Best Personal Loans for Fair Credit of February 2023

How we chose the best personal loans for fair credit

We compared more than a dozen lenders that require a minimum credit score between 560 and 660 to choose the best personal loans for fair credit. We reviewed factors such as income and other borrowing requirements, APR ranges, loan amounts, funding time and the ability to add a co-applicant or collateral.

What is fair credit?

A fair credit score is generally from 630 to 689. Lenders may use different definitions of fair credit based on different credit scoring companies. Most lenders use either FICO, which defines fair credit as 580 to 669, or VantageScore, which puts fair credit or “near prime” scores, between 601 and 660.

If you have a fair credit score, do what you can to move it into the good credit range because consumers in that range often have access to a wider range of personal loan options and often get lower rates.

Can you get a personal loan with fair credit?

You can get a personal loan with a fair credit score, but your options may be limited. Many banks and some online lenders look for borrowers with good or excellent credit.

A lower credit score usually means your personal loan will have a higher annual percentage rate. Use a personal loan calculator to estimate monthly payments based on your credit score.

Here are average personal loan rates by credit score:

How to compare fair-credit personal loans

Here are the most important features to compare on fair-credit loans.

Annual percentage rate

The APR on a personal loan is the loan’s interest rate plus any fees a lender charges. Use this number to compare the cost of one personal loan with another and with other financing options like credit cards.

Monthly payments

A lender should disclose the monthly payments before you sign a loan agreement — usually during pre-qualification or once you’re approved. Personal loans have fixed rates, so the monthly payment won’t change over the life of the loan.

Repayment term

Repayment terms for fair-credit loans typically range from two to seven years. A longer term lowers your monthly payments, but increases the total interest cost. Choose a repayment term that keeps payments affordable and helps you clear the debt within the term or even earlier.

Fees

Prepayment fees aren’t common with personal loans, but some fair-credit lenders charge origination fees. This is usually 1% to 10% of the loan amount, and a lender typically takes the fee before depositing the funds into your bank account.

Other features

If you’re choosing between two affordable offers, compare these other features:

• Time to fund: Personal loans are often funded in less than a week, but some lenders can fund a loan the business day after you apply. If you need the funds quickly, consider lenders that offer fast funding.

• Credit building tools: Ideally, you’ll leave this loan with better credit than when you got it. Most lenders report payments to all three major credit bureaus, but be sure yours does before signing the loan agreement to get credit for on-time payments. Some lenders offer credit score monitoring, so you can see it change as you repay the loan.

• Payment flexibility: Some lenders require you to keep your original payment date for the lifetime of the loan. If you think you’ll need more flexibility, look for a lender that lets you change the payment date.

» MORE: Features to compare on a personal loan

How to get a personal loan with fair credit

1. Compare lender requirements

The lenders listed above accept borrowers with fair credit, but some look for a lower debt-to-income ratio. Others may consider a wide range of factors, like where you attended college or where you live. Compare qualification criteria to learn what each lender requires on a loan application.

2. Pre-qualify

Pre-qualifying can show how likely you are to be approved for a personal loan and let you preview potential rates and loan amounts. The process involves a soft credit check, which doesn't affect your credit score. You can pre-qualify with NerdWallet and see estimated rates from lenders that partner with us.

3. Submit an application

Once you’ve found a lender, it’s time to apply. Many large lenders have online applications that take only a few minutes to complete, but smaller banks and credit unions may require an in-person visit. A tip to speed things up: Gather documents, including W-2s, pay stubs and government-issued IDs before you apply.

» MORE: How to apply for a personal loan

How to improve fair credit

Since having good credit could mean a lower personal loan rate, it might be helpful to build your credit before you apply for a personal loan. Here are a few ways to build your credit quickly:

• Check your credit report. Your credit report doesn’t contain your score, but it shows what lenders see when they review your credit. If you spot an error, correct it. You can view credit reports from all three major credit bureaus — Equifax, Experian and TransUnion — at AnnualCreditReport.com.

• Make on-time payments. Your payment history is the biggest factor affecting your credit score. The more consistently you make payments toward your credit cards, mortgage or car loan, the more likely you are to build your score.

• Keep your credit utilization low. The portion of available credit that you use is called credit utilization and it’s the second-biggest factor determining your credit score. Try to use less than 30% of your credit card’s limit to keep utilization low. You can quickly lower your utilization by asking your credit card company to increase your limit, but the request may trigger a hard credit inquiry.

» Sign up: See your credit score for free with NerdWallet

Tips to boost your chances of qualifying for a fair-credit loan

Consider a credit union: A credit union may weigh your history as a member alongside your credit score, so members in good standing may have a better shot at qualifying for a personal loan.

Secure the loan: Most personal loans are unsecured, but some lenders offer secured personal loans, which require collateral. Giving the bank something to take if you can’t repay makes the loan less risky for the bank. Banks typically let you use a savings or investment account to secure the loan, while online lenders prefer a vehicle.

Add a co-applicant: Adding a co-signer with better credit and a higher income to your loan may help you qualify for a lower rate. A co-signer is someone who agrees to pay the loan if you can’t, but that person doesn’t have access to the money. You may also consider a joint personal loan, which is similar to a co-signed loan except that your co-applicant can access the funds. In both cases, if you fail to repay the loan, your co-applicant is responsible for repayment — and both of your credit scores will take a hit.