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Secured vs Unsecured

Secured vs Unsecured Loan for Bad Credit

Your best loan options when your credit score is below 620. Secured routes, unsecured alternatives, and how to rebuild your credit to access better rates.

Credit Score Tier: Your Options and Rates

Credit ScoreTierUnsecured Personal LoanSecured Personal LoanBest Option
760+Excellent6% - 9%3% - 6%Unsecured (fast, no asset risk)
700 - 759Good9% - 15%3% - 7%Either (unsecured if no assets to risk)
640 - 699Fair15% - 24%4% - 8%Secured saves significant money
580 - 639Poor24% - 36%5% - 8%Secured strongly recommended
500 - 579Very Poor32% - 36%+ (or declined)5% - 8% (savings-secured)Secured only or credit-builder loan
Below 500DamagedUsually declinedSavings-secured (any score)Credit-builder loan to rebuild first

Your Options: From Best to Worst

1
Savings-secured personal loan3-8%
Pros: Lowest rates available at any credit score. Rebuilds credit.
Cons: Requires savings to pledge. Funds frozen during loan.
2
Credit-builder loan6-16%
Pros: Designed for bad/no credit. Builds savings and credit simultaneously.
Cons: Funds locked until paid off. Small amounts ($300-$2,000).
3
Credit union personal loan9-18%
Pros: More flexible than banks. Member-focused underwriting.
Cons: Must be a member. Requires application and qualification.
4
Secured credit card20-28% APR on revolving
Pros: Easy to get with deposit. Builds credit with responsible use.
Cons: High rate if you carry a balance. Use only for small purchases, pay in full.
5
Subprime unsecured personal loan25-36%
Pros: No asset required. Quick funding.
Cons: Extremely expensive. High risk of debt spiral.
AVOID
Payday loans / Title loans100-700% effective APR
Pros: Easy approval.
Cons: Trap borrowers in debt cycles. Title loans risk vehicle repossession.

6 Steps to Improve Your Credit Score

1
Pay every bill on time
Payment history is 35% of your FICO score. Set up autopay for minimums on all accounts. One missed payment can drop your score 60-100 points.
2
Reduce credit utilization below 30%
If your credit card limit is $5,000, aim to keep balances below $1,500. Utilization is 30% of your score. Paying down cards has an immediate positive effect.
3
Dispute errors on your credit report
Get free reports from annualcreditreport.com. Dispute any inaccurate late payments, accounts you do not recognize, or incorrect balances with all three bureaus (Equifax, Experian, TransUnion).
4
Do not close old accounts
Closing a credit card reduces your total available credit and shortens your average account age. Keep old accounts open even if unused (just use them occasionally to keep them active).
5
Limit new credit applications
Each hard inquiry reduces your score by 2-5 points for up to 12 months. When rate-shopping, keep all loan applications within a 14-45 day window so they count as one inquiry.
6
Open a secured credit card
A secured card requires a deposit (typically $200-$500) that becomes your credit limit. Use it for small regular purchases and pay the full balance monthly. Positive history builds quickly.

Compare Options for Bad Credit

These platforms work with a range of credit profiles. Check your rate without affecting your score.

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Secured Personal Loans
How savings-secured loans work
Rates by Credit Score
Full APR ranges across all tiers
Default Consequences
What happens if you cannot repay

Frequently Asked Questions

Can I get an unsecured loan with a 600 credit score?

Yes, but your options are limited and rates will be high. Most major lenders require 620-640 minimum for unsecured personal loans. At a 600 score, credit unions are often the best option - many have more flexible standards for members. Online lenders like Upgrade, Avant, and OppFi serve borrowers in the 580-620 range but charge rates of 25-36% APR. A secured option (savings-secured loan or secured credit card) is almost always a better path at this score.

What credit score is needed for a secured loan?

Secured loans are more accessible for borrowers with imperfect credit. A savings-secured or CD-secured personal loan typically has no minimum credit score since the lender's risk is fully covered by the deposit. Home equity loans often approve borrowers with scores as low as 620-640. Auto loans are available at scores as low as 500-580 through subprime lenders, though at rates of 15-25%.

What is a credit-builder loan and how does it work?

A credit-builder loan is a secured loan designed specifically for people with no credit history or poor credit. The lender holds the loan funds in a locked savings account while you make monthly payments. Once the loan is paid off, you receive the funds. This builds a 12-24 month history of on-time payments on your credit report. Many credit unions and some online platforms (Self, Credit Strong) offer credit-builder loans of $300-$1,000.

Which predatory loans should I avoid with bad credit?

Payday loans (200-700% effective APR) and title loans (secured by your vehicle at 100-300% APR) are the most predatory products marketed to borrowers with bad credit. Title loans are particularly dangerous because your car can be repossessed quickly if you miss even one payment. Payday installment loans from non-bank lenders can also carry triple-digit APRs disguised by complex fee structures.

How can I improve my credit score to access better loans?

The six most impactful actions: (1) Pay every bill on time for 12+ months - payment history is 35% of your FICO score. (2) Reduce credit card balances below 30% of your credit limit (credit utilization is 30% of your score). (3) Dispute errors on your credit report with all three bureaus. (4) Do not close old accounts - length of credit history matters. (5) Limit new hard inquiries to 2-3 per year. (6) Open a secured credit card and pay it off monthly to build positive history.