What Is Predatory Lending?

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If you need to borrow money, there are a wide variety of legitimate personal loan companies that offer fair rates and terms. But unfortunately, there are also plenty of predatory lenders and scammers looking to take advantage of borrowers desperate for a loan.

If you’re wondering what predatory lending is and how to avoid it, here’s what you should know:

What is predatory lending?

In general, predatory lending is any practice that inflicts unfair or abusive terms on borrowers — such as extremely high rates and fees.

This kind of lending often targets borrowers with poor credit scores who have a harder time qualifying for loans. However, anyone can be the victim of a predatory loan if you don’t know what to watch out for.

How to spot a predatory lender

While there’s no official consensus of what constitutes predatory lending, there are several common red flags of predatory lenders to watch out for when you’re shopping for a personal loan, including:

Poor consumer reviews

Reputable lenders sometimes have dissatisfied customers, but you should be able to find a reasonable amount of good reviews. If the overwhelming majority of consumer reviews for a lender are negative, there’s a good chance the lender is predatory.

There are several resources available to help you research lender reviews, including:

Learn More: How to Get a Personal Loan

Seems too good to be true

Applying for a loan online is often a quick and easy process. But if the lender skips common application steps and offers you a loan that you likely wouldn’t qualify for from other lenders, there’s a good chance it’s predatory.

For example, predatory lenders might:

  • Push you to borrow more than what you asked for
  • Skip a credit check
  • Not ask about your existing debt or income
  • Encourage repeat borrowing
  • Require automatic payments as the only possible payment option

Trust your gut — if a loan seems too good to be true, it probably is.

Check Out: How Long It Takes to Get Approved and Get a Personal Loan

No mention of APR or fees

Reputable lenders want you to know exactly how much a loan will cost you over time, which means making sure you know your exact annual percentage rate (APR). Keep in mind that APR includes not only your personal loan interest rate but also any fees you’ll pay over the life of the loan, such as origination fees.

Legally, lenders must disclose their loan rates and fees. But a predatory lender will likely bury this information in fine print rather than clearly stating what you can expect to pay.

Watch out! Predatory loans often come with extremely high APRs that make it extremely difficult to pay them off. For example, say you borrow $500 from a payday lender. State law laws dictate the specific costs associated with payday loans, which can range from $10 to $30 for every $100 borrowed.

If the lender charges you $15 per $100, you’d owe a total of $575. While this might not seem like much, note that with a payday loan, you must repay your balance by your next paycheck — and in many cases, by auto-withdrawal. If you don’t have the money by your next paycheck, you could be hit with fees from your bank and the lender. Ultimately, you could end up paying 300% up 500% APR, depending on the lender.

Learn More: Debt Consolidation Loans

Signs of a reputable lender

Thankfully, there are many reputable personal loan lenders that don’t engage in predatory lending practices. Here are some signs of a trustworthy lender:

  • Rates and terms are clearly disclosed. A reputable lender will clearly advertise the APRs you can expect on their loans. This includes both rates as well as any fees.
  • A credit check and income documentation are required. When you apply for a loan, the lender will perform a credit check to determine your creditworthiness as well as your interest rate. You’ll also typically need to submit documentation showing your income and other debts.
  • You can find positive reviews of the lender. A reputable lender will have satisfied customers, which means you’ll be able to find positive reviews.
  • The lender offers tools and education to their borrowers. Reputable lenders don’t want borrowers to take on more debt than they can handle. Because of this, many lenders provide tools, calculators, and other educational resources to help you decide whether their loan product is right for your financial situation.

If you’ve found a reputable lender to work with, be sure to consider how much a loan will cost you before you borrow. This way, you can be prepared for any added expenses.

You can estimate how much you’ll pay for a loan using our personal loan calculator below.

Enter your loan information to calculate how much you could pay

Total Payment $
Total Interest $
Monthly Payment $

With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan.

Alternative loan options to predatory lending

If you have poor credit, you might feel like predatory lenders are your only option for accessing cash in a hurry. But there are a few alternatives available to you that don’t come with astronomical rates and fees and that won’t trap you in a downward spiral of debt.

Here are a few potential options to consider:

Personal loan from a reputable lender

You’ll typically need good to excellent credit to qualify for a personal loan — a good credit score is usually considered to be 700 or higher.

However, there are also several lenders that offer personal loans for bad credit. While these loans tend to have higher interest rates compared to good credit loans, they’ll most likely be much lower than what you’d pay with a predatory lender.

Tip: If you already have an account with a bank or credit union, you might be able to qualify for a personal loan with them even if you have poor credit. Additionally, you could be eligible for a loyalty rate discount by taking out a loan with them.

You might also have an easier time qualifying for a personal loan if you apply with a creditworthy cosigner. Not all lenders allow cosigners on personal loans, but some do. Even if you don’t need a cosigner to get approved, having one might get you a lower interest rate than you’d get on your own.

If you decide to take out a personal loan, be sure to consider as many lenders as possible to find the right loan for your needs. Credible makes this easy: You can compare your prequalified rates from our vetted partner lenders below in just two minutes — without affecting your credit.

Lender Fixed rates Loan amounts Min. credit score Time to fund Loan terms (years)

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

9.95% – 35.99% APR $2,000 to $35,000** 550 As soon as the next business day (if approved by 4:30 p.m. CT on a weekday) 2, 3, 4, 5*
  • Fixed APR: 9.95% – 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 550
  • Loan amount: $2,000 to $35,000**
  • Loan terms (years): 2, 3, 4, 5*
  • Time to fund: As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except CO, IA, HI, VT, NV NY, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: Avant
  • Loan Uses: Debt consolidation, emergency expense, life event, home improvement, and other purposes
  • Min. Income: $1,200 monthly

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

6.79% – 17.99% APR $10,000 to $50,000 700 Next business day 3, 4, 5, 6
  • Fixed APR: 6.79% – 17.99% APR
  • Variable APR: N/A
  • Min. credit score: 700
  • Loan amount: $10,000 to $50,000
  • Loan terms (years): 3 to 6
  • Time to fund: Next business day
  • Fees: No prepayment penalty
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, home improvement, self-employment, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

4.99% – 35.99% APR $5,000 to $50,000 600 As soon as 1 – 3 business days after successful verification 3, 5
  • Fixed APR: 4.99% – 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 600
  • Loan amount: $2,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 1 – 3 business days after successful verification
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except DC, IA, VT, and WV
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan servicer: Best Egg and Blue Ridge Bank
  • Min. Income: None
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

5.99% – 24.99% APR $2,500 to $35,000 660 As soon as the next business day after acceptance 3, 4, 5, 6, 7
  • Fixed APR: 5.99% – 24.99% APR
  • Min. credit score: 660
  • Loan amount: $2,500 to $35,000
  • Loan terms (years): 3, 4, 5, 6, 7
  • Time to fund: As soon as the next business day after acceptance
  • Fees: Late fee
  • Discounts: None
  • Eligibility:  Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan Uses: Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

9.99% – 35.99% APR $2,000 to $36,500 580 As soon as the next business day 2, 3, 4, 5
  • Fixed APR: 9.99% – 35.99% APR
  • Min. credit score: 580
  • Loan amount: $2,000 to $36,500
  • Loan terms (years): 2, 3, 4
  • Time to fund: As soon as the next business day
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except NV and WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $20,000
  • Loan Uses: Home improvement, consolidate debt, credit card refinancing, relocate, make a large purchase, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

2.49% – 19.99% APR $5,000 to $100,000 660 As soon as the same business day 2, 3, 4, 5, 6, 7
(up to 12 years for home improvement loans)
  • Fixed APR: 2.49% – 19.99% APR
  • Min. credit score: 660
  • Loan amount: $5,000 to $100,000
  • Loan terms (years): 2, 3, 4, 5, 6, 7*
  • Time to fund: As soon as the same business day
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all states except RI and VT
  • Customer service: Phone, email
  • Soft credit check: No
  • Loan servicer: LightStream
  • Min. Income: Does not disclose
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

18.0% – 35.99% APR $1,500 to $20,000 None As soon as the same day, but usually requires a visit to a branch office 2, 3, 4, 5
  • Fixed APR: 5.99% – 24.99% APR
  • Min. credit score: 600
  • Loan amount: $5,000 to $40,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 2 – 5 business days after verification
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except MA, NV, and OH
  • Customer service: Phone, email, chat
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation and credit card consolidation only

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

6.95% – 35.99% APR $2,000 to $40,000 640 As soon as one business day 3,5
  • Fixed APR: 6.95% – 35.99% APR
  • Min. credit score: 640
  • Loan amount: $2,000 to $40,000
  • Loan terms (years): 3, 5
  • Time to fund: As soon as one business day
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except IA, ND, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation, home improvement, vehicles, small business, new baby expenses, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

8.93% – 35.93% APR7 $1,000 to $20,000 560 Within one day, once approved9 3,5
  • Fixed APR: 8.93% – 35.93% APR7
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000
  • Loan terms: 3 to 5 years 8
  • Time to fund: Within one day, once approved9
  • Loan types: Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: A U.S. citizen or permanent resident; not available in DC, SC, WV
  • Customer service: Phone, email
  • Soft credit check: Yes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

5.94% – 35.97% APR $1,000 to $50,000 560 Within a day of clearing necessary verifications 2, 3, 5, 6
  • Fixed APR: 5.94% – 35.97% APR
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000*
  • Loan terms (years): 2, 3, 5, 6
  • Time to fund: Within a day of clearing necessary verifications
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except West Virginia
  • Customer service: Email
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, credit card refinancing, home improvement, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.

4.37% – 35.99% APR4 $1,000 to $50,0005 580 As fast as 1 business day6 3 to 5 years4
  • Fixed APR: 4.37% – 35.99% APR4
  • Min. credit score: 580
  • Loan amount: $1,000 to $50,0005
  • Loan terms (years): 3 to 5 years4
  • Time to fund: As fast as 1 business day6
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $12,000
  • Loan Uses: Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes
Compare rates from these lenders without affecting your credit score. 100% free!
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All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | 10SoFi Disclosures | Read more about Rates and Terms

Paycheck advance

There are several apps available that allow employed borrowers to access a portion of their paycheck early — typically with no interest and minimal fees. This can help tide you over until your next paycheck without trapping you in a debt cycle.

For example: Chime allows users to access their paycheck two days early with direct deposit. And Earnin users can get up to $100 per day from the hours they’ve worked, then pay it back once they have their paycheck.

Borrow from family or friends

Asking for a loan from a loved one can be uncomfortable, but it’s usually a much better solution than relying on a predatory lender. Just be sure to pay back the loan within a reasonable amount of time so you don’t strain your relationships.

Tip: Before you borrow from a friend or family member, it’s a good idea to write out a loan agreement that spells out exactly when and how you’ll repay the loan and whether you’ll pay any interest. Be sure to follow the terms you agree to avoid any hard feelings.

If you decide to take out a personal loan, remember to do your research so you can make sure the company you choose is trusted and reputable. Credible makes this easy — you can compare your prequalified rates from multiple vetted lenders that have your best interest in mind.

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About Rates and Terms: Rates for personal loans provided by lenders on the Credible platform range between 4.99-35.99% APR with terms from 12 to 84 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 8%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 11.51%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 12, 2019, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties.

About the author

Emily Guy Birken

Emily Guy Birken

Emily Guy Birken is a Credible authority on personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

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