Updated
May 09, 2023 Personal loans are an incredibly useful and flexible form of financing, but if you’re seeking a personal loan with fair credit, you may have fewer options.
Luckily, some lenders offer fair credit personal loans. You may not qualify for the best personal loan rates, but these loans may still have lower rates than credit cards and other financial products.
Here’s a closer look at how fair credit affects your approval odds for a personal loan, how to identify the best personal loans for fair credit, and our suggestions for the best fair-credit personal loan lenders.
In this guide:
- How fair credit affects your approval odds for a personal loan
- How to identify the best personal loans for fair credit
- 5 of the best personal loans for fair credit
- How to get the best personal loan with fair credit
- How to apply for a fair credit personal loan
- FAQ
How fair credit affects your approval odds for a personal loan
Fair credit is defined as a FICO score between 580 and 669. The meaning of this number represents the risk you present to a lender. A higher number shows a lender you are a low-risk client, meaning you’re more likely to repay the credit you have with the lender.
When you’re a low-risk borrower with a high credit score, you have better approval odds and get better rates. A lower number signifies a greater risk to lenders because it reflects a credit history that shows you may be less likely to repay the credit.
Your credit score is made up of several components: payment history, amounts owed, length of credit history, new debt, and credit mix. Negative reporting on one of these elements can affect your credit score.
Fair credit borrowers might have some combination of:
- High credit utilization
- Late or missed payments
- Shorter credit histories
- Collections
- Bankruptcy
- Too many credit inquiries
- Too many credit accounts
Some of these factors can exclude fair credit borrowers from qualifying for personal loans. A high credit utilization ratio, for example, affects your ability to qualify for a loan based on how much credit has already been extended to you.
Other factors—like a few late payments on a shorter credit history—mean borrowers have fair credit but still have the ability to repay a loan. You just need to know where to look for loans for people with fair credit.
How to identify the best personal loans for fair credit
When you begin your search for the best loans for fair credit, you’ll want to get the most favorable terms you can find, so keep the following factors in mind:
- APR: The average interest rate across personal loans with a two-year term is 11.48%, according to a report on consumer credit by the Federal Reserve in February of 2023. Fair-credit borrowers can expect that number to be higher than the average.
- Fees: It’s typical to see an origination fee of up to 10% for unsecured personal loans for fair credit. Returned check fees, prepayment penalties, application fees, and other fees will vary by lender. These fees will be disclosed in the paperwork you sign before receiving loan funds.
- Monthly payments: When it comes to a monthly payment, look for what you can afford as well as a payment that will pay off the loan quickly. Shorter loan terms mean you’ll pay much less in interest. They also tend to have much better interest rates.
- Borrower requirements: Some lenders cater to borrowers with good credit and won’t consider loans for fair-credit borrowers. Others will take an application from a borrower with little credit history who is a college graduate with a job offer.
- Repayment terms: Terms generally range between two to six years. Monthly payments will be higher for two-year loans, but you’ll pay much less overall for the loan by not paying interest for years.
- Time to fund: Most lenders will get you your funds shortly after you verify the information on your application. But if you need money now, take a look at our list of quick personal loans for lenders that can fund loans the fastest.
- Payment flexibility: Many lenders offer you the option to choose your repayment schedule.
5 of the best personal loans for fair credit
With the above considerations in mind, we’ve identified five of the best personal loans for borrowers with fair credit.
Best for fair credit: Upgrade
Personal loan
- Soft credit check
- Flexible loan options
- Fast funding
Upgrade is a great option for borrowers with fair credit, as well as those needing smaller loans due to the lender’s small minimum loan amount. With Upgrade, you can check rates without damaging your credit score, and eligibility is based more on free cash flow than with other lenders.
- Recommended credit: 580+
- Prequalify with a soft credit check: Yes
- Rates (APR): 8.49% – 35.97%
- Loan amounts: $1,000 – $50,000
- Repayment terms: 24 – 84 months
- Funding time: Next day
- Disclosed fees: 1.85% – 9.99% origination fee, $10 late fee, $10 returned check fee
Best for thin credit: Upstart
Personal loan
- Flexible qualifications
- Next day funding
- Fully automated loans
Upstart offers competitive rates, a large range of loan amounts, and funding as fast as one business day. It also takes into account future income for new-to-credit borrowers. If, for example, you are graduating from college and have a job offer, you may be able to qualify for a personal loan.
Most of Upstart’s loans are fully automated, so you can upload your documents online and receive your money quickly. There’s little friction in the process—you don’t have to talk to a human if you don’t want to.
- Recommended credit: 600+
- Prequalify with a soft credit check: Yes
- Rates (APR): 6.7%% – 35.99%%
- Loan amounts: $1,000 – $50,000
- Repayment terms: 36 or 60 months
- Funding time: Next business day
- Disclosed fees: 0% – 10% origination fee
Best for changing payment date: LendingPoint
Personal loan
- Soft credit check
- More flexible qualifications
- Fast decisions
LendingPoint uses an algorithm integrating artificial intelligence into an online lending platform to approve more borrowers.
LendingPoint runs a “soft credit check” on the borrower before making a decision, which helps keep you informed of your loan options without affecting your credit score.
- Recommended credit: Not specified
- Prequalify with a soft credit check: Yes
- Rates (APR): 7.99% – 35.99%
- Loan amounts: $2,000 – $36,500
- Repayment terms: 24 – 72 months
- Funding time: As soon as the next business day
- Disclosed fees: 0% – 8% origination fee
Best for credit card debt: Happy Money
Personal loan
- Soft credit check
- Easy and quick online application
- Transparent pricing
Happy Money specializes in personal loans for consolidating credit card debt, even going so far as to name its product “The Payoff Loan.”
The fintech lender offers rates and terms before adding a hard inquiry to your credit. It also has no fees beyond the origination fee—all benefits for people with average credit.
- Recommended credit: 640
- Prequalify with a soft credit check: Yes
- Rates (APR): 10.50% – 29.99%
- Loan amounts: $5,000 – $40,000
- Repayment terms: 24 – 60 months
- Funding time: 3 – 7 days
- Disclosed fees: 0% – 5% origination fee
Best for choosing payment date: Achieve
Personal loan
- Personalized experience with agent
- Same day decision
- Rate discounts
Achieve personal loans for average credit combines the personal experience of a dedicated loan agent with the streamlined experience of an online application.
The online application is easy, doesn’t affect your credit, and has a decision for you in minutes. Fair credit borrowers can use the tool to see if they qualify for a personal loan and for what amount. You do, however, need a credit score of above 620 to qualify.
- Recommended credit: 620+
- Prequalify with a soft credit check: Yes
- Rates (APR): 7.99% – 35.99%
- Loan amounts: $5,000 – $50,000
- Repayment terms: 24 – 60 months
- Funding time: 24 – 72 house
- Disclosed fees: 1.99% – 6.99% origination fee
How to get the best personal loan with fair credit
While there are certainly personal loan options borrowers with fair credit can pursue, you can also make moves to strategically improve your credit score and increase your odds of approval.
1. Focus on your debt-to-income ratio
Your debt-to-income ratio isn’t just a part of your credit score—it determines whether or not you have enough income or too much debt to qualify for a new personal loan.
If your ratio is too high, the lender won’t be able to issue you a loan regardless of your credit score. Increasing income or reducing existing debt can help improve your odds of approval.
2. Improve your credit score
Improving your credit score is one of the best ways to get better loan offers and qualify for personal loans with more lenders.
To improve your credit score, follow these steps:
- Dispute errors on your credit report. Check your credit report for mistakes and dispute any incorrect information with the credit bureaus and the business that reported the error. Credit bureaus are required to investigate within 30 days and will send you the results in writing.
- Ask for a credit line increase. If a credit issuer will increase your credit limit, you can instantly improve your credit utilization ratio. Just be sure not to use your newly available credit, as that will harm your credit score, debt-to-income ratio, and approval odds for a loan.
- Automate your payments. Be sure to make any payment obligations you already have on time every time. A consistent repayment history is the number one indicator to a lender about how you will treat new credit. If you’ve been on time in the past, odds are you’ll be on time in the future.
- Ask for forgiveness. Consider writing a professional letter to creditors asking if they’re willing to remove a record of a past late payment from your report.
- Become an authorized user. See if someone with good credit may be willing to add you as an authorized user to one of their accounts. It’ll show up on your credit report, and you’ll benefit from the positive payment history.
- Report rent to the credit bureaus. If you rent your home and consistently pay your rent on time, you can ask your landlord to report the payments so they appear on your credit report. Since on-time payments account for 35% of your credit score, it’s a great way to boost your score.
3. Identify lenders with more lenient requirements
A lender that’s willing to approve a fair-credit borrower is key. In addition to the lenders featured above, you might explore the following lender types when looking for a personal loan:
- Credit unions. Because they are member-owned non-profits, credit unions can be more lenient in granting loans to people with imperfect credit. They often also offer lower interest rates. You must become a credit union member before you can apply for a credit union personal loan.
- Online lenders. Some online lenders consider college education or use AI to predict your repayment behavior and grant you access to loan products that your credit score can’t.
- Your local bank. A local bank may have a lender who will consider your unique situation and submit your application to underwriting with these important details.
4. Get prequalified
One of the most powerful tools you have at your disposal is an online prequalification tool. This lets you see if you would qualify for a personal loan with average credit—before fully applying. You can avoid a ding to your credit and see loan options that could work for you.
5. Add a cosigner or a co-applicant
If you have a family member or friend with good credit, you could ask them to cosign on a personal loan for you. A cosigner is jointly responsible for loan repayment, so lenders consider the cosigner’s credit and income when deciding whether to lend to you.
A co-applicant can also improve your odds of approval. A co-applicant has equal rights in the property along with an equal obligation to repay it. Personal loan lenders that allow for a co-application can include their income in your application.
Just be aware your borrowing behavior reflects on the cosigner. Don’t ask someone to cosign for you if you aren’t 100% sure you can afford to repay the loan without any late payments.
How to apply for a fair credit personal loan
Applying for a personal loan is easy and can mostly be done online. Banks, credit unions, and online lenders have technology that can approve or deny your application without a hard credit check. You don’t have to sacrifice your credit score to get the best rates and terms.
When you apply for a personal loan online, you’ll need to provide some basic information so a lender can assess your qualifications. Some of the information you may be asked to provide include:
- Your name, address, phone number, email, and other contact details
- Your birth date or Social Security number
- Details about your income and employment history
- Information about your other debts
- What you plan to use your personal loan for
- Cosigner information (if applicable)
Once you’ve submitted your application, many lenders can tell you within minutes if you are approved for the loan.
FAQ
Will a personal loan help or hurt a fair credit score?
Three main credit categories are affected when you apply for a personal loan: payment history, recent credit inquiries, and credit utilization.
Making on-time payments on your personal loan can boost your credit score by improving your payment history. Late payments can hurt it. Your score can also go down if you apply for too many personal loans over an extended period.
Taking on additional debt in the form of a personal loan increases your credit utilization, and your credit score may temporarily decrease. Your credit score will increase, however, as you pay down the principal loan amount.
Is a personal loan the best financing option for fair credit?
A personal loan isn’t the only financing tool you have with fair credit. There are other options to consider, including: