A personal loan is an unsecured loan that you can use to cover an emergency, a trip, or any other short-term, urgent expense. This loan is approved based on factors such as income level, credit score, and so on. This blog post explains how to get personal loans with fair credit scores.
The credit score is one of the most important metrics used by lenders to assess a person’s creditworthiness. To qualify for a personal loan, you should have good to excellent credit.
If you have fair credit, which is usually defined as a credit score between 640 and 699, you may have a more difficult time getting approved. However, there are several lenders who provide personal loans for people with bad credit.
Remember that the best personal loans for fair credit scores offer competitive interest rates, a diverse range of loan terms, and comprehensive eligibility requirements.
What is Personal Loans?
A personal loan is money borrowed from a lender that can be used for almost any purpose, such as debt repayment, financing a large purchase such as a car or a boat, or covering the cost of a major expense such as a wedding or vacation.
Loans are available from online lenders, local banks, and credit unions, with funds provided in a lump sum. Once you receive the funds, you must continue to make payments until the debt is fully repaid.
Personal loans all have three things in common:
- Evidence of the debt (promissory note)
- An amount borrowed (principal)
- The cost of borrowing (interest rate)
When a loan’s repayment terms are met, the promissory note is retired. If loan payments are not made as agreed, the lender can seek restitution through the legal system.
Mortgages for homes or cottages are considered consumer loans, but they are not commonly referred to as personal loans.
When the repayment terms of a loan are met, the promissory note is retired. If loan payments are not made as agreed, the lender has the legal right to seek restitution.
Consumer loans include mortgages for homes or cottages, but they are not commonly referred to as personal loans.
What are fair credit scores?
A credit score is a three-digit number, usually ranging from 300 to 850, that estimates your ability to repay borrowed funds and pay bills.
Your credit score is calculated using information from your credit accounts. Credit-reporting agencies, also known as credit bureaus, collect this information and compile it into your credit reports.
The maximum credit score is 850, though there isn’t much of a difference between a “perfect” score and an excellent score in terms of the rates and products you can qualify for. In other words, don’t worry about trying to get an 850, especially since scores fluctuate so much.
Fair credit scores are at the bottom of the credit-scoring scale. FICO scores typically range from the upper 500s to the mid-600s.
How to get Personal Loans for fair credit scores
Obtaining a personal loan with fair credit is difficult, but not impossible. Here are some options for obtaining a personal loan despite a low credit score:
- Check your credit
- Extend your loan search horizon
- Consult with your lender
- Opt for secured loans
- Make an application for a joint loan or appoint a guarantor
- Take out a loan from non-banking financial companies or a peer-to-peer lending platform
Check your credit
Lenders typically have a minimum credit score requirement, and if you do not meet it, you may be turned down. Many financial companies, offer free credit scores, and annualcreditreport.com provides a free, detailed analysis of your credit behavior over time. You may discover errors on your report that once corrected, will improve your credit.
Extend your loan search horizon
The credit score cut-offs used to evaluate loan applications vary by lender. While some lenders have a high credit score cut-off for loan approval, others may approve loans to those with lower credit scores but at higher interest rates.
Loan applicants with fair credit should broaden their search to find lenders who lend to people with bad credit.
Consult with your lender
If you have a bad credit score as a result of genuine financial hardships in the past, you can discuss it directly with your banker, with whom you have been associated for a long time. Even if you have a low credit score, you may be able to obtain better credit terms as a result of this. Also, if your financial situation has improved, such as a raise in salary or a more secure job, demonstrating evidence of the same increases your chances of having your loan application approved.
Opt for secured loans
Secured loans are available to those who have been denied unsecured loans such as personal loans and credit card loans, or who are being charged extremely high-interest rates due to their credit scores.
Lenders face lower credit risk when they make loans backed by adequate collateral and sufficient liquidity.
As a result, they place less emphasis on credit scores when approving applications for such secured loans.
Make an application for a joint loan or appoint a guarantor
A joint loan is another option for getting a loan despite a fair credit score. Here, one can apply for a loan in collaboration with someone with a good credit score (spouse or family member). This increases the likelihood of loan approval because the other member acts as a co-applicant with the borrower with a fair credit score.
Take out a loan from non-banking financial companies or a peer-to-peer lending platform
Banks conduct stringent credit report examinations, which can sometimes result in hard inquiries, which can lower your credit score.
As a result, you should approach non-banking financial companies rather than banks, as the former have more lenient policies toward people with bad or no credit.
The catch is that these institutions charge significantly higher interest rates than banks.
Apply
To expedite the loan application process, gather all of the necessary documents ahead of time. W-2s, pay stubs, financial statements, and your Social Security number are examples of such documents.
Some lenders will make a decision the same or the next day after you apply, but the majority will make a decision within a few days.
Personal loans for fair credit online
Here are some reputable lenders who provide personal loans for people with fair credit:
- Best Egg
- Upstart
- Upgrade
- Happy Money
- Prosper
- FreedomPlus
- LendingPoint
- LightStream
- Avant
- SoFi
Best Egg
Best Egg is an online lender that provides personal loans to people with fair to good credit.
The personal loans range in size from $2,000 to $50,000 (though some states have different minimums), with repayment terms ranging from three to five years.
Borrowers can use their loans to consolidate debt, refinance credit cards, or pay off large bills.
Upstart
Upstart is an online lending platform that partners with banks and credit unions to provide consumer loans by predicting creditworthiness based on non-traditional factors such as education and employment.
Personal loans for startups are a quick but somewhat limited source of funding. Although Upstart has some of the quickest approval and funding times among lenders, it does not offer joint, co-signed, or secured loans. In addition, the online lending platform only provides two repayment options.
Upstart is distinguished from other online lenders by its underwriting model. The company uses artificial intelligence and nontraditional data to qualify borrowers, such as college education, job history, and residence. Banks and other traditional lenders are almost entirely concerned with a borrower’s credit report, debts, income, and assets.
Upgrade
Upgrade is a low-cost credit product provider that also provides free credit monitoring and education. The company is not a bank or a financial institution. To originate loans, they work with banks and other financial institutions.
Happy Money
Happy Money (formerly Payoff) provides credit card consolidation loans ranging from $5,000 to $40,000.
These loans are intended to assist consumers in quickly repaying their credit card debts, with minimum annual percentage rates of around 6%.
Through a comprehensive approval process and ongoing credit support, the platform can help borrowers improve their credit scores.
Prosper
Prosper is an online peer-to-peer lending platform that provides personal loans to borrowers with fair to good credit. Borrowers can use Prosper to get fixed-rate, unsecured personal loans with terms of three or five years. Personal loans by proper can be used for a variety of purposes, including:
- Debt consolidation.
- Home improvement.
- Medical expenses.
- Household expenses.
- Vehicle purchases.
FreedomPlus
Personal loans from FreedomPlus are ideal for consolidating large amounts of credit card or other unsecured debt. While the initial interest rate is high, it can be reduced if you qualify for one of the lender’s rates discounts, and loan proceeds can be sent directly to creditors.
According to FreedomPlus, personal loans are available for borrowers with fair, good, and excellent credit scores (630 and higher); average borrowers have good credit and a high household income.
The company has an online application, but unlike other online personal loan lenders, you’ll need to speak with a dedicated FreedomPlus loan consultant to finish the application process.
LendingPoint
LendingPoint is an online lender that provides personal loans ranging from $2,000 to $36,500. Personal loans from LendingPoint are a solid, no-frills financing option for a medium-sized expense or home improvement project.
LightStream
Truist Bank’s LightStream division is an American online lender. LightStream provides low-interest personal loans with no fees to borrowers with good to excellent credit.
LightStream, one of its many consumer-friendly features, allows borrowers to choose when they receive their money. It has the ability to deposit funds into your account as soon as the next day or up to 30 days after approval.
Scheduling a later fund date gives you more time to plan for your first payment or allows you to time the start of a home improvement project or other large expenses.
Avant
Avant is an online lending platform that provides personal loans to borrowers with fair and bad credit (689 or lower score); the company claims that the majority of its customers have credit scores ranging from 600 to 700. It charges origination and late fees, but its loans have APRs that are comparable to other bad credit loans.
SoFi
SoFi Technologies, Inc. is an online personal finance company and online bank based in the United States. The company, based in San Francisco, offers financial services such as student and auto loan refinancing, mortgages, personal loans, credit cards, investing, and banking via mobile and desktop interfaces.
Personal loans for credit score of 600
Several personal loan lenders are willing to work with borrowers who have fair credit, which is defined as a score between 600 and 699.
Credible lenders who offer personal loans to borrowers with credit scores in the 600s are as follows:
- Happy Money
- LendingClub
- Marcus
- OneMain Financial
- PenFed
- Discover
- Best Egg
Personal loans for fair credit rating
Your credit score is a key factor that determines whether you qualify for a personal loan. Applicants with fair credit scores — generally from 600 to 689 — may have a harder time qualifying for a loan than those with good or excellent credit. But it’s still possible.
Conclusion
Personal loans can assist you in financing debt consolidation, emergency expenses, and home improvements. Loans can also be used to cover large expenses such as a dream vacation or a wedding.
However, keep in mind that even the best personal loans for people with bad credit may have higher interest rates than personal loans for people with good credit. If you have the time to wait before borrowing, it may be beneficial to build your credit before applying for a better loan.
If you need the money right away, adding a co-signer or co-applicant to your loan may help you qualify or get a better interest rate.
FAQs About Personal Loans for fair credit scores
What is the minimum credit score for a personal loan?
Borrowers typically need a credit score of at least 690 to qualify for a lender’s lowest interest rate.
What credit score do i need for a $5,000 loan?
To qualify for a $5,000 personal loan, you will most likely need a credit score of 600 or higher. Most lenders who offer personal loans of $5,000 or more require bad credit or better, as well as sufficient income to cover the monthly payments.
What is the minimum credit score for a personal loan?
Borrowers typically need a credit score of 610 to 640 to even qualify for a personal loan.
Reference
- www.nerdwallet.com– Best Personal Loans for Fair Credit
- www.creditkarma.com– 4 best personal loans for fair credit
- www.money.usnews.com– Best Personal Loans for Fair Credit
- www.cardrates.com– Personal Loans For Fair Credit
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