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If your FICO credit score falls anywhere between 580 and 669, you are among the 18% of Americans with “fair” or “average” credit. Fair credit personal loans are designed specifically for such borrowers and are known for more lenient eligibility criteria. By learning how to get a loan with fair credit, you will be able to obtain the necessary funds and even build up your credit over time.
Highlights/ Key Takeaways
- Getting a personal loan with a fair credit score is possible.
- Shopping around for a good loan and doing your research is key, as lower credit score often means higher rates.
- Consider applying for a loan with an online lender rather than a standard bank or credit union.
- Continue building your credit score to improve your chances of securing better financial products in the future.
How to Get a Loan with Fair Credit
If you are looking to get a loan with fair credit, you can expect similar general steps, regardless of the specific lender you decide to go with.
- Run the numbers. First, do the calculations to make sure that taking out a loan is the best course of action for your financial situation. Consider origination fees and interest rates and make sure you will be able to keep up with monthly payments.
- Check your credit score. The higher your credit score, the higher your chances of approval with most lenders, - and the lower the expected interest rate. You can run a free credit score check with tools like AnnualCreditReport.com.
- Do the research. Research which types of loans would work well for your needs and whether you would need a collateral or a co-signer to receive a reasonable interest rate.
- Shop around. Once you settle on the type of loan you need, review the terms and conditions offered by different lenders for that same loan type. Choose the product with the lowest fees and the best interest rates.
- Apply! Finally, it is time to apply for the loan and provide all the necessary documentation. With most alternative lenders, the entire process can be completed online within several minutes.
- Get the loan. If your loan application is approved, you will be asked to accept the loan terms and conditions. From there, the funds will be available for you to use within several business days. Now, don’t forget to pay off the loan on time!
Fair Credit vs. Good Credit Personal Loans
While fair credit falls right in the middle of the usual credit score range of 300 to 850, the average American does better than “fair.” Currently, the average credit score in the United States is 698, which falls within the “good” range of 670 to 739.
Fair credit and good credit might be next to each other on the credit score scale, but your financial opportunities are bound to get noticeably better once you pass the threshold of a 670 score. For example, how much you can borrow with a 650 credit score will typically be a lot less than if you have a credit score of 670 or above.
| Fair Credit Personal Loans | Good Credit Personal Loans | ||
| Minimum Credit Score | 550 to 660 for most lenders | 670 and above | |
| Average APR | 22.02% | 16.14% | |
| Loan Term | Short- and long-term loans available | Short- and long-term loans available | |
| Loan Amount | Varies by lender: $1,000 to $50,000 Can reach $100,000 with some lenders | Varies by lender: $2,000 to $100,000 Higher loan limits than for fair credit loans | |
| Fees | Varies by lender | Varies by lender | |
| Income Requirements | Varies by lender | Varies by lender | |
| Turnaround Time | One day to one week | One day to one week | |
| Loan Uses | Varies by lender Debt consolidation loans available | Varies by lender Debt consolidation loans available |
Credit scores aren’t fixed, so there is always an opportunity to move from fair to good credit. If you have a fair credit score, one of the best things you can do for your financial health is to make an effort to get that number into the “good” credit score range by making responsible credit decisions.
How to Improve Your Chances of Approval
Finding a great personal loan with fair credit is not always easy, but it is possible! Here are a few simple steps you can take to improve your chances of approval:
- Monitor your credit. Keeping an eye on your current credit score can give you a good idea of whether you might be approved for a personal loan.
- Check if you can get pre-approved. Checking whether you can get pre-approved before applying for a loan can help you to avoid unnecessary hard inquiries on your credit report.
- Shop around. Explore your options outside of standard banks and credit unions. Some online lenders specialize in fair credit loans and have more lenient qualification requirements.
- Consider having a co-signer. Adding a co-signer to your application can make all the difference between an approval and a rejection. Plus, having a co-signer with good credit might help you get a better interest rate.
A fair credit personal loan can be an important step on your way to financial health. By learning to take control of your credit and submitting your loan payments on time, you will be able to slowly build up a good credit history, so that you can receive more favorable loan rates and terms in the future.
How to Compare and Choose Fair Credit Personal Loans
Finding the right fair credit personal loan can take time, but it is essential to ensure your long-term financial success. Carefully examine the following features of each loan option and ensure that there is no additional burden of hidden costs.
- Loan features. Take a look at minimum and maximum loan amounts, loan terms to choose from, and whether there are any limitations on the intended use of the funds.
- Interest rates and fees. Look into all the costs associated with taking out the loan. This includes borrowing or origination fees, loan interest rates, maintenance fees, possible penalties, and other charges.
- Qualification requirements. What is required to qualify for the loan? Review the required minimum credit score for a personal loan, minimum income, and whether there is an option to add a co-signer.
- Application process. Most lenders describe the application process and mention typical funding times on their websites. Also, try to find out whether the lender would perform a “hard pull” of your credit report.
- Online user reviews. Study both positive and negative user reviews on independent review sites like Trustpilot.
- Customer support. Find out whether the lender offers 24/7 customer support. Review their website to see whether any additional useful information is readily available.
- Perks and bonuses. What else does the lender have to offer? Think payment flexibility, advertising transparency, and advanced technology.
Best Personal Loans for Fair Credit
Securing a good personal loan from a bank can often become a challenge for applicants with subpar credit scores. The good news is that there are several online lenders that cater specifically to fair credit applicants and offer more lenient requirements.
