Personal Loans for 500 Credit Score: Your Complete Guide to Getting Approved in 2025

Having a 500 credit score personal loan might seem impossible, but it’s not. While a 500 credit score falls into the “poor” credit category, several lenders still offer financing options for borrowers in this situation. The key is knowing where to look and understanding what to expect in terms of rates, terms, and requirements.

In 2025, the lending landscape has evolved to become more inclusive. Many financial institutions now use alternative underwriting methods that look beyond just your credit score. This means even with a 500 credit score, you have options.

Understanding Your 500 Credit Score

A 500 credit score places you firmly in the poor credit range, as scores below 580 are generally considered bad credit by most lenders. This score indicates to lenders that you may have had significant payment issues in the past.

Your FICO score is calculated based on five key factors:

Payment history (35%) – Your track record of making payments on time
Credit utilization (30%) – How much of your available credit you’re using
Length of credit history (15%) – How long you’ve had credit accounts
Credit mix (10%) – The variety of credit types you have
New credit (10%) – Recent credit inquiries and new accounts

Understanding these factors can help you work on improving your score while you search for a loan.

Best Personal Loan Options for 500 Credit Score

When looking for a 500 credit score personal loan, you’ll find several lenders willing to work with you, though terms may not be as favorable as those offered to borrowers with higher scores.

Top Lenders for Bad Credit Personal Loans

Lender	Min Credit Score	APR Range	Loan Amount	Key Feature
Upstart	300	6.7% – 35.99%	$1,000 – $75,000	AI-driven approval process
OneMain Financial	No minimum	18.00% – 35.99%	$1,500 – $20,000	Secured loan options
Avant	580	9.95% – 35.99%	$2,000 – $35,000	Quick funding
Universal Credit	560	11.69% – 35.99%	$1,000 – $50,000	Business loan options
Oportun	No minimum	Up to 35.99%	$300 – $10,000	Small loan amounts

Upstart: Best for AI-Driven Approval

Upstart stands out because it accepts credit scores as low as 300 and even considers applicants with no credit history. The lender uses artificial intelligence to evaluate factors beyond your credit score, including your education, employment history, and income potential.

Key benefits:

Considers alternative data points
Fast funding – 99% of loans funded next business day
No prepayment penalties
Loan amounts up to $75,000

OneMain Financial: Best for Secured Loans

OneMain Financial doesn’t require a minimum credit score when you apply directly with them. They offer both secured and unsecured personal loans, which can help you qualify for better terms.

Standout features:

No minimum credit score requirement
Secured loan options with collateral
Co-applicant options available
Physical branch locations for in-person service

Alternative Loan Options for Poor Credit

Beyond traditional personal loans, several alternative options exist for borrowers with a 500 credit score.

Payday Alternative Loans (PALs)

Federal credit unions offer PALs with APRs capped at 28%. These loans range from $200 to $2,000 with terms of one to 12 months. You must be a credit union member to qualify.

Credit Builder Loans

These unique loans help you build credit while borrowing money. The loan amount is held in a savings account while you make payments, and you receive the funds after completion.

Small Bank Loans

Many local banks and credit unions offer small-dollar loans to their customers. For example, Bank of America’s Balance Assist allows customers to borrow up to $500 for just a $5 fee.

Cash Advance Apps

While convenient, cash advance apps can be expensive. The Center for Responsible Lending found average APRs of 367% when repaid in seven to 14 days.

How to Improve Your Chances of Approval

Getting approved for a personal loan with a 500 credit score requires strategic preparation. Here are proven methods to strengthen your application:

Review and Clean Up Your Credit Report

Before applying, obtain free copies of your credit reports from all three major bureaus. Look for errors, outdated information, or fraudulent accounts that could be dragging down your score.

Consider a Co-signer or Co-borrower

Adding someone with good credit to your application significantly improves your approval odds and may result in better terms. However, both parties are responsible for repayment.

Provide Collateral

Secured loans use assets like vehicles, savings accounts, or other valuables as collateral. This reduces the lender’s risk and often results in lower interest rates.

Demonstrate Stable Income

Lenders want to see consistent income that can support loan payments. Gather recent pay stubs, tax returns, and bank statements to prove your ability to repay.

Lower Your Debt-to-Income Ratio

Your DTI ratio compares your monthly debt payments to your gross monthly income. Most lenders prefer ratios below 36%, though some may accept higher ratios for borrowers with compensating factors.

What to Expect with a 500 Credit Score Loan

Borrowers with 500 credit scores should set realistic expectations about loan terms and costs.

Interest Rates and Fees

According to recent data, borrowers with poor credit (below 580) can expect average interest rates around 31.48%. Additionally, many lenders charge origination fees ranging from 1% to 10% of the loan amount.

Loan Amounts and Terms

You’ll likely qualify for smaller loan amounts and shorter repayment terms. Most lenders cap loans at $10,000 to $25,000 for borrowers with poor credit, with terms typically ranging from two to five years.

Monthly Payments

Higher interest rates mean higher monthly payments. For example, a $10,000 loan at 30% APR over five years would cost approximately $264 per month.

Shopping for Your Personal Loan

The key to finding the best 500 credit score personal loan is comparison shopping. Here’s how to approach it strategically:

Step 1: Check Your Credit Score

Know your exact credit score before applying. This helps you target appropriate lenders and avoid unnecessary hard inquiries.

Step 2: Prequalify with Multiple Lenders

Many lenders offer prequalification with soft credit checks that won’t impact your score. This lets you compare rates and terms without commitment.

Step 3: Compare Total Costs

Look beyond just the interest rate. Consider origination fees, late fees, and prepayment penalties when calculating the total cost of borrowing.

Step 4: Read the Fine Print

Understand all terms and conditions before signing. Pay attention to automatic payment discounts, rate adjustment clauses, and default consequences.

Avoiding Predatory Lenders

Borrowers with poor credit are often targets for predatory lending practices. Watch out for these red flags:

Guaranteed approval regardless of credit
Requests for upfront fees
Pressure to sign immediately
Unclear or missing terms and conditions
APRs exceeding 400%

Stick with established, regulated lenders and avoid payday loans, title loans, and other high-cost alternatives whenever possible.

Building Credit While Repaying Your Loan

Once approved for a personal loan, use it as an opportunity to rebuild your credit:

Make All Payments On Time

Payment history accounts for 35% of your credit score. Set up automatic payments to ensure you never miss a due date.

Keep Credit Utilization Low

If you’re using the loan to pay off credit cards, don’t run up new balances. Keep utilization below 30% of your available credit limits.

Monitor Your Credit Progress

Use free credit monitoring services to track your score improvements over time. Many see increases within three to six months of consistent on-time payments.

Alternative Credit Building Strategies

While working on loan approval, consider these additional credit-building techniques:

Become an Authorized User

Ask a family member or friend with good credit to add you as an authorized user on their account. Their positive payment history can boost your score.

Use Rent and Utility Reporting Services

Services like Experian Boost can add your rent and utility payments to your credit report, potentially increasing your score.

Consider a Secured Credit Card

Secured cards require a cash deposit but can help establish positive payment history when used responsibly.

Frequently Asked Questions

Can I get a $10,000 loan with a 500 credit score?

While challenging, it’s possible to get a $10,000 loan with a 500 credit score, especially if you have strong compensating factors like high income, collateral, or a qualified co-signer.

How long does it take to get approved?

Approval times vary by lender, ranging from minutes to several days. Online lenders typically provide faster decisions than traditional banks.

Will applying hurt my credit score?

Prequalification uses soft credit checks that don’t affect your score. However, formal applications require hard inquiries that may temporarily lower your score by a few points.

What’s the easiest loan to get with bad credit?

Payday loans are often the easiest to obtain but come with extremely high costs. For better alternatives, consider credit union PALs or secured personal loans.

The Bottom Line

Getting a 500 credit score personal loan requires patience, research, and realistic expectations. While you’ll face higher interest rates and stricter terms, options do exist. Focus on lenders that specialize in bad credit loans, consider secured options or co-signers, and use the loan as an opportunity to rebuild your credit.

Remember, improving your credit score even by 50-100 points can significantly expand your borrowing options and reduce costs. Consider waiting to apply if you can quickly address obvious credit report errors or pay down existing debt.

The lending landscape continues to evolve, with more lenders recognizing that credit scores don’t tell the complete story of a borrower’s creditworthiness. By understanding your options and preparing a strong application, you can find financing even with a 500 credit score.

For the most current information on personal loans for low credit scores, always check directly with lenders as terms and requirements change frequently.

Note: This article is for informational purposes only. Consult a financial advisor before making any significant lending decisions.