Not everyone has excellent credit. Missed payments happen, life gets in the way, and your credit score can drop after just a few financial mistakes.
Having a “fair” credit score in the range of 580 to 669 may make securing a loan more difficult, but several loan options exist specifically for individuals in this range. Some lenders specialize in providing loans to those with fair credit—or take other factors, like income and education, into consideration as well.
Read on to learn the best personal loans for fair credit and a few tips to help you improve your score.
Lending Sources for People with Fair Credit
Individuals with credit scores in the range of 580 to 669 can secure loans through a few different lending sources.
Instead of offering loans directly through their sites, loan aggregators match users with external lenders who meet their specific financial needs.
Most loan aggregators will have you fill out a form with information like your credit score, your loan’s purpose, and your desired loan amount. They will use these factors to match you with lenders who meet your criteria, helping you narrow down your search.
Our favorite loan aggregators are Fiona, Credible, and Monevo.
Fiona matches users with lenders in as little as 60 seconds. The process is simple—provide some information about the loan, your credit score, and your contact info, and Fiona will send you a list of lenders that meet your needs. Applying is free and will not affect your credit score.
Fiona partners with lenders offering loans from $1,000 to $100,000 and the minimum annual percentage rate (APR) you can expect to pay is 4.99%.
Credible offers a loan-requesting platform similar to Fiona but provides some additional benefits to borrowers.
To browse through the site’s lending options, you can complete a search with filters or fill out a quote form. Once you find a lender you like, you can apply right through the Credible website. Some lenders will send you your funds as soon as the next day.
You can request a minimum loan of $600 through Credible.
Monevo is a free tool that matches users with personal lenders based on their credit scores and desired loan purposes. Its lenders offer financial products such as debt consolidation loans, auto loans, mortgage loans, and student loan refinancing options.
Once you enter your criteria into the form, Monevo will search through 40 of the top lenders on the market, such as Upstart, Figure, and Best Egg, to match you with the right ones for your needs. After you receive your results, you are free to walk away from the service, and applying will not affect your credit score.
Monevo’s lenders start their interest rates as low as 1.99%, though you should expect to pay closer to 4.99% or more. Once your lender approves your application, you can expect to receive your money as soon as the next business day.
Personal Loan Lenders
Not every personal lender provides loans to people with fair credit, but some offer higher interest rates or stricter repayment terms to make up for the lower credit scores. A few lenders will even examine other criteria, such as education or income, to determine your eligibility.
OppLoans and Upstart are our favorite personal lenders for people with fair credit.
Upstart is an online lending marketplace that considers factors aside from one’s credit score when reviewing loan applications. This site recognizes that a credit score is not the only indicator of a person’s financial responsibility, and as a result, it reviews applicants’ income and education as well.
Because Upstart does not target borrowers with poor credit, you can expect its rates to be a bit lower than other personal lenders. Even better, your interest rates and monthly payments will stay the same throughout your repayment period.
If you believe your income and education say more about your ability to repay a loan than your credit score, Upstart may be worth checking out.
OppLoans is a personal loan lender that offers small loan amounts of up to $4,000. This site uses a free online application that takes a few minutes to complete, and if the lenders approve your application, you can receive your funds in as little as one day.
Though OppLoans does not advertise itself as one, the site makes comparisons between its services and those of payday lenders. OppLoans boasts a maximum APR of 199%, compared to some payday lenders that charge up to 400%. And because OppLoans offers low loan amounts, some people may use its services to receive an advancement on a paycheck.
Many customers with low credit scores have qualified for loans through OppLoans. For those with credit scores in the range of 580-699, trying out OppLoans may be a good place to start.
Peer-to-peer, or P2P, lenders, allow individuals to obtain loans directly from other individuals or companies. These types of lenders cut out the middleman, such as a bank, and simplify the loan process.
Several P2P lenders assist borrowers with fair credit scores. Prosper and Lending Club are some of our favorite P2Ps in the lending industry.
Prosper is a P2P platform that matches borrowers with lenders who meet their specific financial needs. The site matches about 4,000 loans each week and has quickly become one of the most popular P2P websites.
These lenders tend to charge APR between 6.99% and 35.99% depending on your credit score. When you fill out a quote request form, the site will run a soft check of your credit that will not impact your score. You can expect to receive your funds within five days.
Prosper does require a minimum credit score of 640, so those on the lower end of the “fair” score range may want to consider other options.
LendingClub is another peer-to-peer platform that matches borrowers with lenders. This site is one of the largest of its kind. Since 2007, LendingClub has initiated over $50 billion in loans and connected over three million borrowers with lenders.
You can apply for loans anywhere from $1,000 to $40,000, and after a lender approves your application, you will receive your funds in around four days. APR rates range from 10.68% to 35.89%.
Along with matching borrowers and lenders, LendingClub also has a comprehensive resource center that can improve your knowledge about the financial world.
And as with any lender, your credit score will impact your APR and repayment terms.
Getting an Auto Loan with Fair Credit
If you have fair credit and are considering purchasing a car, you should be aware of the drawbacks of borrowing directly from the dealership.
Many dealerships charge outrageous interest and fees for buyers with less-than-optimal credit scores. Financing your car through the dealership could lead you to pay almost double what the car is worth.
Instead, your first step when considering an auto loan should be talking to your bank. Banks offer fair interest rates that meet regulations set by their financial institutions, so they will not rope you into paying unnecessarily high interest.
If your bank does not approve your loan application, your next step should be to contact a credit union. As opposed to banks, credit unions are not-for-profit, so they tend to charge lower rates, have fewer fees, and require fewer approval criteria.
If you would prefer not to finance through a credit union, several of the loan aggregators and P2P platforms above can match you with auto lenders. Also, most personal lenders will approve loans for many uses, including auto financing.
Receiving an auto loan through a personal lender will likely result in higher interest rates, so keep this in mind when considering the overall cost of your purchase.
Getting a Mortgage with Fair Credit
Individuals with fair credit may struggle to find a mortgage to pay for a house. However, obtaining a mortgage with this credit score range is possible—and it may be easier than you think.
Mortgage lenders need borrowers in any credit range to help them boost profits and stay afloat. As a result, many lenders do not alter their requirements unless your score is lower than 580, which falls into the “poor” range.
Borrowing a mortgage through the Federal Housing Association (FHA) is your best place to start if you have a fair credit score. FHA mortgages allow borrowers with credit scores of 580 or higher to receive funds with only 3.5% down.
If you are a military veteran, you can also consider applying for a VA mortgage, which does not require a minimum credit score. However, VA lenders may create their own score requirements and limit your options.
If you would prefer to apply for a traditional mortgage, you may have to make some sacrifices to gain approval. Conventional lenders often require higher down-payments or a co-signer with good credit to make up for your fair credit score.
Further, some mortgage lenders will only approve your application if you purchase a house that costs less than you can afford.
Before you apply, consider what sacrifices you are willing to make to receive a mortgage.
Loan Sources to Avoid
Because fewer options exist for borrowers with fair credit, you may feel tempted to take an offer with less-than-ideal terms or high fees to secure a loan. However, you should be aware of a few loan sources to avoid altogether.
Just because a lender seems credible does not mean its terms will be fair. Before agreeing to any loans, read the agreement carefully, calculate how much interest you will pay throughout the repayment, and determine whether you can make the payments on time.
Some lenders target people with fair credit because they know these borrowers may have trouble repaying loans, resulting in profits for the lender. These lenders often fall into the loan shark category, which refers to lenders that offer loans with extremely high-interest rates.
Loan sharking is illegal, but some lenders work around the law to stay in the market. If you ever begin working with a lender that has unusually strict collection terms or appears to operate outside of the law, walk away immediately. You will almost always be able to find a safer, more affordable option.
Payday lending is a form of loan sharking that is legal in some states. Payday lenders offer short-term loans that use your paycheck as collateral. Many people who need quick cash take advantage of payday loans without understanding the associated fees, leaving them with less money than they originally had.
Taking a loan from a payday lender can lead to an endless cycle of borrowing, repaying, and racking up interest. Steer clear of these lending options and always make sure that you can meet the repayment terms before agreeing to any loan.
How to Choose the Best Fair-Credit Loan Company
Many excellent personal loan lenders exist on the market today for people with fair credit scores. Choosing the right one for you ultimately comes down to personal preference. To make the most informed decision, follow these steps that will help you better understand your lending needs:
- Know your credit score: Even if you know that your credit falls into the “fair” category, you should identify your exact score. Some lenders require minimum credit scores that fall into the higher end of this range.
- Determine your desired loan amount: Before diving into the loan process, you should determine how much money to request through your loan. If you only need a few thousand dollars, you may have a better chance of securing a loan with lower interest rates than if you request a higher amount.
- Understand your finances: You know your financial situation better than anyone. As you begin examining the terms for different lenders, consider how much you would be able to pay in interest on top of your loan amount. You should also schedule out a repayment plan that works with your budget before agreeing to any loans.
- Read the terms: Some lenders include essential information about the loan in the fine print. Read the entire agreement for each lender and take note of any hidden fees or terms that you find.
- Take your time: Many loan aggregators boast how quickly you can receive your loan after applying. Though you may need the money right away, try not to rush into any agreements. Take your time to consider every aspect of each lender before deciding.
With these steps in mind, you can choose a lender that will best suit your financial needs.
Types of Fair Credit Loans
The personal loans that people with fair credit can acquire fall into the following categories:
- Unsecured loans: These loans do not require you to provide collateral, making them riskier for lenders. Most unsecured loans charge APR based on your credit score.
- Secured loans: These loans do require collateral in the form of your personal property, such as your house or car. Mortgages and auto loans fall into the secured loans category. Some banks even let you use money in a savings account as collateral for your loan.
- Fixed-rate loans: Many loans offer fixed interest rates, meaning that you will pay the same monthly payments throughout the repayment period. When looking for a fair credit loan, try to limit your search to ones that offer fixed rates.
- Variable-rate loans: These loans charge interest rates that can fluctuate throughout the repayment period based on a benchmark set by the bank. Though variable-rate loans sometimes offer lower interest rates overall, you could end up paying more than you intended because of their unpredictable nature.
- Co-sign loans: Borrowers with fair credit scores can benefit from lower rates that come with co-sign loans. These loans require the borrower to link another individual to the loan, such as a spouse or parent, who promises to repay the loan if the original borrower cannot.
- Debt consolidation loans: Borrowers use the funds from these loans to repay higher-interest debt.
Identifying which type of loan you need can help you streamline the search process.
How to Spot Fair-Credit Loan Scams
Individuals with fair credit need to be especially cautious of falling into a loan scam. Some lenders prey on those with lower credit because they know these borrowers may be desperate to acquire a loan and, for that reason, spend less time reading the terms before agreeing.
Here are some signs that a fair-credit loan may be a scam:
- The lender doesn’t ask about your credit: You might think that a lender not needing to know your credit score would give you a better opportunity to secure the loan. However, all lenders should ask about your payment history. If they do not, they could be trying to scam you.
- The lender asks for a prepaid card: Lenders asking for payment in the form of a prepaid card may also indicate a scam. Reliable lenders will deduct any fees from the loan itself. Asking for a prepaid card shows that the lender wants to hide its activity, meaning that it could be trying to steal your money.
- The lender reaches out without inquiry: Reliable lenders advertise their services through traditional methods: online, through commercials, or in print advertisements. If a lender contacts you directly without you reaching out first, it could be a scam.
- The lender uses an unsecured website: When you apply for a loan online, you should ensure that the website is secure before providing any financial information. Secure websites have a padlock symbol to the left of the search bar, and their web addresses start with “https” rather than “http.”
- The lender guarantees approval: No credible lender can ensure any loan until it reviews the borrower’s financial information. If a lender guarantees approval upfront, you can assume that it is trying to scam you.
- The lender does not disclose its fees: Lenders need to lay out all of their costs before you agree to their terms. If a lender avoids stating its fees altogether, it may be trying to rope you into paying high costs without noticing.
Overall, if you are unsure if a lender is credible, the best course of action is to walk away.
What is Considered Fair Credit?
Fair credit scores fall into the range of 580 to 669. About 17% of Americans have scores in this category, and while it is still one step above poor credit, having a fair credit score is not ideal.
A person’s credit score starts on the higher end of the spectrum and decreases each time they make a late payment, accumulate debt, or check their credit report. A score in the fair range means a person has made several financial mistakes throughout their payment history.
How to Improve Your Credit
If your credit score falls into the fair range, you may miss out on financial opportunities and struggle to obtain loans and credit cards. Thankfully, credit scores are ever-fluctuating numbers, and you can boost your score to a more acceptable range with time.
Here are a few safe, reliable ways to improve your credit score:
- Use Experian Boost: One of the fastest ways to increase your score is through Experian Boost. This free tool will examine your payment history for bills like Netflix and allow you to choose which payments you would like to contribute to your credit score. Your score will increase by several points almost instantly.
- Pay off debt: If you currently have a credit card or personal debt, you should try to pay it off as quickly as possible. The longer that debt sits in your account, the more interest it will accrue. Obtaining a debt consolidation loan can help you streamline your debt repayment.
- Make loan payments on time: Taking out a loan and making payments on time can also boost your credit score. Doing so shows lenders that you are responsible with your money and that you can meet their loan terms.
If you have fair credit, be sure to provide, in writing, a rationale to the credit bureaus about any incidents in your credit history that have lowered your credit.
Documents Required for a Loan Application When You Have Fair Credit
Most lenders require you to provide a few documents as part of your loan application. Individuals with fair credits may need to offer additional evidence of their financial responsibility to qualify for a loan.
Keep these documents ready as you begin your application process:
- Your recent pay stubs
- Your W-2 forms
- Your Social Security award letter
- Your employer’s contact information
- Your income tax returns from the previous year
- A written explanation of your credit problems
If you have fair credit, you should provide all of the evidence possible about your credit history and any extenuating circumstances that led to your credit problems.
Most lenders are flexible with how you use your loan. Common uses include auto financing, home renovations, weddings, funerals, debt consolidation and medical bills.
In general, once you secure a loan, you can use the funds for any personal expenses.
The national average interest rate for personal loans is 9.41%, and the best interest rates fall at or below this average. However, you can expect your credit score to impact the rates for which you qualify—lower scores lead to higher rates.
Though you can damage your credit score in just a few days, rebuilding it takes time. You need to rectify the problems that decreased your score and then demonstrate your financial responsibility on top of those problems.
The exact time it will take to rebuild your score depends upon the reasons for its decline. Delinquencies will remain on your credit report for seven years, while inquiries appear for around two years. Bankruptcies, however, can linger for up to 10 years.
You can work to improve your score while these adverse elements remain on your report, but they will continue to affect your score negatively in some way until they expire.
Though having a “fair” credit score may put a damper on your financial opportunities, you can still find dozens of lenders that are willing to offer personal loans to individuals in this credit range. Some lenders will even consider your income and education in addition to your credit score.
Keep in mind that until you increase your credit score with the credit bureaus, you will likely have to pay higher APR and have stricter repayment terms on loans. Boosting your score into the “good” or “excellent” range will provide you with more financial opportunities and allow you to pay lower fees overall.
Until then, ask yourself this question: How can I use a personal loan to improve my credit score?