When unexpected expenses or surprise financial situations hit, you might find yourself looking into hardship loans for bad credit. These loans can help provide several thousand dollars to cover unforeseen expenses such as medical care, vehicle repairs or ordinary expenses while coping with a job loss or other disruption to finances. Learn the most favorable loans for these situations as you work to overcome your financial challenges.
Quick Look: The Best Hardship Loans for Bad Credit
- Best for Short-term Loans: Avant
- Best for Lower Qualification Requirements: Upstart
- Best for Flexible Loan Terms: OneMain Financial
- Best for Fast Loan Approvals: LendingPoint
- Best for Small Loan Amounts: Universal Credit
Best Hardship Personal Loans for Bad Credit
A short-term loan could help you get through hard times while paying expenses for the next few years when you can’t finance them another way. Here’s a look at the best hardship loans for bad credit alongside information about what makes these options great.
1. Best for Short-term Loans: Avant
Most loans that fit this criteria require that you agree to repayment terms of 24-36 months. In contrast, Avant offers the option for a 12-month loan. Or if you need a larger sum, you can finance the expense for up to 60 months to help keep the payments manageable.
Borrows don’t need impressive credit to qualify. A credit score of 580 or above can qualify you.
Pros
- More loan repayment term options than most
- Lower credit score requirements compared to other lenders
- Can get funding within one business day
Cons
- Origination fee makes loans more expensive
- Administrative fees
- Loans capped at $35,000
- Not available in Hawaii, Iowa, Maine, Massachusetts, New York, Vermont or West Virginia
2. Best for Lower Qualification Requirements: Upstart
If you have a limited credit history, you can still get a loan. Upstart offers a good option for a hardship loan with bad credit or minimal credit. Your credit score could be as low as 300 and you might still qualify.
And if you get back on your financial footing quickly, you won’t have to pay early fees for paying off your loan. Choose from loan terms of 36 to 60 months.
Like many of these lenders, with Upstart you’ll find yourself paying an origination fee for the loan. And if you fail to make your payments, you’ll be charged late fees of up to 5% so be careful with these loans.
Pros
- Qualify for the loan even if you have low credit and limited credit history
- Pay off the loan early with no penalties
- Enjoy fast loan funding, often within one business day
Cons
- Late fees can make the loan significantly more expensive
- The origination fee could be as much as 10%
- If you want the loan agreement on paper and not just digital, there’s a fee for that
3. Best for Flexible Loan Terms: OneMain Financial
Get a loan of just $1,500 to help you get by for a little while. Then repay that loan without incurring an early payoff penalty. OneMain Financial is known for its flexible loan terms and favorable options that help get people back on their feet following a surprise expense.
You can qualify for the loan even with poor or fair credit. The origination fees in some states are only $25 to $500. In others, they’ll be a percentage of the loan up to 10%. The interest rates for the loans are high, but that reflects the risk involved for the lender in providing hardship loans for poor credit and more flexible options to meet borrowers' needs.
Pros
- Possible for borrows to get loans even when they have poor credit
- Borrowers do not incur an early payoff fee
- Option to get a smaller loan of just $1,500
- Prequalification only requires a soft credit check
- Get the money within a few business days once finalized
- Secured loan options when you have collateral, which could lower interest rates
Cons
- Higher interest rates than other lending options
- Loan origination fee
- No option for a co-signer
4. Best for Fast Loan Approvals: LendingPoint
When you’re facing a financial bump in the road, you likely need money quickly to avoid credit card debt or other high-interest loans or financing. LendingPoint offers some of the fastest approval timelines in the industry.
You can get loans of $2,000 to $36,500 to help with short-term expenses. The terms the lender offers include 24-72 months. Depending on where you live, you will pay a loan origination fee but it is generally not as high as some of the other options.
Pros
- Same-day loan approvals
- Funding can be available within one business day once you finalize documents
- No early payoff fees
- Can prequalify with a soft credit inquiry
Cons
- Higher credit score requirements
- Cannot apply for a joint or co-signed loan
5. Best for Small Loan Amounts: Universal Credit
Get a loan of just $1,000 to help make ends meet and avoid other costly penalties while meeting your needs. The largest challenge with this loan is that it comes with high origination fees of 5.99% to 9.99%. And those with poor or limited credit will pay exorbitant interest rates of up to 35.99%. So you need to be a well-qualified borrower for this loan to make sense for you.
To qualify, you’ll need a credit score of no less than 560 as well as a debt-to-income ratio of 75% or less.
Pros
- Can be used to pay off creditors directly
- Apply with a co-applicant for better terms
- Get funding within one business day
Cons
- High interest rates
- High origination fees
- If you get behind on repayments, the late fees can make the loan unaffordable
What Are Hardship Loans?
Hardship loans are personal loans that can help when you face serious financial struggles. They work a great deal like an emergency loan to cover the cost of living or surprise financial situations to help you keep things afloat so you avoid eviction or losing property because of financial strains.
These loans serve as a stop-gap for helping you keep your essentials while easing the burden on your budget. That way you don’t have to give up things like groceries or gas. While these loans are helpful in trying situations, they also come with high interest rates, so you’ll need to compare your options for staying afloat based on the fees and interest you’ll pay over the course of the loan. Avoid getting into more debt in high-interest situations when you can avoid it.
How Does a Hardship Loan Work?
Hardship loans offer a lump sum of money, generally within a few business days of applying for the loan. Some lenders offer options for secured and unsecured loans but the most common form is unsecured.
You’ll need some basic credit history to qualify and generally at least a fair credit score. Some lenders are more flexible and offer options for those with low credit or limited credit, but those loans are harder to find and qualify for. Some lenders also require low debt-to-income ratios to help ensure you can repay the loan.
Types of Hardship Personal Loans Available
A variety of loan types are available even within the personal loan category. Here’s a look at some of the options you might consider:
- Unsecured (no collateral required)
- Secured (requires collateral)
- Retirement plan hardship withdrawal
- Payday
- Peer to peer (P2P)
Pros and Cons of Hardship Loans for Bad Credit
Before applying for loans, review these pros and cons that hardship loans offer to make sure it’s the right financial move for you.
Pros
- Ability to get funds fast
- Can be used for a variety of use cases
- Might help with avoiding high interest on other accounts, such as credit cards or medical loans
Cons
- High interest rates
- Increases your debt during hard times
- Repayment terms are not very flexible
- Maximum funding might not be enough to help you meet your financial commitments
How to Get a Hardship Loan with Bad Credit: 5 Steps to Follow
Once you decide on the best financial tool to help you get out of your challenging financial situation, you can follow these simple steps to get a hardship loan.
- Evaluate needs: Take some time to go over your budget and be realistic about what you have and what you need to get by. The lower the loan you take out, the better the terms and easier repayment will be.
- Review your credit report: Knowing your credit score will help you know what you’ll qualify for to get a better idea of your options. Knowing where your credit is will help you make informed decisions about what loan and lender are best for you.
- Apply for prequalification: Prequalification does not require a hard credit pull, which means it won’t affect your credit score. By going through a few lenders for this process, you’ll have a chance to review credit terms based on what you qualify for.
- Complete a formal application: Once you decide which lender is best based on your needs, you can complete a formal application with that lender. This will require a hard credit pull, so you might see minor changes in your credit at this point. That’s why it’s important to go through prequalification first so you don’t do this process too many times and tank your credit score.
- Finalize your loan: Once you complete the paperwork for your loan, you can often get funding within a few business days. Use the money to pay off high-interest debt or purchase essentials.
Quick Tips for Managing a Hardship Loan
Learn how to manage your loan for the best outcomes and to avoid financial penalties for late payments or other situations.
- Work with a co-signer for better terms. This person would take on the debt if you were unable to pay. That’s why it can help make the terms more favorable because the lender will have another place to go if you default.
- Apply for a secured loan if you have collateral to put up. This will provide more favorable rates, though you want to make sure you can repay the loan to avoid losing your collateral.
- Avoid taking out a loan you can’t realistically afford. Review the monthly payments you’ll be committing to and see whether you can afford it long-term as you get back on your feet.
- Know when payments are due and commit to making the payments. When you sign the paperwork, make sure you know how much your payments are for and how to make them. Late fees will only add to the cost of your loan.
- Pay off the loan when you can to avoid continuing to pay interest. Review your debt and pay off the highest-interest debts first to make your monthly budgets manageable.
Fast Financing to Help with Surprise Expenses
Hardship loans can help borrowers get out of surprise financial situations, including job loss. While the loan can increase your overall debt, it can help protect assets and avoid hard situations like eviction, which can make it more challenging to hold down a job and stay financially sound. Evaluate your options and choose an affordable loan based on your situation.
Frequently Asked Questions
What qualifies for a hardship loan?
Hardship loans are generally ideal for paying expenses including medical bills, tuition, rent/mortgage payments, funeral expenses and home repairs. Explaining your financial situation could help you qualify for one of these loans.
Do you pay back a hardship loan?
Yes, you’ll need to be prepared to repay a hardship loan, regardless of whether you borrowed from a lender or your retirement plan balance.
What’s the difference between secured vs. unsecured loans?
A secured loan requires that you put forth collateral to qualify for the loan. That way, the lender has something to seize and pay off your debt if you default. An unsecured loan does not require collateral, but will often come with higher interest rates as a result.
How long does it take to receive a hardship loan?
Hardship loans provide funding within a few business days of completing all required documents.
About Rebekah Brately
Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.