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Loans for Low Credit Scores from Direct Lenders

loans-for-low-credit-scores-bad-credit

When your credit is good to excellent there are a variety of loan options available. But when trying to find a variety of loans for low credit scores, roadblocks and obstacles are bound to pop up.

Borrowers with low credit scores should expect higher rates for bad credit loans, but it’s also possible to find direct lenders with affordable rates.

In reviewing direct lenders we looked at interest rates, loan origination fees, flexible repayment options along with early repayment without incurring a penalty.

Summary of the best direct lenders for low credit scores

Approved borrowers will have an opportunity to build a better credit history with timely payments as these lenders report loan payments to the credit bureaus.

Universal Credit: Best for credit scores 560 and above.

Upgrade Loans: Best for credit scores 580 and above.

Upstart Loans: Best for borrowers with limited credit history.

Earnin: Best for short-term loans up to $500.

What is a direct lender?

Direct lenders provide loans directly to borrowers without a lead provider, loan broker, or third-party lender. When you complete a loan application with a lead provider website, they shop your application around to multiple third-party lenders.

For instance, bad credit loans Urban BCL are not direct lenders, they simply take your application then shop it at multiple lenders.

In some instances, those lenders are tribal lenders offering payday loans that typically have significantly higher interest rates than traditional direct lenders.

Here is one cautionary tale about payday lenders by one user on Reddit’s Poverty Finance forum. “Listen kids, don’t be stupid and accept payday loans. I paid this off early today!”

There are several benefits to utilizing a direct lender for personal loans:

  • A direct lender offers you a loan directly.
  • Borrowers get the opportunity to evaluate a direct lender based on the factors that are important to you.
  • Working with a direct lender may save you money by eliminating the middleman that may not offer you the best interest rate loan.
  • You get an interest rate that’s coming directly from the lender.
  • Direct lenders offer security and transparency, unlike a lead provider website that shops your information to various third-party lenders.
  • Direct lenders limit your exposure to fraudulent and unscrupulous practices.

Direct Lenders for Bad Credit Personal Loans

We have compiled a list of direct lenders for bad credit personal loans.

1. Universal Credit Loans – 560 or higher credit score


Universal Credit is a direct online lender offering personal loans up to $50,000 for people with poor to average credit. Universal Credit helps borrowers with a wide range of credit scores. Borrowers with poor to good credit have a good chance to qualify. Universal Credit is flexible with its eligibility criteria while offering competitive loan rates. Borrowers can choose from flexible loan options that allow you to customize your loan amount and term.

Universal Loan Details

  • Loan amounts range from $1,000 – $50,000.
  • Repay monthly, over 3 to 5 years.
  • Estimated APR: 8.93% to 35.43%.
  • Loan origination fee of 4.25% to 8% of the loan amount which is deducted directly from your loan funds.
  • Universal Credit reports loan payments to all three major credit bureaus.
  • No prepayment fee.
  • Offers a 0.5 percentage point rate discount for setting up autopay.
  • Universal Credit borrowers have free access to their credit score, credit monitoring and a credit score simulator tool.

2. Upgrade Personal Loans – 580 or higher credit score


Upgrade personal loans range from $1,000 to $50,000. Upgrade works with people who have credit scores as low as 580. Initially, a “soft pull” of your credit report is performed so checking a loan offer won’t affect your credit score.

Upgrade Personal Loan Details

  • Loan Amounts from $1,000 to $50,000. Based on Credit.
  • Simple one-page application.
  • Get a decision in seconds – with no negative impact to your credit score.
  • Fast funding, you can get money to your bank account within a day of clearing necessary verifications.
  • A Personal Loan You Can Use for Nearly Any Purpose.
  • As of this writing, interest rates range from 6.99% up to 35.97% APR.
  • Upgrade charges a loan origination fee of 1% to 6% of the loan amount which is deducted directly from your loan funds.

3. Upstart – Best for borrowers with limited credit history


Upstart is a direct lender that offers unsecured personal loans for a variety of purposes with competitive interest rates that range from 5.22% up to 35.99% APR. The lower interest rates are reserved for people with higher credit scores but for people who have struggled with credit in the past, Upstart will factor in other pieces of information for a better shot at approval.

Upstart Personal Loan Details



  • Minimum credit score requirement at 600.
  • Loan amounts range from $1,000 to $50,000.
  • Interest rates range from 5.22-35.99%.
  • Upstart has two options for repayment, with term lengths of 36 or 60 months.
  • Get your rate in 5 minutes without affecting your credit score.
  • Loan origination fee can range from 0% to 8% of the loan amount. This is a one-time fee that’s deducted from the loan proceeds before they are delivered to the borrower.
  • No prepayment penalties. Upstart does not charge prepayment penalties for borrowers who wish to pay off their loan early.

4. Earnin – Best for short term loans up to $500.


Earnin is a paycheck advance app that is a cheaper alternative to payday loans. The app lets you draw small amounts of your earned wages before payday. Earnin does not charge any fees or interest but they do ask users to provide an optional tip for the free service.

Earnin Short Term Loan Details

  • Bad credit history? Earnin offers access to your paycheck up to $500 per pay period with no minimum credit score required.
  • Borrowers must have a checking account and be paid by direct deposit.
  • Earnin doesn’t charge interest or fees, borrowers can opt to donate a “tip” of any amount.
  • Simple application process with a quick decision.
  • You will receive your money in one to two business days if you request on a weekday. There’s an option to get the money immediately, but only if your bank supports it.


How online loans for bad credit work

People needing personal installment loans for bad credit may not be aware of reputable online lenders that offer instant approval with repayment terms up to 4 years.

  • First. Expect interest rates to be higher with installment loans for bad credit.
  • Second. Most online personal loan lenders run a soft credit pull to determine if you qualify. What that means is if for some reason you don’t meet qualifications, there will not be any impact on your credit scores. When lenders run a hard credit pull, your credit score decreases by several points.
  • Third. Online installment loans for bad credit offer a convenient way to repay typically between 2 to 4-year terms. Lenders calculate your monthly payment so that each payment reduces your loan balance and covers your interest costs, eventually bringing your balance to zero over the term of your loan.
  • Fourth. Typical rates for online loans range between 5.22-35.99%. The lowest rates are generally reserved for good to excellent scores. But rates for personal loans depend on a variety of factors including your credit history, income, and other factors. The way to get around paying rates over the full term of the loan is to pay the loan in full as soon as possible. Most online loans have no prepayment penalties or fees.
  • Fifth. As with most lenders, there may be a loan origination fee. Loan origination fees cover the costs of processing your loan application and can range from 1% to 10% of the loan amount. Lenders typically deduct the origination fee from the loan proceeds deposited into your account.
  • Sixth. Online lenders offer fast approval for bad credit loans so you will not have to wait days or weeks for a decision.
  • Seventh. Next business day funding via direct deposit in your checking after loan approval and e-signed documents.
  • Eighth. Online personal loan lenders are equipped to conduct the entire loan process and paperwork online, there is no need for in-person visits.

How are installment loans different?

Most personal loans fall in the category of installment loans where you borrow a set amount of money all at one time. You then repay the loan over a fixed number of payments with a fixed payment amount, called installments.

Installment loans have a specific length of time you’ll be making payments and a set amount you pay each month. These are more commonly referred to as “loan terms.” You’re probably already familiar with installment loans if you’ve taken out a long-term loan like a mortgage, car, or student loan.

Installment loans can be short-term or long-term and are typically more easily managed than a high-interest payday loan. Installment loans are not backed by any collateral (like a house or car). Unlike a mortgage or car loan, a lender cannot directly seize your assets if you fail to pay back an installment loan.

Installment loans for bad credit can help improve credit scores with timely payments reported to the major credit bureaus.

While payday loans offer a quick turnaround for cash, many people get stuck in a cycle of repeated indebtedness.

According to the Center for Responsible Lending:

The long-term debt is the typical borrower experience and the core of the business model. With each loan flip or new loan, borrowers are unable to both repay the lender and have enough money left until the next payday arrives. Payday loans are a debt trap by design and lead to cascade of other financial consequences such as increased overdraft fees and even bankruptcy.

On average, payday loans carry a 391% APR (annual percentage rate). Installment loans for bad credit are a much better option for borrowers seeking quick cash.

Can you refinance a bad credit loan?

Yes. If your existing bad credit loan is too expensive consider refinancing your loan to get better terms and lower monthly payments.

Refinancing involves replacing an existing loan with a new loan that pays off the debt of the first one. With bad credit loans, there’s an opportunity to improve your credit scores over time.

It’s a good idea to monitor your credit scores for improvement. Once your credit history reflects positive information, you may be able to refinance to a new lender with more favorable terms.

Installment loans can help your credit scores

On-time payments can help build a positive credit history and improve credit scores over time. Payments are reported to the major credit bureaus. If an installment loan is used to consolidate high-interest credit card debt this can improve your credit scores because you lower the amount of credit you are utilizing.

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