Best Personal Loans for Fair Credit: How To Find the Right Loan for You
You can find a personal loan for fair credit through a variety of lenders, including credit unions and online-only lenders. Banks may be an option as well, but it depends on whether they require a high credit score. FICO defines a fair credit score as 580 to 669, and if you have a score in this range you'll likely pay a higher interest rate than average when you borrow money. Comparing offers from multiple lenders with a soft credit check is the fastest way to find a good rate.
Key Takeaways
Fair credit means a FICO score of 580 to 669. In this range you can often qualify for a loan, but usually at a higher interest rate than borrowers with good or better credit.
Credit unions offer rate-capped Payday Alternative Loans. PALs run up to $2,000 with terms of one to 12 months, and federal rules cap the interest rate at 28% APR — built for fair- and poor-credit borrowers.
Online lenders can fund fast, often in 24 to 72 hours. The trade-off is that rates may run higher than a bank or credit union loan in exchange for speed and convenience.
Compare at least three prequalified offers first. Prequalification uses a soft credit check that doesn't affect your score, so you can shop rates before a hard inquiry.
Know your debt-to-income (DTI) ratio before you apply. Lenders weigh your monthly debt payments against gross monthly income, and limits vary by lender and loan type.
A co-signer or collateral can improve your odds. A secured loan or a creditworthy co-signer lowers the lender's risk, which may help you qualify with fair credit — though approval isn't guaranteed.
Summary generated by AI, verified by MoneyLion editors
MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms and fees from different lenders and choose the best offer for you.
What Is a Fair Credit Score?
FICO credit scores have five categories: poor, fair, good, very good and excellent. Here's how those bands convert to numbered scores. Note that VantageScore, the other major credit-scoring model, uses a slightly different scale than FICO.
FICO Rating | Score Range | What It Means for a Personal Loan |
|---|---|---|
Poor | 300 to 579 | Hardest to qualify for loans, will likely qualify for the highest interest rates. May need a co-signer or collateral to qualify. |
Fair | 580 to 669 | You may be able to get approved for loans, but probably with higher interest rates |
Good | 670 to 739f | Good chances of getting approved for a loan, with better interest rates compared to fair-credit borrowers |
Very Good | 740 to 799 | High approval odds, will generally qualify for even lower interest rates than those with good credit |
Exceptional | 800 to 850 | Best approval odds, will likely qualify for the lowest rates |
Where To Find the Best Personal Loans for Fair Credit
If you're looking for the best personal loan for fair credit, don't accept the first offer you receive. Checking in with multiple lenders can help you save money on interest and fees.
Credit Unions
Credit unions are member-owned cooperatives that often offer competitive rates, though you'll need to become a member before you can apply. Many credit unions offer short-term Payday Alternative Loans (PALs) for amounts up to $2,000. The benefit of PALs is that their interest rates are capped at 28% APR by the National Credit Union Administration (NCUA), and they're specifically built for borrowers with fair or poor credit.
Online Lenders
Online lenders make personal loans easy to access. Their streamlined underwriting means they can deliver funds within 24 to 72 hours. You could get a quicker turnaround, but the downside is that you may have to pay a higher interest rate for these loans compared to personal loans from banks and credit unions in exchange for the convenience.
Banks
Some banks offer personal loans for people with fair credit, but they tend to have more stringent requirements for approving applications — so they may not be the best option for fair-credit borrowers.
How To Compare Offers and Apply
Some personal loans offer better terms than others. To find the lowest interest rate and fewest fees, it's worth taking the time to comparison-shop. This will also help protect your credit score.
Check Your Rate Without Hurting Your Score
Many online lenders and credit unions let you prequalify for a personal loan. This involves sharing some basic personal information with the lender, including your name, address and the loan size and term you're looking for. The lender will use this information to give you a preliminary sense of the loan terms and rates you might qualify for, all without involving a “hard pull" of your credit score, which can cause your score to dip a few points in the short term.
The lender will still perform a hard credit pull if you decide to move forward with the application based on your prequalification results, but prequalifying is a great way to get a sense of the offers you're eligible for across multiple lenders without hurting your score.
Know Your Debt-To-Income (DTI) Ratio
It's also helpful to know your debt-to-income (DTI) ratio before you start applying for personal loans. Your DTI is your monthly debt payments divided by your gross monthly income. Lenders use this ratio to determine your ability to manage loan payments. Note that the DTI limits will be different for each lender, and also depends on your credit profile, income and how much you're borrowing, among other factors.
Apply in 5 Steps
To apply for a personal loan with fair credit, follow these steps:
Find lenders that offer personal loans specifically for borrowers with fair credit.
Compare at least three offers across lenders that offer prequalification.
After finding the best option, submit an application for a personal loan.
Gather the required documents, including proof of income and identification information.
Wait for approval, then receive your loan funds.
4 Tips To Improve Your Approval Odds
If you want to increase your chances of getting approved for a fair-credit personal loan on the first try, make sure to consider these tips.
Improve your credit 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 lowering your credit utilization ratio.
Consider adding a co-signer to your application: 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, and the co-signer becomes responsible for the loan if the borrower cannot cover the payments.
Request a realistic loan amount: Asking for a lower loan amount may increase your chances of getting approved. Higher loan amounts result in higher monthly payments, and that means a higher risk for the lender.
Consider a secured loan: Secured loans are backed by collateral, such as a property like a home or car. If you can’t pay back the loan, the lender will take the collateral to cover what you owe. Because the collateral reduces the lender's risk, secured loans can be easier to qualify for with fair credit.
FAQ
How much can you borrow with a fair credit score?
The personal loan size you can get with a fair credit score will vary based on your term length and other application details, but you may qualify for less than borrowers with higher scores. Borrowers with credit scores in the low-to-mid-600s take out an average of around $4,300, according to TransUnion data, compared to about $7,000 across all borrowers.
Does getting prequalified for a personal loan hurt your credit score?
Getting prequalified for a loan doesn’t hurt your credit score, since it only involves a soft credit pull rather than a hard credit check. However, a hard credit inquiry will still be required if you move forward with applying for a loan.
Can you have more than one personal loan at a time with fair credit?
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. Each loan you take out also increases your Debt-To-Income ratio, which can make it harder to get approved for new credit.
Does paying off a personal loan early hurt your credit score?
Paying off a personal loan early may cause a small dip to your credit score in the short term because it will affect your average age of accounts and your credit mix. However, it can have a positive effect in the long term, since it reduces your overall debt and frees up room in your DTI ratio for future borrowing.
Key Terms
Fair credit score: A FICO score of 580 to 669. Borrowers in this band can often qualify for loans but typically pay higher interest rates than good- or excellent-credit borrowers.
Annual percentage rate (APR): The yearly cost of borrowing, including interest and certain fees, expressed as a percentage. It's the best number for comparing loan offers.
Payday Alternative Loan (PAL): A small-dollar loan from a federal credit union, available in amounts up to $2,000 with terms of one to 12 months and an interest rate capped at 28% APR.
Prequalification: A preliminary review based on a soft credit check that estimates the rate and loan amount you might qualify for without affecting your credit score.
Soft credit inquiry: A credit check — such as checking your own report or a prequalification — that does not affect your credit score.
Hard credit inquiry: A lender's review after you formally apply. It can lower your score by a few points and stays on your report for two years, though it usually affects your score for about one year.
Debt-to-income (DTI) ratio: Your total monthly debt payments divided by your gross monthly income. Lenders use it to gauge whether you can manage new loan payments.
Secured loan: A loan backed by collateral, such as a car or savings. Because collateral lowers the lender's risk, secured loans can be easier to qualify for with fair credit.
Sources
FICO. What Is a FICO Score?
NCUA. Payday Alternative Loan Rule.
Summary generated by AI, verified by MoneyLion editors
Marc Guberti contributed to the reporting for this article.
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