» COMPARE: See your bad-credit loan options

On this page…

• What is fair credit?

• How fair credit affects your personal loan rate

• How to compare loans for fair credit

• Where to get a personal loan with fair credit

• How to get a personal loan with fair credit

• How to improve fair credit

• Alternatives to personal loans for fair-credit borrowers

• Frequently asked questions

What is fair credit?

A fair credit score is generally from 630 to 689. Lenders can have their own definitions of fair credit, which may be informed by which credit scoring company they use to evaluate applications. FICO defines fair credit as 580 to 669, while VantageScore puts “near prime” scores between 601 and 660.

Some lenders review information from both companies to determine whether an applicant qualifies.

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How fair credit affects your personal loan rate

Your credit score is often a key factor that determines your personal loan rate, in addition to your income and outstanding debts. A low score due to missed payments on other loans or credit cards, or because you have a thin credit profile, may indicate to a lender that you could default on a new personal loan. Lenders make up for that risk by charging higher annual percentage rates.

Moving a fair score into the good credit range (generally 690 to 719) gets you access to a wider range of personal loan options and often lower rates.

Qualified borrowers may get the most affordable loans from federal credit unions because they cap APRs at 18%.

Here are average personal loan rates by credit score:

Calculate your fair-credit loan rate

Use this personal loan calculator to estimate your potential monthly payment, based on your loan amount, rate and repayment term.

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How to compare personal loans for fair credit

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

Annual percentage rate

A personal loan APR is its interest rate plus any fees a lender charges. This is the best apples-to-apples cost comparison tool for personal loans and other financing options like credit cards. Lenders weigh your financial and credit information differently, so it pays to compare rates from multiple lenders.

» MORE: See this month’s average personal loan rates

Monthly payments

A lender should disclose the monthly payments before you sign a loan agreement — usually when you check your rate or once you’re approved. Aim for a monthly payment that leaves some extra room in your budget. Personal loans have fixed rates, so the monthly payment won’t change over the life of the loan.

Borrower requirements

Compare lenders’ borrowing requirements, including minimum credit score, income and maximum debt-to-income ratio (DTI). Because lenders consider your income and existing debts on an application, meeting the minimum credit requirements may not be enough to qualify, especially if the monthly payment would overextend your finances.

Repayment term

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

Fees

Prepayment fees aren’t common with personal loans, but some fair-credit lenders charge origination fees. This fee is from 1% to 10% of the loan amount, and a lender typically takes it from the funds before depositing them 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’re approved. 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 how payments affect your score.

• 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

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Where to get a personal loan with fair credit

Credit unions and online lenders are your best bets for getting a personal loan with fair credit. A strong relationship with a local bank may go a long way, though.

Credit unions: Your credit union may consider your membership history, in addition to credit and income, on a personal loan application. If you’ve been a member for several years, usually repay your debts and keep your account in good standing, the credit union may take that into account.

» MORE: Credit union personal loans have low rates and flexible terms

Online lenders: An online lender may use alternative data to make a loan decision based on your full financial picture rather than just your credit and income. Pre-qualify with multiple online lenders to see your likelihood of qualifying and what rate to expect without affecting your credit score.

» MORE: How to pre-qualify for a personal loan

Banks: Fair-credit borrowers may not qualify for a loan from major national banks, which prefer borrowers with good or excellent credit scores (690 or higher). However, a strong relationship with your local bank could improve your chances.

» MORE: Best bank loans

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How to get a personal loan with fair credit

1. Review your credit reports. Check your reports from the three credit bureaus to spot any errors or opportunities to improve your credit. If your score is already on the rise, consider taking extra time to build it before you apply for a personal loan.

2. Check in with your budget. Review your budget to determine what an affordable personal loan payment would be. Consider whether you’ll need to cut back on any regular expenses before you borrow.

3. Compare lender requirements. The lenders listed above accept borrowers with fair credit, but many also consider income and DTI. Some lenders review a wide range of factors, like your education and work history. Compare qualification criteria to learn what each lender requires on a loan application.

4. Pre-qualify. Pre-qualify to see how likely you are to be approved for a personal loan and preview potential offers. Check offers from multiple lenders to find the best rate and terms.

5. Submit an application Once you’ve found a lender, it’s time to apply. Many lenders have online applications that take only a few minutes to complete, but some 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.

6. Get funded. If approved, most lenders can fund a loan within a few days. Your first payment date will usually be 30 days after funding, so make sure to add your new loan payment to your budget.

» MORE: How to apply for a personal loan

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

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, which may mean better approval odds for you. Banks and credit unions 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 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.

Add up income streams: Most personal loan lenders accept income from alimony, Social Security payments, child support and retirement. Be sure to account for all your income on a personal loan application.

» MORE: How to boost your chances of personal loan approval

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How to improve fair credit

Taking the time to build credit before applying for a personal loan could get you a lower APR or larger loan amount. The best way to start improving credit is to first understand what’s holding it down.

Here are the factors that go into creating your credit score, according to FICO:

• Payment history (35%)

  A payment history that shows consistent, on-time payments toward other creditors will help build your score. On the other hand, having missed payments on your credit report will reflect poorly in your score.

• Amounts owed (30%)

  This is also known as credit utilization. Using too much of your available credit may mean that your finances are overextended and you’re relying on credit to get by. NerdWallet recommends using 30% or less of your available credit.

• Length of credit history (15%)

  The age of your credit accounts, how recently you’ve used them and the age of your oldest account are all factors that help make up your score. If you’re new to credit, this category may not help you, but a short history may not directly hurt your score, according to FICO.

• Credit mix (10%)

  More types of credit — credit cards, installment loans, mortgages, retail accounts — can help your score. FICO says it’s not necessary to have one of each, but having a few can show your ability to manage multiple types of debt.

• New credit (10%)

  New credit can refer to how many credit accounts you’ve recently opened. Many hard credit inquiries — which happen when you apply for credit — in a short period could lower your score. New loans and credit lines also lower the average age of your accounts, which can hurt your credit score.

Here are a few tips to build credit quickly:

• Make on-time payments. The more consistently you make on-time payments toward your credit cards, mortgage or car loan, the more likely you are to build your score.

• 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.

• Become an authorized user. If you can get yourself added as an authorized user to a family member’s or partner’s credit card, the positive payment history they’ve built up can benefit your credit. You don’t have to get access to the card to become an authorized user.

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Alternatives to personal loans for fair-credit borrowers

Fair-credit personal loan rates can be high, so compare alternative borrowing options to find the right one for your budget and expense.

Credit cards: While personal loans work best for large, one-time expenses, credit cards are better for everyday use. Some cards for fair credit even come with rewards. Like personal loans, your credit is a factor in determining whether you qualify for a credit card, and your rate will likely be high, which is especially important to remember if you tend to carry a balance.

» MORE: Best credit cards for fair credit

Buy now, pay later: If you need to make a large purchase such as a mattress or laptop, a “buy now, pay later” loan may be an inexpensive alternative to personal loans and credit cards. BNPL apps often only do a soft credit check and don’t charge interest on their short-term payment plans. BNPL is offered at most major retailers. Proceed with caution, though, as these plans can encourage overspending.

» MORE: What is buy now, pay later?

Cash advance apps: A cash advance app lets you borrow up to a couple of hundred dollars to bridge an income gap or cover an unexpected expense. Like payday loans, apps don’t check credit and withdraw repayment on your next payday, but they usually have lower fees. If you can repay the money in two weeks or less, an advance from an app can get you cash quickly.

» MORE: Cash advance apps that cover you until payday

Family loans: Though it could be uncomfortable to ask, a loan from a friend or family member can be an affordable, no-credit-check borrowing option. You and the lender can draw up a loan agreement, including rates, terms and interest, to avoid any misunderstandings. Tread lightly with this type of loan — your relationship with the lender may be collateral.

» MORE: What is a family loan?

Lending circle: You may have friends or family members who could occasionally use extra cash, in which case, consider starting a lending circle. The group raises money for one member at a time by contributing a set amount of money each month. Once the funds are sent to that member, the cycle starts over and moves on to the next person.

» LEARN MORE: What is a lending circle?

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