Searching for a personal loan for fair credit can feel like trying to find a prom date after getting head gear. Even though you’re working on improving yourself, it’ll be a while before you’re the perfect dance partner.
But here’s the good news: Some lenders are willing to let you borrow money with not-so-perfect credit. And finding them doesn’t have to come with the same drama as high school dating.
Find out what to expect when it comes to getting a personal loan with fair credit as well as three of the best options out there today.
How does fair credit affect personal loan qualifications?
Different lenders and credit bureaus have different thresholds, but here are the general ranges for credit score ratings:
Poor credit: 629 and below
Fair credit: 630 to 689
Good credit: 690 to 719
Excellent credit: 720 and above
If your credit score is in the 600s, you probably have fair credit — also referred to as average credit. Average credit puts you on the border between good and bad credit, where you won’t always meet a lender’s eligibility requirements.
But that’s OK. You might not be able to qualify for any loan you want, but with some research, you’ll find lenders with flexible standards that might be a good fit.
Personal loans for fair credit often cost more
Although some lenders will approve borrowers with fair credit, the best personal loan rates are reserved for people with excellent credit (720 to 850). Meanwhile, getting a personal loan with fair credit can lead to higher interest rates compared to borrowers with excellent credit.
Advertised rates start around 5.00% to 6.00%, for example, but most borrowers’ rates will be higher on personal loans for fair credit. The average personal loan rate is 10.13%, according to the Federal Reserve Bank. With fair credit, your personal loan rate will probably be close to that rate or a little higher.
Your rate also will vary based on your lender’s guidelines and other financial factors, such as your income and monthly cash flow. On top of higher interest rates, origination fees of around 1 to 6 percent are commonly charged on personal loans for fair credit.
The bottom line: You might pay a little more for a personal loan for fair credit, but you can get approved.
3 best personal loans for fair credit
Of course, not every lender is willing to accept applicants with fair credit. Each lender has its own credit and eligibility requirements.
To get a personal loan for fair credit, you’ll need to know where to look. We did some of the legwork for you and found three personal loans that require a minimum FICO score well within the “fair credit” range.
1. Avant: 580 FICO minimum
Avant has flexible personal loan requirements and considers applicants with a credit score as low as 580. Additionally, Avant has no set income requirements for its personal loans.
Personal loan amounts range from $2,000 to $35,000. Loan terms of two, three, four, and five years are available. Avant does charge an origination fee 4.75% of loan balance of the loan balance.
2. LendingClub: 600 FICO minimum
A peer-to-peer lending platform, LendingClub pools funds from individual investors to offer personal loans. The minimum required FICO score is just 600, and there are no set income requirements.
With a LendingClub loan, you can borrow $1,000 to $40,000. Loan terms of three and five years are offered. Make sure you plan for the LendingClub origination fee, however, which will be between 1 and 6 percent of the loan.
3. Upstart: 620 FICO minimum
Upstart welcomes applications from borrowers with a credit score as low as 620. Borrowers with an annual income of at least $12,000 are eligible.
Upstart personal loans allow you to borrow $1,000 to $50,000 and offer terms of three and five years. The lender will assess an origination fee of 1 to 6 percent.
How to shop around for personal loans with fair credit
If you have fair credit, you’ll pay a little more for a personal loan than borrowers with good or excellent credit. But you still should put in the time to find the best deal you can. Follow these tips to identify the best personal loan for fair credit.
1. Know your credit score
First, you want to make sure you know what your credit score and history look like. That way, you can be sure you’re looking at the right lenders.
You also should know how lenders might view other factors in your personal finances, such as:
Credit report and payment history: They form your overall track record of borrowing behavior.
Income: This is how much money you have coming in that you can use to repay the loan. Lenders also might consider your employment history, career field, or educational attainment.
Cash flow: This is the money going out. It might be measured by your debt-to-income ratio or by looking at your fixed housing costs, such as your rent or mortgage. Lenders will want to make sure you’ll have enough leftover each month to reasonably keep up with payments.
Lenders will gather these details through the underwriting process once you apply. They’ll use them to create an overall picture of your financial resources and behavior and estimate how likely you are to repay the personal loan.
2. Review different lenders
The three lenders above are a good starting point for your personal loan search. But other lenders provide personal loans for fair credit too. Take some time to perform a comprehensive search for a personal loan.
Check with different types of lenders, from online personal loans for fair credit to major banks and local credit unions. Each lender will have its own perks and drawbacks. For example, you’ll likely find low interest rates with online lenders, better repayment terms with major banks, and more flexible repayment options with credit unions.
3. Get and compare personal loan rate quotes
Once you have a few top picks, request a rate quote from the lender. Make sure it uses a soft credit check to avoid dinging your credit.
The lender can give you a custom rate estimate for a personal loan, which might include different loan term offers and should outline other costs, such as an origination fee. Comparing these personalized rates quotes will point you to the personal loan that is the best deal.
If you need to borrow some cash for an urgent expense or to consolidate debt, a personal loan for fair credit is a viable option. Shopping around is a smart way to find lenders that will approve your application, even with fair credit — and offer decent loan terms.