Best Personal Loans for Fair Credit
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How to Get a Personal Loan for Fair Credit
Have a “fair” credit score? You’re not alone, in fact, most Gen Zers, Millennials, and Gen Xers have an average credit score in the upper “fair” range. While fair lands you slightly below the US average, you’re in a good position to build your score with wise borrowing and diligent bill paying.
Applying for a personal loan with fair credit is fast and easy:
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What is considered to be a fair credit score?
It depends on which credit score you’re looking at:
- FICO fair scores are between 580 and 699.
- Vantage Score fair scores are 601 to 660.
Can I obtain a personal loan with fair credit?
Yes, though you’ll likely be offered less money and/or higher interest rates.
You also need to consider what other forms of credit you’ve already got. If you have a fair score because you’re still in the process of building your score for the first time, you may be able to access more money or better interest rates.
Conversely, if you have a fair score because you already have debt, you may struggle to get a new loan.
Best personal loans for fair credit
✔ Minimum Credit Score: 660
✔ APR: 5.94% to 35.97%
✔ Loan term: 2 - 7 years
✔ Funding turnaround: as soon as next business day
Upgrade offers borrowers with fair credit scores to obtain loans up to $50k. Joint applications are allowed. Origination fees may apply.
✔ Minimum Credit Score: 580
✔ APR: 9.99-35.99%
✔ Loan term: 2 - 4 years
✔ Funding turnaround: as fast as within 24 hours
With LendingPoint, borrowers with fair credit can obtain a loan between $2,000 - $36,500 and get funded within 24 hours. Origination fees may apply.
✔ Minimum Credit Score: no minimum requirement
✔ APR: 18.00 - 35.99%
✔ Loan term: 2 - 5 years
✔ Funding turnaround: 24 - 48 hours
With OneMain Financial, borrowers can obtain a personal loan of up to $20K without a minimum required credit score. Origination fees do apply and the lender offers bonus financial education tools and calculators.
How much does a fair credit personal loan typically cost?
Most fair credit personal loans offer an interest rate of 5-35%, though you’ll need to be in good standing to get a rate below 10%.
If you were to borrow $4,000 over 5 years at 11%, your monthly payments would cost around $86.97, with the total cost of the loan being $1,218.18.
Don’t forget the actual cost of the money you borrow, which is the total interest over the time you borrow. While a monthly payment of $86.97 may sound extremely affordable, you need to consider that you pay $1,218.18 for borrowing that $4,000.
Sometimes, you simply need the money (for example, to buy a new car to get to work). However, with a fair credit score, it may be worth looking into temporary budget options to solve your problem while you save, rather than borrowing money.
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What can I do to improve my fair credit score?
If you have a fair credit score, you’re in a good position to improve it quickly. Here are some of the things you should consider doing:
- Pay down your current debt – if you have high credit utilization, it’s a good idea to pay it down before you think about taking out another loan. Credit utilization is the percentage of credit you’ve used against how much you can borrow. For example, if the total amount of credit you have access to is $10,000, and you’ve only used $1,000, your credit utilization is 10%. The recommended credit utilization amount is 30%, so consider paying off debt before taking out more.
- Avoid missed payments – if you get paid irregularly, you may be reluctant to set up automatic payments, but a missed payment or two can seriously harm your credit score. Set up automatic payments for the minimum and then make additional payments for more when you can.
- Don’t open new accounts too often – it can be tempting to get that new store card for that 20% off, but store cards often have a low barrier to entry but will still mark as new credit on your score. While a store card can be a great way to kickstart a credit score for a young person, having dozens of them opened up every few months may do more harm than good – especially if you leave a balance on them.
- Monitor your score – we often don’t think about our credit score until we’re thinking about getting a new credit card or loan, but there are plenty of free services that will help you monitor your score. Look out for any errors and have them corrected if necessary.
- Follow tips, but don’t look for overnight fixes – a credit score takes time to build, so be wary of any form of credit or anyone saying they can help you drastically improve your score overnight.
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What’s the best type of personal loan for fair credit?
Generally, all personal loans are made equal, regardless of what they say they’re for. For example, looking for a home improvement personal loan will not really be any different from a debt consolidation personal loan, because the loan money will be deposited into your account.
That said, there are some better options out there for people with a fair credit score. You can consider:
- A secured personal loan – if you own property, such as a home, land, car, or another valuable asset, you may be able to secure the loan against your property. Most loans are unsecured, which means the lender gives you money based only on your promise to pay the loan back. A secured loan is a much safer bet for them because if you don’t pay they can legally seize your asset. For this reason, you need to step cautiously when looking into secured personal loans and be confident you can pay it back to avoid your property being seized.
- A co-signer – some personal loans will lend you money as long as you have a co-signer. A co-signer is someone else who has a stronger credit history than you who agrees to pay the loan should you default. For obvious reasons, this can be problematic, so only do this if you are absolutely confident in your ability to cover the costs of the loan, and it’s someone you’re close to, such as a parent, sibling, or spouse.
- Get pre-qualified – while this isn’t a different type of loan, it’s worth mentioning that many lenders will now allow you to get “pre-qualified” before you actually apply. You enter all your details, they’ll do a “soft” credit search on you (which won’t affect your credit score) and then tell you if they’re likely to approve you or not. They’ll do a hard search after that, but if they’ve approved you after the soft search, it’s unlikely they’ll reject you at this stage.
Are there alternatives to personal loans for borrowers with fair credit?
Some alternatives are:
- Credit cards – if you only need a nominal amount or emergency money, a credit card may be a better solution (if you’ll use it responsibly).
- Cash advance – some credit cards will allow you to get a short-term loan through a bank or an ATM, which may be a good option if you need cash in hand, though there are usually added fees.
- 401(k) loan – if you have a 401(k) that allows this, you can sometimes borrow the money from your future self. To do this, your retirement plan provider must allow it and you must have a secure position and be able to pay off the debt in 5 years or less, so the same affordability factor will apply.
- Car loan – if you are trying to buy a new vehicle, opting for car finance through the dealership you work with can help you get approved more easily because the loan is secured against the car you buy.
- Overdraft – if you’re on good terms with your bank, you may be able to apply for an overdraft. This is essentially money you can borrow when you reach the limit in your bank account. Overdrafts can be difficult because they’ll essentially “eat” all the money deposited in them each month, though you can reuse your overdraft until you get out of it. They are also usually terrible for added fees, so tread carefully.
What do I need to apply for a personal loan with fair credit?
To apply for a personal loan, you need:
- To know how much you make (after tax) a year and month
- Your bank details
- The cost of your monthly bills
- The total of other forms of debt you have (other than your mortgage)
- How much you need to borrow
- The reason why you want to borrow (they’ll ask about this, though the answer you give rarely makes a difference to your application)
In some cases, you may need to send proof of income before they’ll make their final approval. You will have a little time to do this if asked, so don’t panic. They’ll usually ask for proof of income, such as your pay stubs or bank statements.
How do I choose a fair credit personal loan lender?
If you’re planning to take out a personal loan with fair credit, go into it calmly – don’t rush into anything and take some time to think about whether borrowing this money is right for you. Also consider:
- High-interest rates – personal loans are usually better for this than credit cards because your set monthly payments will pay off the loan in the determined time, but don’t forget that the interest rate increases the cost of the loan.
- Look at additional fees – some lenders will tack on additional fees, so keep an eye out for those and how much they may increase the cost of the loan.
- Look at the repayment terms – don’t take a loan that won’t allow you to pay it off early if you choose, or that charges an early repayment fee. Also look at other terms, as some allow you to choose your monthly payment date or give you a few payment “holidays” which allow you to opt to skip a payment in an emergency.
How to qualify for fair credit personal loans
The key to qualifying for a personal loan with a fair credit score is making sure it’s well within your affordability. Spend some time looking at your budget and make sure you can pay for it without stretching yourself.
Apply for a personal loan for fair credit
Ready to find the right personal loan for you? Finding a personal loan with fair credit is easy with us – use the comparison tables here to find the one that suits your circumstances and offers the best terms and rates for you, then apply. Now you understand what it takes to get a personal loan with fair credit, you’re much more likely to get approved.
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