Best hardship loans for bad credit in May 2024

Nearly everyone has faced a financial emergency of some sort before, no matter how big or small. Maybe your car broke down, you’ve had an unexpected medical bill, or you’ve lost your job. Fortunately, a hardship loan could help you get back on your feet even if you have bad credit.

When you’re applying for any type of loan, your credit score is a crucial factor that determines your eligibility and interest rate. But having a bad credit score doesn’t necessarily mean you can’t get a loan. There are some lenders that specifically offer loans to borrowers with bad credit.

Compare hardship loan rates for bad credit of May 2024

(If you have bad credit, you'll likely get a rate at the top end of the ranges below if approved for a loan.)

Best hardship loans for bad credit 

A bad credit score doesn’t have to hold you back. Below, you’ll find the best hardship loans for bad credit to help you get the financing you need.

Methodology

We evaluated the best hardship loans for bad credit based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Our team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.

How to compare hardship loans for bad credit

If you have a bad credit score, you’re more likely to land higher annual percentage rates (APRs) and may have fewer loan options available to you. Here’s how to compare hardship loans for bad credit.

• APR: The annual percentage rate includes both the interest rate and upfront fees. This is especially important for payday loans, where the loan cost is often expressed as a fee instead of an interest rate. If you pay attention to only the interest rate, the loan might not seem as expensive as it really is.
• Repayment terms: The repayment term directly impacts your loan’s monthly payment. The longer your term, the more you’ll pay in interest. However, you may have a lower monthly payment. Your lender should provide you with a repayment schedule so you can see how much it might be. You can then determine if that works for your budget.
• Loan amount: The loan amount can impact your interest costs as well. Besides credit, the amount you’re eligible for also depends on the lender and your income.
• Collateral: Secured personal loans allow you to use an asset as collateral to qualify for the loan if you have bad credit. You can use collateral such as your house, car, or investment account. However, using collateral can be a big risk. If you can’t make your payments, the lender can seize your asset.
• Cosigner: Some lenders allow a cosigner. Their credit and income is taken into account when your application is processed, which can improve your chances of approval. However, they become responsible for making payments if you default.
• Fees: Some lenders charge fees, such as origination fees. These are typically upfront and bundled with your APR. Origination fees are usually 1% to 12%.
• Time to fund: Some personal loan lenders can fund your loan as soon as the same or next business day. Some can take up to a week. Payday loans and cash advances can usually get your funds in minutes or as soon as the same day.
• Customer reviews: Consult trusted customer review websites such as Trustpilot and the Better Business Bureau. Getting insight from other borrowers’ experiences can help you make an informed decision.

Check out: Average personal loan interest rates

What is a hardship loan?

While there’s no set definition of a hardship loan, someone might borrow one when they are facing financial hardship. In most cases, hardship loans can be used for any purpose.

Personal loans

Personal loans are installment loans that can be secured or unsecured. A secured loan uses collateral, like your house or car, to secure the loan. An unsecured loan typically has a higher APR if you have bad credit. These loans are available from all sorts of lenders, including traditional banks, credit unions, and online lenders.

They have some key benefits during difficult financial situations, including quick approvals, loan amounts as low as $1,000, and repayment terms of one to seven years. They also tend to have lower APRs than credit cards. The average APR for a 24-month personal loan was 12.35% in November 2023, according to the Federal Reserve. The average for a credit card was 21.47%. If you have bad credit, however, your APR will likely be higher than the average.

Learn more: What is a personal loan?

Payday loans

Some borrowers with bad credit may turn to payday loans, which are short-term unsecured loans with fees that are known to amount to incredibly high APRs. The loan is typically repaid by your next payday. Payday loans can come with fees that amount to nearly 400% APR. Many state laws set a maximum for fees from $10 to $30 for every $100 borrowed.

While payday loans may seem like a good option for struggling borrowers, they should only be considered as a last resort.

Payday alternative loans

Certain federal credit unions offer these as alternatives to predatory payday loans. There are two types: PALs I or PALs II.

• PALs I are available in amounts from $200 to $1,000 — and must be repaid within one to six months. You also must be a member of the credit union for at least one month before applying.
• PALs II have loan amounts up to $2,000 and extended terms from one to 12 months. No waiting period is required to be eligible for this type.

For both types, credit unions are prohibited from charging more than 28% APR, compared with the 400% or more charged on some payday loans.

Cash advance

If you only need a small amount to cover you in the short term, a cash advance from either an app or your credit card can be less expensive than other types of loans.

• Cash advance app: Usually repaid by your next paycheck, cash advance apps typically don’t charge interest and don’t require a credit check. You can borrow anywhere from $100 to $750 per pay period, depending on your credit profile and what the app offers. Apps charge fees such as expedited funds fees, subscription fees, or optional tips that can equate to high APRs. However, they can be more affordable than a payday loan. EarnIn and Dave are two options to consider.
• Credit card cash advance: If you have a credit card, you can typically withdraw cash up to your credit limit from an ATM or with a check. However, using your credit card for a cash advance can be an expensive way to borrow. For example, a cash advance starts accruing interest as soon as you withdraw your funds. There is no grace period at all and they usually have higher APRs than a regular credit card charge. Credit card cash advances also have a fee you must pay when you use the service, either a percentage of the transaction or a flat fee.

Check out: Online payday advance apps

Pros and cons of hardship loans

If you need a hardship loan, consider the pros and cons first. Of course, because there are multiple types of hardship loans, some pros and cons may only apply to certain loan types.

Pros

• Fast funding: Many hardship loan types, including personal loans, may allow you to receive your money within just one or two business days. However, some could take up to a week.
• Use for any purpose: Hardship loans can be used for any purpose, including debt consolidation, unexpected medical bills, or major repairs.
• Long repayment terms: Some hardship loans, such as personal loans, can have repayment terms of several years, helping to keep your monthly payments low.

Cons

• Can be predatory: Certain loans, such as payday loans, prey on borrowers in difficult situations and charge them high fees for short-term loans.
• High APRs: Even if you avoid a payday loan and get a personal loan or PAL, you’re likely to pay a higher interest rate than average if you have bad credit.
• Fewer options for bad credit: With bad credit, you may have far fewer options for a hardship loan. Many personal loan lenders require good credit to qualify.
• Lower loan limits: You’re unlikely to qualify for a large loan. Additionally, payday loans and PALs are generally only available in small amounts.
• Can have short repayment terms: Certain hardship loans, such as payday loans and PALs, have repayment terms of just weeks or months, resulting in large payments.

How to get a hardship loan

Are you facing financial difficulties and need to apply for a hardship loan? Here’s what you can do:

1. Check your credit: Knowing your credit score can give you a good idea of what loans you can and cannot qualify for. This can help you narrow down your list of lenders. You can also check your credit for any errors and report to the credit bureaus. Check out AnnualCreditReport.com for free credit reports.
2. Compare your options: Round up a list of lenders that have eligibility criteria you can meet and compare the APRs, loan amounts, and repayment terms from multiple lenders.
3. Prequalify, if possible: You can often prequalify to see possible rates, amounts, and terms from personal loan lenders without any impact to your credit. However, prequalification is not an offer of credit, and your final rate may differ.
4. Complete your loan application: After you’ve compared and chosen the best loan for you, complete the full application. Personal loan lenders will perform a hard credit pull once you formally apply, which can ding your score temporarily.
5. Get your loan: Depending on your situation, your loan could be approved instantly. And, depending on the lender, it could be funded as soon as the same or next business day, or within a week.

Related: What is personal loan pre-approval?

Hardship loan alternatives

Here are other options to help you through financial hardship, some of which are loans and some of which aren’t:

• Home equity loan or line of credit: If you’re a homeowner, you may be able to get a secured loan or HELOC by borrowing against the equity you’ve built up in your home. You’ll need sufficient equity and credit to qualify, but you may be eligible for a lower interest rate since they’re both secured by your home (though this means you could face foreclosure if you can’t make payments). A home equity loan is a lump-sum payment you receive upfront, similar to a personal loan. A HELOC is a revolving account that lets you draw funds up to a certain amount, typically based on the available equity.
• Credit card: While credit cards aren’t ideal for emergencies because of their high interest rates, they may be a better option than payday loans. It’s even better if you can qualify for a card with a 0% introductory rate. As mentioned, the average APR for a credit card was 21.47% in November 2023, according to the Federal Reserve.
• “Buy now, pay later” services (BNPL): With these services, you can split a purchase into multiple fixed monthly payments and, depending on the provider, your credit may not be impacted. Terms vary based on the service, but typical options include interest-free payments every two weeks or monthly installments (with interest) on 3-, 6-, and 12-month plans. Some BNPL services may charge late fees.
• 401(k) loan: If you have money in your employer-sponsored 401(k), you may be able to borrow against your vested balance (if your plan allows 401(k) loans). You’re generally allowed to borrow up to 50% of your vested account balance, up to a maximum of $50,000. You must pay the loan back within five years, but could be required to pay back the entire balance immediately if you leave or lose your job. These loans can have low interest rates, and a credit check isn’t required to qualify (since it’s already your money). Defaulting on these loans can come with tax penalties, however, so carefully review your options before opting for one.

• Hardship withdrawal: An alternative to a 401(k) loan is a hardship withdrawal. The IRS allows you to withdraw from your 401(k) if you’re facing an “immediate and heavy” need. However, the funds are only limited to the amount necessary and you may be subject to a 10% additional income tax.
• Peer-to-peer loan: A peer-to-peer loan is a type of nontraditional financing that allows you to borrow from another individual or investor rather than a bank. They closely resemble personal loans, but you may have an easier time qualifying.
• Government and nonprofit assistance: If you’re facing a truly dire situation and are struggling to pay your bills, consider contacting your local government or nonprofit organizations for assistance. For example, 211 can be a great resource for community services.
• Credit counseling: A credit counseling service can help you develop a debt management plan and work with your creditors on your behalf. Some services may require a small fee. The National Foundation for Credit Counseling is one place to start.

Hardship loan FAQ

Are there guaranteed hardship loans?

Unfortunately, there are no guaranteed hardship loans. However, there are several lenders that offer loans to borrowers with bad credit. You also have other options, including applying with a cosigner or seeking non-loan assistance in the form of grants.

Do I need a cosigner for a hardship loan?

You don’t necessarily need a cosigner for a hardship loan. However, if your credit makes it difficult for you to qualify on your own, a cosigner could improve your chances. Keep in mind that a cosigner is responsible for making payments if you miss them.

Related Articles?

• Where can I get a personal loan?
• Best emergency loans
• Best emergency loans for poor credit
• Best installment loans for bad credit
• Best personal loans with a cosigner
• No-credit-check loans
• What is a personal line of credit?