Best Hardship Loans for Bad Credit in 2024

Applying for a hardship loan is essentially the same process as applying for any personal loan. While the details may vary depending on the lender, here’s the general process you may go through:

• Review your budget. Create a budget and determine how much you can afford to borrow. To help with this, examine areas where you can cut back so you won’t have to borrow as much.
• Check your credit score. Check your credit score for free by using LendingTree Spring. These three little numbers determine which lenders you qualify for and at what rate. If your credit background is poor, consider taking some time to improve your credit score.
• Prequalify for multiple hardship loans. Choose at least three lenders and see what rates, terms and amounts you may be eligible for. Prequalifying for a personal loan won’t impact your credit score, but keep in mind that these offers aren’t set in stone.
• Verify your information. Once you choose a lender, you may have to fill out a formal application and verify your identity and income. Your lender will also perform a hard credit pull. This can cause your credit score to temporarily drop by a few points.
• Close on your loan. In the final step, you’ll need to sign a personal loan contract, agreeing to repay the debt on time and in full. Once you’ve signed your agreement, your lender will send your funds and you’ll have to start making payments.

How to get a hardship loan with bad credit

Bad credit can make it difficult — but not impossible — to get a hardship loan. If your credit score leaves a lot to be desired, but you need a personal loan quickly, you can apply for a bad credit loan or use one of the following strategies:

• Add a cosigner. It may be easier to qualify for a cosigner loan than a traditional loan, since there are two people agreeing to repay the debt instead of one. A personal loan cosigner can be a family member or friend. Just make sure your cosigner understands that they are equally responsible as you are for repaying the loan.
• Apply for a secured loan. This can come with some risks, as secured loans require collateral — a vehicle, real estate or savings account, for example. The collateral serves as your guarantee to the lender to repay the loan — if you’re unable to, your lender can seize the asset. However, secured loans tend to come with lower rates than unsecured loans and may be easier to qualify for.

Hardship loans aren’t a one-size-fits-all solution to your financial problems — in some cases, they may not be a good fit at all. If so, consider these alternatives to hardship loans to help make ends meet:

• Credit counseling: If you’re financially struggling because of debt, a credit counselor can help you come up with a plan and advocate to your lenders on your behalf. If you qualify, your credit counselor can put you on a debt management plan.
• Family loans: If your loved ones are willing to help you cover expenses, consider taking out a family loan. This can help you save money on interest and fees. However, it can be a source of tension, so be sure to write out a loan agreement specifying a payment schedule, fees and interest.
• 401(k) hardship loans: If you’ve built up a retirement account at work, you may be able to pull funds in what’s known as a 401(k) hardship loan. To avoid paying taxes on this loan, the IRS dictates that the money must be for an “immediate and heavy financial need” and limited to a “necessary” amount.
• Payday alternative loans: Though uncommon, payday alternative loans (PALs) are a much more affordable option than payday loans. PALs are offered by credit unions and come with an APR cap of 28%.
• Buy now, pay later: Many retailers offer buy now, pay later as an option to finance products, including groceries. This is a type of installment debt that allows you to split expenses into four equal payments with no interest or fees. Buy now, pay later apps can be found with most large retailers.
• Cash advance apps: Some apps allow you to borrow money ahead of your paycheck without interest or credit checks. However, paycheck advance apps typically only offer small loans and are often a short-term solution to deeper financial issues.
• Home equity loans or lines of credit: If you own your home, you can tap into the equity you’ve built into it using a home equity loan or home equity line of credit (HELOC). Keep in mind that these types of debts are secured by your home, so if you’re unable to keep up with payments, you could lose the roof over your head.
• Student loan hardships: If keeping up with your student loan payments is a struggle, you can apply for student loan deferment or forbearance depending on your lender. In some cases, you may even qualify for student loan forgiveness, though you may need to meet strict qualifications.

Hardship loans you should avoid

Some companies with predatory lending practices specifically target consumers who are financially struggling. These types of hardship loans typically don’t come with credit checks and are quickly funded. While not all no-credit-check lenders are bad, some charge sky-high rates and fees that can trap you in a cycle of debt.

It’s best to avoid the following types of loans:

• Payday loans: These types of hardship loans can come with nearly 400% APRs. Payday loans are typically capped at $500 and borrowers usually have two to four weeks to repay it. The short repayment terms, on top of their three-digit APRs, can lead to consumers having to take out more debt to pay off the original payday loan.
• Pawnshop loans: This type of debt can also come with large fees and short repayment terms. In some cases, pawnshop loans may require that you provide valuable collateral — and if you can’t repay the debt, your lender can keep it.