Best Personal Loans for Fair Credit: Explore Your Options

Finding the perfect personal loan when you have fair credit can be a bit like searching for a needle in a haystack. But fear not, because with a little know-how, you can find the best deals and secure the funding you need.

With careful research and planning, you can find competitive rates and terms that suit your financial needs. This article will guide you through the process of finding the best personal loans for fair credit, helping you make informed decisions and secure the funding you require.

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 $100,000 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’ll 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 for fair credit 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

Some 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. It may be more difficult to qualify for a bank personal loan if you only have fair credit.

2. Credit unions

A credit union is a financial cooperative owned by its members. Unlike banks, which are for-profit businesses, credit unions operate with the primary goal of providing financial services to their members.

Credit unions are similar to banks in the sense that they offer competitive interest rates and terms. However, it can also be a bit more difficult to qualify for a personal loan with fair credit from these institutions.

3. Online lenders

Online lenders make personal loans easy to access. They typically have fewer government regulatory burdens 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.

Nevertheless, it can be a more simplified process to obtain a personal loan for fair straight from online lenders.

4. Cash advance apps

Cash advance apps do not offer loans but instead, offer a way to 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 Instacash^SM. 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 offer better terms 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

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.

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.

It’s possible you could work with a trusted family member or friend with good credit to help you get a loan. Just make sure you have a plan to pay back the loan – you don’t want to financial burden to fall on the co-signer.

3. Be realistic with loan amounts

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. Lenders may be more willing 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. Take a look at 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 allows you to 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. This could create an added financial risk, and you could lose your home if you’re unable to pay back your loan.

Get the cash you need

Finding the best personal loans for fair credit requires careful consideration and comparison. By understanding your financial needs, researching reputable lenders, and improving your credit score, you can increase your chances of securing favorable terms.

Remember, patience and persistence are key in the loan application process. With the right approach, you can find a personal loan that aligns with your goals and helps you achieve financial success.

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