Best Personal Loans For Fair Credit Of July 2024 – Forbes Advisor – Technologist

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Best Personal Loans for Fair Credit of 2024

• Best Fair Credit Personal Loan for Long Terms: Upgrade
• Best Fair Credit Personal Loan for Joint Loans: Lending Club
• Best Fair Credit Personal Loan for Quick Funding: Upstart
• Best Fair Credit Personal Loan for Small Amounts: OneMain Financial
• Best Fair Credit Personal Loan for Flexible Requirements: LendingPoint
• Best Fair Credit Personal Loan for Customer Experience: Avant
• Best Fair Credit Personal Loan for Large Amounts: SoFi
• Best Fair Credit Personal Loan for Low Rates: LightStream

Summary: Best Personal Loans With Fair Credit of 2024

Tips for Comparing Personal Loans for Fair Credit

Consider these tips when comparing personal loans for fair credit:

Having fair credit can make it difficult to qualify for the lowest personal loan interest rates. Prequalifying with different lenders can help you find the lowest-cost option and save you money once you start repayment.
-Colin Beresford, deputy editor, personal and business loans

Guide to Fair Credit Loans

What Is a Fair Credit Score?

Based on the FICO credit score range of 300 to 850, a score between 669 and 580 is considered to be a fair credit score. Borrowers with fair credit are viewed as higher risk and may find it more difficult to qualify for personal loans in addition to other credit accounts like credit cards or mortgages. It’s in your best interest to improve your score before applying for a loan to increase your chances of receiving more favorable terms.

Fair credit scores are typically a result of poor payment history, high credit usage and/or too many credit applications or hard credit inquiries. If you want to improve a fair credit score, it’s best to focus on these areas of your credit profile.

How Does a Personal Loan Affect Credit Score?

A personal loan can help you gain access to necessary financing while building your credit if used responsibly. Here’s how the lifecycle of a personal loan may affect your credit score.

• Shopping for a personal loan. Shopping around for a personal loan typically has no impact on your credit score. Most lenders that offer a prequalification process utilize a soft credit check, which doesn’t damage your credit. However, be sure to confirm a lender uses a soft credit check vs. a hard credit check to safeguard your score.
• Applying for a personal loan. When you apply for a loan, your lender will then run a hard credit check, which can temporarily drop your score between one and five points. Hard credit checks typically impact your score for one year but stay on your credit report for two years. If you need to shop around for rates, multiple hard inquiries for the same type of credit within a short period (typically 14 to 45 days) are usually treated as a single inquiry by credit scoring models, reducing their impact on your score. Be sure to keep personal loan applications to a minimum to reduce hard inquiries on your report.
• Repaying your personal loan. Your payment history is one of the most important factors that makes up your credit score—it accounts for 35% of your FICO score. If you make all your payments on time, it can boost your credit score. But if you miss payments, your score will likely start to experience pitfalls. Therefore, prioritizing timely payments is essential for maintaining and improving your credit health.

Related: How Do Personal Loans Affect Your Credit Score?

Average Personal Loan Interest Rates by Credit Score

Personal loan interest rates vary by credit score. Below, you’ll find the average rates based on VantageScore risk tiers, according to Credible. Please note that interest rates are determined and set by lenders.

How To Improve Your Credit Score Before Applying

If your score is lower than you wish and you want to increase your chances of receiving better loan terms, take time to improve your score before applying. Use these strategies to build your credit fast:

• Pay all of your bills on time. On-time payment history is one of the most important factors when building credit. Be sure to pay all of your bills on time leading up to applying for a personal loan.
• Become an authorized user. An authorized user is someone who is added to an existing credit card account. When you become an authorized user, the card’s history will appear on your credit report. If the primary account holder has a history of on-time payments, your credit score may experience a boost.
• Pay off existing debt. Your debt levels impact your credit utilization ratio—how much of your total available credit you use, represented by a percentage. The higher your ratio, the harder it is to qualify for a personal loan. Paying off existing debt before applying can help boost your score by decreasing your credit utilization ratio.
• Request a credit limit increase. Paying off existing debt is not the only way to reduce your credit utilization ratio. Because your credit utilization looks at how much of your available credit you use, increasing your credit limit can achieve the same goal. To request a credit limit increase, contact your card provider. This may require a hard credit check that temporarily dings your score.
• Check your credit report for errors. Regularly review your credit reports for any inaccuracies or errors that may be negatively affecting your score. Dispute any incorrect information with the credit bureaus to have it corrected.

Related: Best Debt Consolidation Loans

Where To Get a Personal Loan With Fair Credit

Various lenders offer loans to borrowers with fair credit, so compare all of your options before accepting financing, including:

• Credit unions. Credit unions often work with borrowers with fair credit, particularly if you have an existing relationship with the lender. You’ll typically need to be a member to apply for a personal loan from a credit union. 
• Online lenders. Online personal loan lenders often have flexible qualification requirements, and some offer loans to borrowers with credit scores as low as 580. 
• Family and friends. Borrowing from a family member or friend can be a good option for a loan. Before accepting any money, writing a promissory note can set expectations for how and when a loan will be repaid.
• Cash advance apps. If you have a steady source of income, a cash advance app is one loan option to consider. These lenders provide quick access to small amounts, but the interest and fees can make this a costly option. 
• Peer-to-peer (P2P) lending platforms. P2P lending platforms connect borrowers with individual investors willing to fund loans. These platforms often have more flexible credit requirements and competitive interest rates.
• Local banks. Some local banks offer personal loans to borrowers with fair credit, especially if you have an established relationship with the bank.
• Secured personal loans. You may qualify for a secured personal loan if you have assets such as a savings account, car, or other property. These loans are less risky for lenders and can be easier to obtain with fair credit.

How to Apply for Personal Loans for Fair Credit

While the process may vary depending on your specific score and lender, here are the general steps you can follow to get a personal loan with fair credit:

• Check your credit score. Start by checking your credit score through your credit card provider or another credit-providing website before looking for the best lender. This will give you an understanding of which lenders you can or can’t qualify for. Personal loans for fair credit typically require minimum scores between 580 and 660.
• Improve your score. If you have a fair credit score, you usually won’t receive the most favorable terms, like low interest rates. Take time before applying to improve your score as much as possible to receive the best terms possible for your situation. Some quick ways to improve your credit include repaying any outstanding debts and reducing your credit usage.
• Evaluate your budget. Prior to looking for the right lender, evaluate your budget and understand how much loan you can afford. Be sure to only borrow what you need because you’ll owe interest on the entire balance. Use a personal loan calculator to estimate your potential monthly payments.
• Prequalify with multiple lenders. Some lenders offer a prequalification process, which lets you see what terms you may receive once approved without a hard credit check.
• Add a co-signer, if necessary. If you need to boost your application to receive better terms, consider adding a co-signer. A co-signer is a secondary person who agrees to pay back the loan if you fail to do so, which reduces the risk you pose to the lender.
• Submit your application. Once you’ve found the best lender for your situation, submit an application online or in person. Prepare to provide your personal information, such as your Social Security number (SSN), address and income information.

Alternatives to Personal Loans for Fair Credit

Personal loans aren’t your only option to get financing. Other choices include:

• 401(k) loan: A 401(k) loan allows you to borrow from your retirement savings at lower interest rates than traditional loans. If you fail to make payments, your loan will be classified as a withdrawal and could result in a 10% penalty. 
• Credit card: For borrowers with fair credit, credit cards can be one option to secure financing. Before accumulating debt, have a plan for repayment because credit card APRs can make carrying a balance expensive.
• Secured personal loan: Valuable items, such as your car, can be used to qualify for a secured loan if your credit history is insufficient. However, you risk losing your collateral with a secured loan if you stop making loan payments.
• Buy now, pay later (BNPL) loan. BNPL loans allow you to purchase items and pay for them over a set term, often with no money down and no credit check. Although interest rates can be as low as 0%, missing payments or defaulting can result in costly fees.
• Home equity financing: Home equity loans or home equity lines of credit (HELOCs) allow homeowners to tap into the equity they’ve accumulated in their homes. Although you can qualify for these financing options with fair credit, defaulting on these loans can result in your lender taking possession of your home. 
• Community-based aid: Lenders and financial institutions aren’t your only option to find funding. Community-based aid is available in many areas by dialing 211 or visiting 211.org.
• Family and friends: Borrowing from family or friends can be a viable option. Ensure to have a clear agreement in place to avoid potential conflicts and misunderstandings.

Recap: Best Personal Loans for Fair Credit

• Upgrade: Best Fair Credit Personal Loan for Long Terms
• Lending Club: Best Fair Credit Personal Loan for Joint Loans
• Upstart: Best Fair Credit Personal Loan for Quick Funding
• OneMain Financial: Best Fair Credit Personal Loan for Small Amounts
• LendingPoint: Best Fair Credit Personal Loan for Flexible Requirements
• Avant: Best Fair Credit Personal Loan for Customer Experience
• SoFi: Best Fair Credit Personal Loan for Large Amounts
• LightStream: Best Fair Credit Personal Loan for Low Rates

Methodology

We reviewed 31 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose lenders that have a minimum credit score requirement of between 580 and 669 and ranked them based on the weighting assigned to each category:

• Eligibility and accessibility. 30%
• Loan cost. 25%
• Loan details. 20%
• Customer experience. 15%
• Application process. 10%

Within each major category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications and the geographic availability of the lender. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like prequalification options and mobile apps.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Personal Loans Rating & Review Methodology.

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