How Much Can You Borrow With Bad Credit?

The main points

Poor credit loans may accept a FICO score of less than 560 or may require no credit score at all.

Each lender has different borrowing requirements and maximum loan amounts.

Upstart, Avant, and LendingPoint are three of the best bad credit lenders because of their lending models, APR ranges, and payment terms.

A bad credit score is a FICO score of less than 670 or a Vantage score of less than 661. No matter which credit scoring model you prefer, a low score can qualify you for a loan and make it difficult to get the money you need.

However, there are mortgage lenders who provide loan sums ranging from $1,000 to $50,000. Keep in mind that the maximum amount given will vary depending on your creditworthiness and the underwriting standards of the lender.

How do lenders decide how much money you may borrow?

Every lender has their own set of eligibility rules that affect whether you qualify, the lender's APR, and how much you can borrow. Lenders that serve people with poor credit often have relaxed eligibility criteria, which makes it easier to get approved.

Lenders will perform a rigorous credit check to look at your credit report when determining your eligibility. Your credit report includes all of your payment information and credit history, including any missed payments, open accounts, and your debt-to-income ratio.

Credit score and history

Most lending institutions will not accept borrowers with a score lower than 670. However, for those with a credit score of at least 560 or less, they do not consider the score when considering the application.

When applying for a loan, one of the most essential eligibility parameters is definitely your credit score. Lenders dig deeper into your credit history to get a better view of your score, which mainly includes factors like how much debt you have and whether you pay your bills on time.

The higher your score, the more "trustworthy" you appear to lenders and the more loans you are allowed to take out. Good credit shows your debt repayment history and shows that you have not borrowed more than your income. As a result, the higher your credit score, the more you may borrow. For example, Earnest has a maximum borrowing limit of $250,000 for those with excellent credit (800 and up).

Eligibility specifications

Each lender will have different criteria when assessing eligibility and risk of default, but lenders may look at different financial factors when it comes to a loan for poor credit. If the loan is advertised specifically for people with bad credit, the lending institution will likely consider factors other than just credit score.

Upstart, for example, offers unsecured loans of up to $50,000 and requires no credit score. Although it requires a minimum income of $12,000, it will count towards the credit score. Lending Point is another lender that bases itself on multiple factors rather than strictly looking at results.

Debt-to-income ratio

The debt-to-income ratio (DTI) is the percentage of the amount you owe per month versus the amount you earn per year. To determine your DTI, total up all of your monthly debt obligations, such as school loans, vehicle loans, mortgage payments, and credit card balances, and divide the entire monthly income by that figure.

Ideally, most lenders will prefer a DTI of less than 36 percent, but some will accept rates higher than 50 percent. The lower your DTI, the more credible you are to the lender, giving you a better chance of getting the money you need.

If your DTI is over 50 percent, consider taking the time to pay off your current loan before getting another one. If you need money urgently, check for lenders who don't require DTI information or accept higher interest rates.

3 best lenders for bad credit

Even when you have a bad credit score, there are many different lenders you should consider, which makes it important to shop around and find the best loan terms. Here are some of the best bad credit lenders.

Upstart: Upstart takes more than just credit history into account when evaluating an app. They factors into the applicant's employment history, educational background, and even field of study. If approved, the upstart promises to make the loan amount available immediately, in just one day. Upstart also pays lenders directly. The annual interest rate on start-up loans ranges from 6.7 percent to 35.99 percent.

Avant: Avant offers a quick and easy three-step application process and explores potential interest rate options that won't affect your credit score. In addition, applicants can use other family members to help qualify for the loan. Avant regularly gives out loans to applicants whose credit score is less than 600. The annual interest rate ranges from 9.95 percent to 35.99 percent.

LendingPoint: LendingPoint approval depends on a variety of factors. It uses proprietary technology designed to create a complete profile of the applicant, which goes beyond a credit score. It also offers low loan amounts, as low as $2,000, allowing people with poor credit to borrow less and use it to improve credit through responsible repayment. The annual interest rate ranges from 7.99 percent to 35.99 percent.

How to get a loan with bad credit

Getting approved for a personal loan with bad credit can be difficult, but it is not impossible. Find lenders that specialize in bad credit loans or use a qualified co-signer to increase your chances of getting approved.

While it may seem tempting to apply once you've found a lender you qualify for, read the terms and conditions first to check for any hidden fees or requirements on the primary website. Also, if the lender offers pre-qualification, take advantage of it before you start applying.

Prequalificaiton allows borrowers to check their eligibility odds and anticipate terms without credit impact. Since loans for people with poor credit history often come with higher rates and unfavorable terms, it is best to compare possible offers before making a final decision.

How do lenders measure eligibility?

To determine how much you can borrow -- and your odds of getting public approval -- the lender will use a process called underwriting. The guarantor's job is to access your financial history to tell the lender how much "risk" they may be taking as a borrower.

When an underwriter looks at your credit report, it is usually looking for good credit and a low chance of default. However, default risk will still be assessed when it comes to bad credit loans, but underwriting specifications may focus more on factors such as income and education when determining risk.

To increase your chances of getting the maximum amount, do a thorough review of your lender's qualifications and your finances. If you meet all the requirements, you will most likely be approved or offered a larger loan amount.