How To Find Legitimate High Risk Lenders And Avoid Predatory Loans

How To Find Legitimate High Risk Lenders And Avoid Predatory Loans

EPF Last Update: November 23, 2019

There are legitimate lenders offer high risk loans, but there are also predatory lenders that use similar products to trap you in a cycle of debt. Their loans are often 10-50 times more expensive and lead to plenty of financial hardship. By reading this guide, you’ll learn how to spot legitimate loans and avoid predatory scams.

If you need additional assistance, you can always contact our loan help center. We have experts standing by that will review your financial situation and help find a loan that’s right for you.

We also have an extensive guide on bad credit loans. It’s packed with plenty of tips that will help save you money.

What is a high risk loan?

According to Thomas Nitzsche, media relations manager for Clearpoint Credit Counseling, “A high-risk loan is a subprime loan that is offered to someone with a blemished credit history, according to their credit report.”

These loans often come with double or even triple-digit interest rates.

How do personal loans differ from payday loans?

Personal loans allow you to borrow anywhere from $500 to $35,000, with APRs that range from 5.99% to 35.99%. When terms exceed these limits, we don’t categorize them as personal loans.

Payday loans – according to the Consumer Financial Protection Bureau (CFPB) – have average APRs of 400%. For every $100 you borrow, you end up paying roughly $30 in interest per 2-week period. Payday loans also trap many borrowers in a cycle of debt.

Alternative payday loans are a middle-ground option. Amounts range from $1,000 to $5,000 and APRs range from 35.99% to 400%. However, most lenders cap their APRs at 200%.

How do high risk personal loans differ from high risk payday loans?

High risk personal loans

High risk personal loans usually provide $5,000 or less in financing and come with APRs of 15% to 35.99%.

Our recommended lenders are:

Loan CompanyMin Credit ScoreAPRAmountType
BadCreditLoans05.99% – 35.99%$5,000Personal Loans for Really Bad Credit
CashUSA05.99% – 35.99%.$10,000Secured Personal Loans for Bad Credit
SignatureLoans05.99% – 35.99%$35,000Co-Signer Loans for Bad Credit
Opploans0Varies By State$5,000Alternative Payday Loans for Really Bad Credit
LendUp0Varies By State$1,000Alternative Payday Loans for Really Bad Credit
LendingTree5003.99% – 35.99%.$50,000Personal Loans for Bad Credit
Credible5005.34% – 35.99%$35,000Personal Loans for Bad Credit
PersonalLoans5805.99% – 35.99%.$35,000Personal Loans for Bad Credit
LendingPoint6009.99% – 35.99%$25,000Personal Loan for Bad Credit


High risk payday loans

Payday loans are designed for people with extremely bad credit. And payday lenders want you to think they’re your only option. But this isn’t the case. Plenty of legitimate lenders offer similar products at much more affordable rates.

High risk alternative payday loans

Like we mentioned above, alternative payday loans have APRs that are higher than personal loans but much less than payday loans. On average, you can expect an APR of roughly 100%. And while not cheap, it’s still much less than a 400% APR payday loan.

Alternative payday lenders also help borrowers with bad credit by allowing refinancing options, waiving late payment fees and sometimes allowing you to skip a payment. They also offer more favorable lending terms as you build a relationship with them.

So what companies offer the best alternative payday loans?

Loan CompanyMin Credit ScoreAPRAmountType
Opploans0Varies By State$5,000Alternative Payday Loans for Really Bad Credit
LendUp0Varies By State$1,000Alternative Payday Loans for Really Bad Credit


Because they don’t perform a credit check, it’s also much easier to qualify for a loan. Some applicants won’t be approved, but alternative lenders analyze factors like your income and financial history, instead of focusing solely on your credit score. If you demonstrate the ability to repay the loan in-full and on-time, they’re likely to offer financing.

Are alternative payday loans recommended?

Like most things in life, there are pros and cons. For a complete breakdown, see our guide on alternative payday loans.

As a quick reference, we recommend borrowers apply for alternative payday loans after they’ve completed the following steps:

  1. Apply for a bad credit personal loan at 5-10 lenders. If you’re denied, contact the lenders and see if there is anything you can do. Discuss the possibility of a lower amount or adjusted terms. Pro tip: Mention that you want to refinance your predatory loans; this can increase your chances of approval.
  2. Apply for a secured personal loan or a co-signer personal loan
  3. If you have the time, work on boosting your credit score; it will open you up to more attractive offers.
  4. Use other means to generate the funds; you can apply for an advance on your paycheck, conduct freelance work online, or take paid surveys in your spare time.

Expected APRs by type of high risk loan

Type:Expected APR:Total Interest Paid:

(1-Month,  $1,000 Loan)

Personal Loan15%-35.99%$12.50-$29.99
Alternative Payday Loan100%$83.33
Payday Loan400%$333.33


How lenders determine your creditworthiness

The main factors lenders analyze are your credit score, debt-to-income ratio and your annual income. Unique factors can include how often you move, how often you change your phone number and how often you change jobs.

Inquiries through our loan help center tell us that most borrowers think they’re higher risk than they really are. Some have a low credit score, but very high income. Others have a high credit score, but also a high debt-to-income ratio. Before assuming you’re too risky for a loan, you should always apply because one lender may view your application differently than another.

How to boost your credit score

The best way to achieve a higher credit score is to make all of your bill payments in-full and on-time. Also keep credit card charges to less than 30% of your balance. The length of your credit history also plays a role. The longer your accounts have been open, the more it boosts your credit score. It may seem counterintuitive, but a lengthy credit history shows your accounts have been in good-standing over a long period of time.

Apply to more than just direct lenders

Most people who contact us ask about direct lenders. However, peer-to-peer (P2P) lending networks offer access to hundreds of lenders that often compete for your business. The sites earn a commission on finalized loans, but with their large pool of lenders, you have a better chance of receiving a low APR of 5.99% to 35.99%.

Most importantly, P2P networks offer access to a wide range of products, which allow you to avoid predatory payday loans.

Are any high risk payday loans legit?

If by legitimate you mean: licensed companies that meet state regulations – then yes. But keep in mind, many states ban payday loans or regulate their terms because of the financial harm they cause. For this reason, we don’t recommend them.

Likewise, some of the alternative lenders we mentioned above do not offer loans in every state – usually because their APRs are too high. For a breakdown of loan laws by state, see our legal glossary (link?).

What about tribal loans?

Tribal loans are offered by Native American lenders and are exempt from certain state laws. The exemption allows them to charge higher APRs and even offer payday loans in states where the product is illegal.

Similar to traditional payday loans, we only recommend tribal loans as a last resort.


Because we receive so many inquiries regarding high risk loans, we were inspired to write this guide. But throughout our discussions, we found that people often perceive their creditworthiness to be much worse than it really is. And this negative perception leads them to accept loans from the first lender who says yes. Remember, predatory lenders thrive off this behavior.

So, as a word of advice, DO NOT search for high risk loans. Instead, search for bad credit personal loans. By doing so, you’ll find you have more options than you think.

Elite Personal Finance

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