How To Get a Personal Loan With Fair Credit

U.S. consumers in Fair Credit range. (Source)

Do you need cash to pay for an unexpected expense, a large purchase, or to consolidate debt? Personal loans are often an ideal choice in these situations because they come with lower interest rates than credit cards, longer terms, and fixed payments.

If your credit isn’t perfect, you may think you can’t qualify for a personal loan. Not so fast. Getting a personal loan may be a bit more challenging with fair credit, but it’s certainly possible.

What is considered fair credit?

Before you do anything else, you should have a good picture of your credit situation. If you haven’t done so yet, pull your free credit score. This will tell you where you fall on the credit spectrum and if your score is indeed “fair.”

Fair credit is generally considered to be a rating in the low to mid-600’s, with FICO® scores ranging from 300 to a high of 850. According to the latest FICO® Score Distribution reports, people in this “fair” credit range account for anywhere from 10.3%-13.3% of U.S. consumers.

How a fair credit rating impacts your chances of getting a personal loan

If you’ve been approved for a car loan or a mortgage with fair credit, you might think that getting a personal loan will be a snap. It’s not quite as simple to qualify for these loans for one simple reason.

Personal loans are unsecured loans, which means that a lender doesn’t attach collateral to your loan. If you don’t make your mortgage or car payment, the lender can simply repossess those assets. Personal loans rely on trust, so are riskier for a lender. Lenders base their loan decisions almost entirely on your credit report and score.

Your credit score is a reflection of your financial reputation. FICO® Scores are an accumulation of several important financial factors, taken from your credit report and weighted depending on their importance.

For example, your payment history has the most weight (35%), so paying bills on time is essential to a good credit score. Other FICO® Score factors include your debt utilization, length of credit history, types of credit accounts, and recent credit score inquiries.

Improving your credit before applying for personal loans

If you pull your credit score and find out that you lie in that gray area between fair credit and bad credit, you might want to improve your rating before you apply for loans. While there are personal loans for bad credit, they will cost you.

Syracuse University did a study on bad credit loans, which reported that borrowers with bad credit (scores around 600 pay almost $5,000 more in credit card interest than someone with good credit. If you can move your score up into the fair range, you could save thousands on your personal loan.

One of the easiest ways to boost your credit score is to pay off some debt. If possible, try to pay down your balances so that you are using 30% or less of your available credit. You should also pay off any other outstanding personal loans and dispute any incorrect information on your credit report.

Where can you get a personal loan with fair credit?

There is no shortage of personal loan lenders in the marketplace today. Look for lenders with a good reputation and affordable rates.

SuperMoney provides free expert reviews and consumer comments on leading lenders so you can check the terms and feedback of other borrowers before you choose a lender.

Best Personal Loans for Fair Credit

Lending PartnerMinimum FICO scoreEstimated APR 
60015.49% – 34.99%*Apply
No Min36% – 299%*Apply
6605.99% – 35.89%*Apply
5809.95% – 35.99%*Apply
No Minimum35% – 155%*Apply

If you have an established account and relationship with a local credit union, you might wish to start there. Provided they’ll accept your credit score, a credit union will probably offer you the best terms.

Online lenders are another excellent source of personal loans, particularly if you have less than perfect credit. Many of these lenders work with challenged borrowers and will also consider such things as income level when approving a loan.

Alternatives to personal loans if your credit is an issue

In your search for a personal loan for fair credit, you might run across some alternative loan offers that sound easy. If a company promises that they won’t pull your credit report for a loan, it may mean it is either a payday lender or that it will ask for collateral on the loan. The APR on a payday loan can reach 300% or more. Car title loans, also have notoriously high interest rates.

Fortunately, there are several online lenders of personal loans who have both fair rates and good reputations.

Online lenders that accept cosigners

Some online lenders allow borrowers to add cosigners to their loan applications. Adding a cosigner who has excellent credit to your application may help you qualify for lower interest rates and better terms. Unfortunately, not that many lenders accept cosigners. Here are a few that do.

Lenders Accepting Co-Signers

Lending PartnerMinimum FICOAPR Range 
6802.19% – 17.49% (with AutoPay)*Apply
6005.99% – 35.96%*Apply
6007.93% – 29.9%*

Comparing personal loan lenders when you have fair credit

Even with fair credit, there are several online lenders who might be happy to have you as a new customer. These personal loans will have higher interest rates, but they are much lower than payday loans and won’t roll over or trap you in an endless cycle of debt.

There are several benefits of dealing with an online lender. You can fill out your application at home and you’ll generally get an answer within the same day. If you are approved, many of these lenders will deposit funds in your bank account within just a few days.

Pick at least two online lenders that accept borrowers within your credit tier.

Get a personal loan with fair credit

Avant Credit
APR: 9.95% to 35.99%*Loan Amount: $1,000 to $35,000*
Origination Fee: 0.95% to 4.75%
Pros
Cons
Considers borrowers with less than perfect credit
Competitive rates
No prepayment penalty fees
Checking your rate will not hurt your credit
Charges an origination fee
Well-qualified borrowers may find lower rates elsewhere

LendingClub has loan terms up to 60 months, and no prepayment penalties. They do charge a loan origination fee, which varies basing on your credit. Other borrower qualifications for personal loans include:

  • At least a 3-year credit history.
  • Debt-to-income ratio of 40% or below.
  • No more than 5 hard credit inquiries in the past 5 months.
  • Have two or more open and active credit accounts.
  • Have verifiable employment and income.

LendingClub is the world’s largest lending marketplace for personal loans but is not available in either West Virginia or Iowa. Loans are usually funded in less than a week.

Prosper is an online marketplace lender that provides personal loans to borrowers with a credit score of at least 640. Their loan amounts range from $2,000 to $35,000. If your score is slightly lower, you might still be able to apply and qualify for a smaller personal loan.

When you apply with Prosper, you create a loan “listing” that appears on their marketplace. Peers, or investors, can choose to finance your loan when fully funded, the money transferred to your bank account.

You will find out your APR when you apply, which is based on your credit rating and Prosper’s score. To qualify for a personal loan with Prosper, you must:

  • Own a bank account.
  • Have steady and verifiable income.
  • Have a social security number.
  • Have a debt-to-income ratio of 50% or less.
  • Show no bankruptcies in the past year.
  • Not have more than seven credit inquires in the past six months.

Prosper charges a loan origination fee that starts at 1% but has no prepayment penalties. You can find out your personal loan rate with a soft credit pull. Also, successfully paying off a Prosper loan can lower your rates on future loans.

Making the right personal loan choice

When you shop lenders, compare interest rates as well as additional fees, so that you are sure you’re getting the best deal. Also, read online reviews of the lenders and check their legitimacy with the Federal Trade Commission to avoid lending scams.

Visit SuperMoney to read personal loan reviews, learn more about lending terms, and compare rates and terms here.

Featured lenders for personal loans

Lending PartnerMinimum FICO scoreEstimated APR 
60015.49% – 34.99%*Apply
6802.19% – 17.49% (with AutoPay)*Apply
650Fixed:
5.49% – 14.24% APR (with AutoPay)*
Variable:
4.99% – 11.14% APR (with AutoPay)*
Apply
6605.99% – 35.89%*Apply
6204.93% – 29.99%*Apply
5809.95% – 35.99%*Apply
7005.25% – 12%*Apply