How to get a personal loan with fair credit

A personal loan is a type of installment loan that allows you to borrow money from a lender and pay it back over time with interest. Personal loans may be helpful for making big purchases. And they can be used to consolidate high-interest debts.

If you have a fair credit score, you may be wondering whether you can get a personal loan. Learn more about getting a personal loan with fair credit and some alternatives you may want to explore. 

Key takeaways

  • There isn’t a universal minimum credit score needed for a personal loan. It all depends on the lender and the loan. 
  • FICO® says a fair credit score falls between 580 and 669. VantageScore® says fair scores range from 601 to 660.
  • When shopping for personal loans, it’s a good idea to compare loan terms, including the approval requirements, loan amount, repayment term, monthly payment, interest rates and fees. 
  • There are alternatives to personal loans, like credit cards and balance transfers, that you may want to look into before making any decisions. 

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Can you get a personal loan with fair credit?

There’s no specific minimum credit score needed for a personal loan. So you may be able to get approved for a personal loan even with fair credit.

But the lower your credit scores, the harder it might be to get approved—and the higher your interest rate might be. Each lender sets its own requirement for what credit score is needed for a personal loan.

What is a fair credit score?

What’s considered a fair credit score depends on the credit-scoring company that calculated it.

FICO and VantageScore are two major credit-scoring companies. Both companies calculate credit scores that range from 300 to 850. But they have different criteria for what’s considered a fair score.

  • FICO considers a fair credit score to range from 580 to 669.
  • VantageScore says a fair credit score ranges from 601 to 660.

Where to get loans for fair credit

There are a few different kinds of financial institutions that may offer personal loans, including: 

  • Banks
  • Credit unions
  • Online lenders

Remember, each lender decides what credit scores and other criteria are needed for personal loans. And it’s not guaranteed that a lender will offer personal loans to applicants with fair credit. 

How to get approved for a personal loan with fair credit

If you have fair credit and are considering a personal loan, here are a few steps you can take that may help:

Compare lenders and loan options

Different banks, credit unions and online lenders might have their own standards when it comes to who qualifies for a personal loan. It’s important to find a lender whose terms work for you. 

Exploring different lenders and loan options can help you find the best fit. Plus, before you take out any kind of credit, it’s important that you understand all the terms. Here are a few things to look into:

  • Approval requirements 
  • Loan amount
  • Repayment term
  • Monthly payment 
  • Interest rates 
  • Fees

See if you’re pre-qualified or pre-approved

Finding out whether you’re pre-qualified or pre-approved for a personal loan can give you an idea of how likely you are to be approved. 

Narrowing down your options could help you avoid unnecessary hard inquiries. Hard inquiries can have a negative effect on your credit scores, especially if you have many hard inquiries in a short period of time. 

Consider a co-signer

Having a co-signer with good credit might help you get approved for a loan. A co-signer might also help you get a better interest rate. But keep in mind that if you make late payments or miss payments, it can hurt your own credit as well as your co-signer’s credit. And your co-signer is ultimately responsible for the loan if you can’t pay.

Ways to improve your credit score with responsible use

Credit is important, whether you’re applying for a personal loan or not. The better your credit scores, the better your chances of qualifying for a personal loan—and the better your interest rate might be. 

Here are a few healthy credit habits that may help improve your credit scores, according to the Consumer Financial Protection Bureau (CFPB):

  • Pay on time. Payment history can be a big factor in calculating your credit scores. It’s important to pay your loans on time, every time. 
  • Stay below your credit limits. Your credit utilization ratio shows how much of your available credit you’re using. The CFPB says it’s a good idea to keep this ratio below 30%. 
  • Be mindful of your credit age. Having a longer credit history may help your credit scores, according to the CFPB. So you may want to consider your credit age when deciding whether to close an account. 
  • Only apply for credit you need. New credit applications trigger hard inquiries. The effect of a single hard inquiry may be minor. But a lot of hard inquiries in a short period of time could have a more significant impact.

Check your credit

Regularly monitoring your credit is another important part of credit health. CreditWise from Capital One lets you access your weekly TransUnion® credit report and your VantageScore® 3.0 credit score without hurting your credit.

You can even explore the potential impact of financial decisions, like taking out a personal loan, before you make them with the CreditWise Simulator. CreditWise is free for everyone, whether you’re a Capital One customer or not.

Personal loan alternatives

When you’re considering a personal loan, it can help to be aware of the other options that might be available to you. Here are some alternatives to a personal loan:

  • Credit cards: Unlike personal loans, credit cards are a type of revolving credit. That means that the card can be used and paid down repeatedly as long as the account remains open and in good standing. Personal loans are closed-ended credit accounts that you pay back over a set period of time. If you decide a credit card better suits your needs, Capital One’s pre-approval tool makes it easy to find out if you’re pre-approved for card offers before you apply. Pre-approval doesn’t guarantee approval, but if you answer a few simple questions about yourself, you’ll be able to review any offers you may be eligible for. Pre-approval is quick, and it won’t hurt your credit scores. 

Find a card that fits your needs

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  • Balance transfer: A balance transfer lets you move credit card debt to another issuer. It could help you simplify payments and combine your loans at a lower interest rate. But be sure you understand how it works and whether there are any fees or restrictions.
  • Cash advance: A cash advance is similar to using a debit card to get cash. But instead of the money coming from your bank account, it’s taken from your available credit. Cash advances can be convenient, but they can also come with higher interest rates than purchases you make with your credit card. You might also have to pay fees.
  • Peer-to-peer (P2P) lending companies: Companies that connect lenders and borrowers through online services are another possibility. P2P lending companies vary in how they review lenders and borrowers, including what’s required to qualify for a loan. The CFPB recommends that you make sure you understand all fees and interest charges associated with these types of loans.

Fair credit personal loans in a nutshell

There isn’t a single minimum credit score that’s required for a personal loan. But the lower your credit score, the harder it may be to get approved. And the higher your interest rate might be.

If you have fair credit and are considering a personal loan, you can take steps to improve your scores with responsible use and potentially improve your chances of approval. And don’t forget that there might be other options available to you.

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