Best Personal Loans for Fair Credit in April 2024

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Reviewed byAlvin Yam, CFP
Contributions by6 experts
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Updated: April 12, 2024

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Happy Money offers the best personal loans for borrowers with fair credit, earning a MoneyGeek score of 93 out of 100 for its transparency in loan terms, quick application process and quality service. Avant is the runner-up, with a MoneyGeek score of 93 out of 100, for its flexible loan terms and straightforward application.

According to Experian, the average credit score in the United States in 2023 is 715. If you have a fair credit score ranging from 580 to 669, getting a personal loan is still possible. MoneyGeek scored lenders based on factors like interest rates, loan terms, customer service, application process and transparency to find the best options for your particular needs and credit profile.

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What Is a Fair Credit Score?

Fair credit scores typically range from 580 to 669. Borrowers in this range may qualify for loans and credit cards but might encounter higher interest rates and less favorable terms than consumers with higher credit scores.

A credit score reflects your creditworthiness and is based on various factors such as payment history, credit utilization, length of credit history, types of credit in use and recent credit inquiries. Lenders often use credit scores to assess the risk of lending money and determine loan terms, including interest rates and loan amounts.

PROACTIVELY IMPROVE YOUR CREDIT SCORE

"You can proactively improve your credit score by ensuring timely payment of existing debts, maintaining low credit utilization ratios and avoiding multiple credit applications. These tips can positively impact your credit score and potentially enhance your eligibility for more favorable loan terms." — Alvin Yam, CFP®

Pros and Cons of Personal Loans for Fair Credit

While personal loans offer opportunities for individuals with fair credit to access funds for various needs, they also come with potential drawbacks to consider.

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NEGOTIATING LOAN TERMS

"Loan terms are the detailed rules you agree to when you borrow money, such as the length of time you have to pay it back and the applicable interest rates, fees and any extra conditions.

To effectively negotiate loan terms, thoroughly research and compare offers from multiple lenders to see who best fits your financial profile. Leverage recent improvements in your credit score and financial stability to negotiate more favorable terms." — Alvin Yam, CFP®

How to Choose the Best Personal Loan for Fair Credit

Finding the best fair credit loan for your needs and circumstances can be complex. To simplify the process, consider following these steps:

1

Check eligibility requirements

Lenders set different eligibility criteria for personal loans, with some focusing on credit scores while others consider other factors. Reviewing these requirements can save time and avoid potential damage to your credit score from multiple applications.

2

Compare interest rates

Personal loan interest rates vary based on your creditworthiness, so always compare rates from different lenders. This ensures you secure the most competitive option available to you.

3

Examine loan terms

Lenders offer a range of loan terms, including short and long repayment periods. Assess these terms carefully to choose the option that best fits your particular financial situation and goals.

4

Look out for additional fees

While some lenders may charge additional fees, such as origination fees or prepayment penalties, others may not. Being aware of these fees can help you understand the total cost of borrowing and avoid unexpected expenses.

5

Research lender reputation and reviews

Reading reviews and customer experiences can help you understand the reputation of potential lenders, ensuring you choose a reputable lender known for providing reliable service and customer satisfaction.

6

Calculate monthly payment amounts

Before committing to a loan, make sure you can comfortably afford the monthly payments. Using tools like MoneyGeek's personal loan calculator can help estimate your monthly payments and budget effectively.

FACTORS TO CONSIDER WHEN LOOKING FOR A PERSONAL LOAN

Consider the following factors when shopping around for a personal loan with fair credit:

  • Credit score: Having a fair credit score may result in different loan offers compared to consumers with higher scores. Knowing where you stand can help manage expectations and guide your search for the right loan.

  • Loan amount: Analyze exactly how much you need before pursuing an application. For example, if you're consolidating $10,000 in credit card debt, you'll want a loan amount that covers this total to pay off your balances.

  • Time to receive funds: Assess how quickly you need the funds. Some lenders may offer faster processing times than others, impacting your decision-making process.

  • Prequalification: Some lenders offer prequalification, allowing you to see potential loan offers without hurting your credit score. This can be valuable for comparing options and determining eligibility before formally applying.

Alternatives to Personal Loans for Fair Credit

Exploring alternatives to personal loans for those with fair credit can help you discover other options that may offer more favorable terms or lower costs. These include:

  • Credit cards: Credit cards may provide immediate access to funds and offer rewards or cash back incentives. However, they often come with higher interest rates than personal loans, making them costly for long-term borrowing.

  • Home equity loans or lines of credit: Leveraging the equity in your home can result in lower interest rates compared to personal loans, making it a cost-effective option for larger expenses. That said, home equity loans or lines of credit may pose a risk to your home if you default on payments.

  • 401(k) loan: Borrowing from your 401(k) retirement account allows you to access funds quickly without a credit check. Any interest you pay is typically returned to your own account, potentially making it a more affordable option.

  • Peer-to-peer lending: Peer-to-peer lending platforms connect borrowers with individual investors, often offering competitive rates and flexible terms compared to traditional lenders.

  • Credit counseling: Seeking guidance from a credit counselor can help you explore debt management strategies, negotiate with creditors and develop a personalized plan to improve your financial situation without taking on additional debt.

Considering all of your options for funding before selecting a personal loan is a financially savvy strategy. One of these alternatives may better suit your specific financial needs and circumstances.

FAQ About Personal Loans for Fair Credit

Navigating personal loans for fair credit can raise many questions, from finding the best options to understanding their impact on credit scores. Below are answers to frequently asked questions to help you make informed decisions when considering personal loans for people with fair credit.

Happy Money stands out as the best personal loan for fair credit, boasting a MoneyGeek score of 93 out of 100 for its transparency, quality service and quick application process.

Achieve and Prosper both offer competitive starting APRs of 8.99%. However, it's important to note that these rates are typically reserved for borrowers with excellent credit scores.

While it may be more challenging to secure a personal loan with fair credit compared to excellent credit, many lenders specialize in serving individuals with fair credit scores.

Repaying a personal loan on time can positively impact your credit score by demonstrating responsible financial behavior. Conversely, missed or late payments can have a negative impact on your credit score.

Yes, improving your credit score can lead to better loan terms, including lower interest rates and higher loan amounts. You may also have the option to refinance your existing loan for more favorable terms.

Pay particular attention to clauses related to prepayment penalties, late fees and default terms. Interest rates, repayment period options and associated fees, like loan origination and maintenance, directly impact the total cost of the loan.

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The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about our editorial policies and expert editorial team.