Everything To Know About Personal Loans For Fair Credit

5 Min Read
Updated Dec. 20, 2023
Couple smiling and embracing while making a transaction online.
Written By Sam Hawrylack

Lenders take a considerable risk with personal loans because they’re unsecured loans. This means they don’t have any collateral, which can put lenders at risk. Because of this, credit score is an important factor for lenders. The better your score, the more at ease they may feel providing a personal loan. If you need personal loans for fair credit, you may have to do some legwork to get approved.

Here’s how to increase your chances of loan approval.

What Is A Fair Credit Score?

A fair credit score typically ranges from 580 to 669. Although this isn’t the lowest credit score rating, it’s low enough that lenders might consider you a high-risk borrower. Fico® credit scores go as high as 850 and as low as 300. According to Experian, the average consumer has a credit score of 714. This is considered a good credit score and would get better rates and terms on a loan than a consumer applying for loans with fair credit.

See What You Qualify For

Can You Get A Personal Loan With Fair Credit?

There are many reasons someone may need a personal loan. Common reasons include:

  • Debt consolidation
  • Home improvements or home emergency
  • Medical emergency
  • Significant expenses, like buying a car or paying for a wedding

Whatever your reason, you can likely get personal loans with fair credit. However, you won’t get the same rates and terms as someone with better credit. Unfortunately, most lenders save some of the best rates and terms for borrowers with a credit score of 670 or higher, but there are options if you have fair credit.

What To Know About Loans With Fair Credit

When you apply for personal loans with what’s considered a fair credit score, you’ll face a few more restrictions from lenders. For example, you may not be able to borrow as much or you’ll pay higher interest rates than someone with better credit.

Since a low credit score tells lenders that you may have trouble handling your debts responsibly, they need other reasons to feel secure in your ability to repay the loan.

Tips To Qualify For A Personal Loan With Fair Credit Score

While securing personal loans for fair credit isn’t as easy as picking any lender and applying, there are some ways to improve your chances of approval.

  • Use a co-signer: A co-signer is another person responsible for your loan. If you don’t make the payments, the lender will turn to the co-signer. This gives the lender more leverage, and if your co-signer has good credit, it can improve your chances of getting approved with better loan terms.
  • Get prequalified: Getting prequalified tells you upfront how much a lender will lend you and what they’ll charge. If you don’t like the terms, you can ask what you should improve to get a better interest rate or term.
  • Improve your credit score: If you know you have a fair credit score or worse, consider improving your credit score before applying for a loan. Pull your free credit report and see what’s causing the low score. Common examples of what you might need to improve are bringing late payments current, paying down high debts or keeping old accounts open to lengthen your credit history.
  • Pay your debts down: The fewer debts you have, the easier it is to qualify for a personal loan. Lenders consider you high-risk when you have a lot of debt because your income is already committed to other debts. Pay your consumer debts (especially credit cards) down, and you’ll increase your chance of approval.

How To Apply For A Personal Loan With A Fair Credit Score

It’s easy to learn how to apply for a personal loan with fair credit with these steps.

  • Complete a loan application with your lender of choice.
  • Provide information about your identity, employment, income, debts and assets.
  • Provide any documentation they require, such as proof of income or assets.
  • Prove your identity with a government-issued ID.
  • Sign the loan agreement.
  • Receive the funds.
  • Start making payments to repay the loan.

Finding The Right Fair Credit Lender For You

Shop around to find the right fair credit lender. Unfortunately, not every lender will give you a loan because you don’t have a good or excellent credit score.

When you find fair credit lenders, compare the loans closely, looking at the origination fees, loan terms and interest rates. Don’t assume the loan with the lowest interest rate is the best; consider the big picture. For example, how much does it cost over its entire loan term?

Personal Loans For Fair Credit FAQs

Personal loans for fair credit are possible, but it’s important to understand what you’re getting into before applying.

What do I need to get approved for a loan with fair credit?

Along with credit score, lenders will look at your income, assets and debt-to-income ratio. Lenders will review such documents as bank statements, tax returns and paystubs to be sure you can afford the loan and will repay it.

What is the minimum credit score for a personal loan?

The minimum credit score required will depend on the lender. Lenders typically want at least a 640 credit score for a personal loan. However, some lenders may allow credit scores as low as 610.

How much do personal loans with fair credit scores cost?

Personal loans don’t typically have many fees. However, lenders may charge an origination fee if you have a fair credit score. This is a percentage of your loan amount. For example, if you pay 2% on a loan amount of $20,000, you’ll pay $800 in origination fees. Origination fees are typically upfront costs. You’ll also want to consider what you’ll pay in interest over the life of the loan.

How do personal loans affect my credit score?

Personal loans may initially lower your credit score because it’s a new debt. In addition, the inquiry and shortened credit history length may hurt your credit score. However, with timely payments and proper use of your loan, a personal loan can help your credit score increase.

The Bottom Line

Personal loans for fair credit are possible, especially if you can provide other compensating factors, such as a low debt-to-income ratio or a co-signer. It’s most important to pay attention to the loan’s interest rates and costs since lenders may charge more for loans when borrowers have less than perfect credit.