How to Find the Best Personal Loans for Fair Credit

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How to Find the Best Personal Loans for Fair Credit

A personal loan can help you cover any expense. Whether you need extra funds for an emergency, vacation, or anything else, these loans can help. However, consumers with fair credit may have a more difficult time finding personal loans. Most lenders have credit score requirements, and barely making the threshold often results in a higher interest rate. Even if you have fair credit, you can still access capital that you can use in any way you desire. This guide will reveal some ways to find personal loans with good terms if you have fair credit.

MoneyLion offers a service to help you find personal loan offers based on the info you provide, you can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you. You can also use the loan funds to pay off other existing debts.

What is considered fair credit?

FICO credit scores have five categories: poor, fair, good, very good, and excellent. A fair credit score is somewhere between 580 to 669. A fair credit score puts you roughly in the middle of FICO’s credit scoring ranges. Some lenders have a 600 minimum credit score requirement for their loans, while others accommodate more consumers. 

How does fair credit affect loan eligibility and interest rates?

A fair credit score can still help you get a personal loan, but you will likely have to pay a higher interest rate for it. Lenders look at your credit score to assess the likelihood of receiving on-time loan payments. The average interest rate on a personal loan depends on various factors.

How to find the best personal loans for fair credit

Consumers looking for the best personal loans should reach out to multiple entities. Checking in with multiple lenders instead of accepting the first loan offer you receive can help you save money on interest and fees.

1. Banks

Banks offer personal loans for people with fair credit. While banks tend to offer competitive interest rates and terms, they also have the most stringent requirements.

2. Credit unions

Credit unions are similar to banks. They offer competitive interest rates and terms. Credit unions operate as non-profit organizations.

3. Online lenders

Online lenders make personal loans easy to access. They experience less scrutiny from the government and can deliver the funds within 24 to 48 hours. You could get a quicker turnaround, but you may have to pay a higher interest rate for these loans compared to personal loans from banks and credit unions.

4. Cash advance apps

Cash advance apps do not offer loans but let you access your wages early. These apps often have 0% APR cash ready to go. For instance, consumers can get a cash advance of up to $500 with MoneyLion’s InstacashSM. Access your hard-earned pay any day. Typically, cash advance apps have lower limits than companies that offer personal loans. 

How to choose the best personal loans for fair credit

Some personal loans are better than others. You can weigh these factors to choose the best personal loan for your credit.

1. Compare interest rates

A lower interest rate can help you save money on your loan. Reaching out to several lenders instead of one lender can help you compare rates and secure a better deal. 

2. Consider loan terms

The optimal loan term depends on several factors. If you want to get out of debt sooner, a shorter loan term can help. However, if you want a lower monthly payment, a lengthier loan term can free up room in your monthly budget. Consumers should also consider fees or charges covered in the loan terms. Some of these costs are reasonable, while others could become unmanageable. Comparing multiple loans can give you a better idea of what to expect from fees and charges.

3. Read reviews and testimonials

Sites like Trustpilot and Better Business Bureau give consumers an idea of what past customers think of the company. You can read reviews to see whether the lender you want to work with has helped customers. This extra step can validate your decision to work with a lender or make you consider another choice.

How to apply for a fair-credit personal loan

Applying for a fair-credit personal loan involves several steps. Here’s what you can expect:

  1. Find lenders that offer fair-credit personal loans: Look for multiple lenders that offer credit score requirements that you meet. Having multiple lenders in this step can help you choose the best terms.
  2. Compare offers: See what interest rates and terms each lender provides. You shouldn’t rush to obtain the first loan offer you receive.
  3. Apply for a personal loan: After deciding which loan offer is the best for you, it’s time to apply.
  4. Gather the necessary documents: Lenders will ask for things like your ID, Social Security number, proof of income, and other resources. Each lender has different requirements, but there is plenty of overlap.
  5. Receive your loan: Once you are approved, the funds can be sent to your bank account. You can then use the money as you desire, and you will start making monthly payments.

Tips for increasing your chances of fair-credit personal loan approval

Obtaining a free-credit personal loan can offer more financial flexibility. If you want to increase your chances of getting approved on the first try, these tips can help.

1. Improve your credit score

Many lenders have credit score requirements and will assign interest rates based on your score. A higher credit score will help you qualify for more loans and get better financing. You can improve your credit score by making on-time payments, trimming your debt, and enhancing your credit utilization ratio. The more bills you can pay off, the more your credit score may go up.


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2. Consider a co-signer

A co-signer can help you secure a loan — even if you wouldn’t qualify on your own. Lenders assess the co-signer’s financials and credit score during the application process. The co-signer becomes responsible for the loan if the borrower cannot cover the payments. A trusted family member or friend with good credit can help you get a loan. Make sure you pay back the loan instead of having it fall on the co-signer. Only take on as much of a loan as you can afford to repay.

3. Be realistic with loan amounts

Asking for a lower loan amount can increase your chances of getting approved. Higher loan amounts result in higher monthly payments, and that means a higher risk for the lender. Lenders may be more happy to work with you if you request a smaller loan or take out a longer term to minimize your monthly payments.

Alternatives to personal loans for fair credit

Personal loans can give you the extra capital you need for an emergency expense, vacation, or something else. But you don’t have to rely on personal loans to get extra money. These are some of the alternatives. 

1. Secured loans

A secured loan uses collateral and reduces the lender’s risk. If a borrower cannot repay the loan, the lender gets the collateral. While this setup is riskier for the borrower, secured loans typically have lower interest rates than unsecured personal loans.

2. Peer-to-peer lending

Peer-to-peer lending platforms let you borrow money from a lending community. This strategy can make cash more accessible, but you may have to wait a while before enough peers give you the necessary funds. There’s also the chance of a higher interest rate for your loan.

3. Home equity line of credit (HELOC)

A HELOC lets you convert a portion of your home’s equity into a credit line. These financial products only accrue interest when you borrow against them. These secured loans also tend to have lower interest rates than personal loans. However, HELOCs typically have variable interest rates, and your home becomes collateral for the loan.

Get the cash you need

A personal loan can give you extra money when you need it. Lenders have various loans available for people with fair credit scores. Building your credit and shopping around can help you find personal loans with competitive rates and terms.

FAQ 

Do I need collateral to secure a personal loan with fair credit?

You typically do not need collateral to secure a personal loan with fair credit.

Can I apply for multiple personal loans if I have fair credit to increase my chances of approval?

You can apply for multiple personal loans if you have fair credit. However, each application can result in a hard credit check, which could lower your credit score by a few points.

Can I use a personal loan for debt consolidation if I have fair credit?

You can use a personal loan for debt consolidation regardless of your fair credit score

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