Getting a loan with a 500 credit score: A detailed guide (2024)

A FICO score of 579 or less is considered a bad credit score.

According to Experian’s 2023 Consumer Credit Review, a little more than 12% of Americans score in that range. But that doesn’t mean you can’t get a loan with bad credit, even with a 500 credit score.

Types of bad credit loans

The good news? You may be able to get approved for a loan, even when your credit is bad. The bad news? You'll pay more—way more—than those who have fair or excellent credit.

Personal loans

Personal loans are installment loans that provide money upfront, as soon as the same day you apply in some cases, or within one to three business days of approval. Compared to most other 500-credit-score loan options, they offer some of the longest repayment terms and most affordable borrowing costs.

Personal loans typically have a fixed interest rate, which means you repay them in equal payments over several months or years. Annual percentage rates (APRs) typically top out around 36% and are based largely on your credit. In other words, if you have a 500 credit score and can qualify for a personal loan, you should expect to pay an APR north of 30%.

Many lenders require a credit score above 500 to qualify for a personal loan, but others are more lenient. Upstart, for example, allows credit scores as low as 300, while TD Bank and Citi don’t set official credit score minimums. Additionally, some lenders offer options that can help you qualify, such as secured loans and the ability to apply with a cosigner or co-applicant.

A quick way to gauge whether you’re eligible for a personal loan is to prequalify with one or more lenders. It won’t hurt your credit score and takes a few minutes. But you may need to provide personal information, like your Social Security number, so lenders can soft-check your credit. Once you apply for a personal loan, the lender will conduct a hard credit pull, which could impact your score.

Payday alternative loans (PALs)

Payday alternative loans (PALs) are small, short-term loans that offer federal credit union members an affordable alternative to payday loans. Regulated by the National Credit Union Administration (NCUA), there are two types of PALs (I and II):

• Maximum interest rate: 28%
• Loan amounts: up to $2,000
• Loan term: up to 12 months
• Application fee: Up to $20 per loan
• Available to: Federal credit union members of at least one month (PAL I); available to credit union members immediately upon joining (PAL II)

There is no set minimum credit score requirement to qualify for a PAL.

Credit builder loans

Credit-builder loans function more like savings accounts but help you build credit like a regular installment loan. Here’s how they work:

1. You apply for a loan with a provider of credit-builder loans.
2. If approved, the lender deposits the loan amount into a bank account (not yours).
3. You agree to pay off the loan through installments (with interest) over a set term.
4. Each payment is reported to the credit bureaus and helps to improve your credit reports and scores.
5. Once the loan is paid off, you get the loan amount.

These won’t be a fit if you need to borrow money immediately, but they can be helpful if you need the money in the future and want to build a positive credit history.

Cash advance apps

Cash advance apps like Earnin, Dave, and MoneyLion allow you to borrow a small amount of money until your next paycheck. These apps often don’t require credit checks, so they're great if you’re credit-challenged.

To apply, you join the app of your choice and connect your bank account. The company will assess your deposit and transaction history to decide if you qualify for an advance. Advance amounts vary depending on the app and your banking history but often range from $100 to $700.

If you take a cash advance, you’ll be asked how fast you want the money. The advance could be free if you can wait a few business days. For example, Earnin offers free transfers that take one to three business days. However, if you want the money in your account on the same day or within minutes, you’ll pay a fee — which is where cash apps can get expensive.

For example, Earnin also offers Lightning Speed transfers, which take minutes but cost from $3.99 to $4.99 per transfer. If you borrow $100 for two weeks and pay $4 to transfer it instantly, that equates to a 104% APR.

Payday loans

Payday loans are small, often around $500, that you can borrow and repay on your next payday. Unfortunately, these often come with high fees that make them hard to repay.

For example, a typical two-week payday loan that costs $15 per $100 borrowed amounts to an APR of 391%. But you could pay even more. For example, the average APR on a $500 payday loan in Idaho is 652%, according to Pew Research. If you can’t pay, many payday loan lenders will let you roll the loan into another payday loan, which may have more fees.

Many states have limits on payday lender fees, and some have even outlawed them altogether. In short, payday loans should be approached with extreme caution. Before taking one out, check your state’s rules, limits, and maximum fees. Cash advance apps and PALs offer a much more affordable short-term solution.

Title loans

Title loans are high-risk loans that offer money secured by the title of a vehicle you own. The fees can be expensive, sometimes costing up to 25% of the amount you borrow, and the terms are usually short, around 30 days. If you can’t make payments as agreed, the lender can seize and sell your vehicle to recoup its costs. Due to the high risks and costs, these should be a last resort or non-option.

Getting a loan with a 500 credit score

If you want a loan with a 500 credit score, the first step is to consider your loan options and resources to find the best fit.

1. First, do you know your exact credit score? If not, check it for free at AnnualCreditReport.com. If it’s higher than 500, you may have additional options, like more personal loan lenders willing to consider your application.
2. See if you can prequalify for a personal loan to get an idea of loan APRs you might qualify for.
3. Compare loan and cash advance providers based on APR to get an idea of the lowest-cost loans available. Also, compare the repayment term and monthly payment amount. Can you afford to make payments for the term?
4. Check whether your credit union offers PALs or if you’re eligible to join one that does.
5. If you can wait for the money, consider a credit-builder loan. It will likely have the lowest APR available and can improve your credit score through timely payments.

Important: If possible, choose a personal, credit-builder, or another type of loan that reports payments to the credit bureaus (payday loans, cash advance apps, and title loans typically don’t). Timely payments can improve your score, making it easier and less expensive to borrow money in the future.

If you’re struggling to qualify for an affordable payment or loan type, consider whether you know someone with good credit willing to cosign a personal loan. They’re equally responsible for the loan, which can make lenders more willing to lend to you. Just know that if you miss payments, your cosigner is on the hook for them, and their credit (along with yours) would likely drop.

How does credit score affect personal loan eligibility?

Your credit scores greatly impact your ability to get a personal loan.

Personal loans are often unsecured, so lenders primarily look at your income and credit to determine if they can trust you to make your loan payments on time. Lenders are told you’re a lower-risk borrower when your credit scores are good. When they’re poor, it raises red flags. As a result, the lower your credit scores, the harder it’ll be to get approved. And if you do get approved, you’ll likely pay a higher interest rate or high fees (or both).

For example, the average APR on a three-year personal loan to borrowers with a FICO score below 600 was 33.06%, according to Credible data in April 2024. The average APR for borrowers with a credit score over 780 was 12.54% on the same loan.

A good credit (FICO) score of 670 or higher will open up lower rates and additional loan options.

Personal loans for bad credit

While getting approved with bad credit can be difficult, it may still be possible. Certain lenders specialize in bad credit bad credit personal loans. That said, the amount you can borrow will often be lower while your borrowing costs will be higher.

If you can’t get approved with one of the lenders above, consider OppLoans which specializes in helping borrowers with bad credit get personal loans. It bases approval largely on your income but may run a soft credit check to learn about your credit history. Loan amounts through OppLoans range from $500 to $4,000 and APRs max out at 179%. While the APRs are high, they aren’t as high as those on payday loans and don’t include any origination fees.

How to rebuild your credit

A 500 credit score can make life a bit more difficult on the financial front. If you’re looking to improve your score, here are some steps you can take:

• Pay all of your credit accounts and bills on time.
• Keep your credit utilization on revolving credit lines down.
• Maintain a mix of installment and revolving credit accounts.
• Leave your revolving credit accounts open and active long-term.
• Limit the number of hard credit inquiries you allow.
• Monitor your credit reports and scores for improvements and catch any mistakes early on.
• Add utility bills you regularly pay to Experian’s Boost program.
• Consider getting a secured credit card or credit builder loan.

Frequently asked questions

Can I get a personal loan with a 500 credit score?

You may be able to get a personal loan with a 500 credit score by applying with lenders specializing in bad credit personal loans. Further, you can look for lenders that offer secured loans and the option to add a cosigner or co-applicant.

Where can I get a personal loan with bad credit?

If you have bad credit and want a personal loan, you can look into lenders such as OppLoans, OneMain Financial, and Upstart. All of these companies offer flexible eligibility requirements that are tailored to people with less-than-perfect credit.

How to get a fast loan with bad credit

If you need cash fast but have bad credit, you may be able to get funds the same day through a personal loan or a cash advance app. Both are designed for speed and convenience.

You can often apply online, get a decision in minutes, and, upon approval, have the money in your account within minutes or hours. However, some personal loan lenders may take one or more days to send funds, so make sure you apply for a fast personal loan.