Stable Income

Lenders want to see that you have reliable income to repay the loan. Provide proof of steady employment or other consistent income sources.

5. Consider a Smaller Loan Amount

Requesting a smaller loan may increase your chances of approval, as it represents less risk to the lender.

6. Shop Around

Compare offers from multiple lenders to find the best terms available for your credit profile.

Important Considerations for Bad Credit Personal Loans

Before taking out a personal loan with a credit score under 600, keep these factors in mind:

High Cost of Borrowing

Bad credit loans often come with high interest rates and fees. According to the Federal Reserve, the average APR for a 24-month personal loan was 11.48% in May 2025. However, borrowers with credit scores under 600 can expect to pay significantly higher rates.

Predatory Lending Practices

Be wary of lenders offering guaranteed approval or no credit check loans, as these may be predatory. Always read the fine print and understand all terms before signing.

Impact on Credit Score

Taking on new debt can initially lower your credit score. However, making timely payments can help improve your score over time.

Debt-to-Income Ratio

Consider how the new loan payment will affect your debt-to-income ratio. A high DTI can make it difficult to manage your finances and qualify for future credit.

Alternatives to Personal Loans for Credit Scores Under 600

If you’re unable to qualify for a personal loan or want to explore other options, consider these alternatives:

Secured credit cards: Can help build credit while providing access to a credit line
Credit-builder loans: Designed to help establish or improve credit history
Peer-to-peer lending: May offer more flexible terms for borrowers with poor credit
Home equity loans or HELOCs: If you own a home, these may provide lower interest rates
Borrowing from family or friends: Can be a low-cost option if handled responsibly

Improving Your Credit Score

While it’s possible to get a personal loan with a credit score under 600, improving your credit can open up more favorable borrowing options in the future. Here are some strategies to boost your credit score:

1. Pay Bills on Time

Taking care of monthly payments, especially those for credit cards and loans, is crucial to building a positive payment history.

2. Reduce Credit Utilization

Maintaining low balances on revolving accounts can improve your credit utilization ratio, which makes up 30% of your FICO score.

3. Increase Your Credit Limit

A higher limit decreases the proportion of available credit you’re using, which positively affects your credit score.

4. Dispute Inaccuracies on Your Report

Contact the credit bureaus to dispute any errors or inaccuracies in your report that negatively affect your score.

5. Maintain Longstanding Credit Accounts

A longer average age of accounts contributes positively to your credit history and score.

Note: Improving your credit takes time, but consistent efforts can lead to substantial improvements over several months or years.

Personal loans for individuals with credit scores under 600 are a viable option when handled carefully. By understanding the risks and benefits of bad credit personal loans, as well as exploring alternatives and strategies for improvement, you can make informed decisions about borrowing and work towards financial stability.