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Updated on Friday, August 21, 2020
If you have a credit score of 600 or less, you probably think it’s impossible to get a personal loan. While lenders traditionally favor borrowers with good credit scores, that doesn’t mean there are no financing options to those seeking personal loans for fair credit.
Read more to help you find loans for fair credit, and to better understand the application process.
- What credit score is needed for a personal loan?
- Personal loans for borrowers with a 600 credit score or lower
- Applying for a personal loan with fair or poor credit
- How to improve your odds for loan approval
- Beware predatory lenders as you shop
What credit score is needed for a personal loan?
To lenders, your credit score is a reflection of your ability to repay debt on time and in full. Many lenders require a minimum 600 credit score when you apply for a personal loan.
Your FICO Score, which is a type of credit score, is the one lenders most often use when determining loan eligibility. It ranges from 300 to 850, with 800 to 850 considered exceptional and 300 to 579 very poor. A FICO Score in the 580 to 669 range is considered fair, and anyone in this range is considered a subprime borrower, meaning they’re a higher risk group and are more at risk of defaulting on a personal loan.
Your credit score is calculated using factors such as:
- Payment history
- Debt amounts owed
- Credit history length
- New credit
- Credit mix
Because a fair credit score means you’ll likely face higher interest rates and fees, you should determine whether it is worthwhile to borrow. This personal loan calculator can help you determine monthly costs of a personal loan. You can see average APRs by credit score range:
Credit score range
|Less than 560||113.62%|
Personal loans for borrowers with a 600 credit score or lower
Minimum Credit Score
24 to 60**
Up to 4.75%**
Avant is an online lender that offers personal loans ranging from $2,000 to $35,000. ... Read More
*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.
Based on the responses from 7,302 customers in a survey of 140,258 newly funded customers, conducted from August 1, 2018 - August 1, 2019, 95.11% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.
As an online personal loan provider, Avant will consider applications from those with less-than-perfect credit by taking into account both the borrower’s credit history and situation. A credit score of 600 to 700 is typical for borrowers who get approved for Avant loans, but you can still apply if your credit score is lower.
With Avant personal loans, you can request a loan amount of $2,000 to $35,000 and choose a loan length of 24 to 60 months. Offered rates, terms and loan amounts vary based on your state and credit determination. Some borrowers also may be charged an administration fee on issued loans.
Minimum Credit Score
24 to 48
0.00% - 6.00%
on LendingTree’s secure website
LendingPoint is an online lender that targets borrowers with fair credit, and allows borrowing up to $25,000.... Read More
LendingPoint is another online personal loan platform offering personal loans from $2,000 up to $25,000. The online lender advertises itself as a fair credit borrower accepting applicants whose credit score is in the 585 and above range.
In addition to your credit score, LendingPoint notes other factors they take into consideration when determining loan eligibility:
- Job history
- Financial history
- Credit behavior
Personal loan amounts, terms and APR will vary, depending on your situation and history. Depending on your state of residence, you may incur origination or other fees of up to 6%, and loan terms range from 24 to 48 months.
Minimum Credit Score
36 or 60
1.00% - 5.00%
Even with a credit score of 600, you still might be able to secure a loan through Peerform. ... Read More
Peerform is an online peer-to-peer marketplace through which borrowers can get a personal loan. To qualify, you must have a fair credit score of 600 or above and a debt-to-income (DTI) ratio below 40%.
Peerform uses a proprietary algorithm to determine your qualification. Through the marketplace, borrowers can get loans ranging from $4,000 up to $25,000 with loan terms of 36 or 60 months; APRs range from 5.99% to 29.99%. You also may incur loan origination fees from 1.00% - 5.00% of the loan amount.
Applying for a personal loan with fair or poor credit
Before submitting a formal application for a personal loan, do your homework so you can find the best personal loan for your situation.
First, identify lenders that cater to those with your fair credit score of 600. You can use a lending marketplace like LendingTree to prequalify with lenders with a soft credit check. This won’t affect your credit and allows you to see lenders you could be eligible for.
Next, compare lenders. Take note of each lender’s APR ranges, repayment terms and fees. Origination fees are commonplace when applying with subprime credit. This fee ranges from 0% to 8% and is added on top of your loan amount or deducted before funds are disbursed.
Then, apply with your No. 1 lender. Whether you’re going with a brick-and-mortar lender or you’ve selected an online option, make sure to have all your documents pulled together ahead of time. Requirements vary from lender to lender, but in general you’ll need
- Social Security number
- Proof of address
- Proof of income and employment
- Bank information
- Driver’s license or other government-approved identification
When you submit an application, the lender will do a hard pull on your credit. Multiple hard credit pulls can negatively impact your credit score.
Last, wait for the lender’s decision. Once your personal loan application is submitted, the lender will review it along with your credit history and any other criteria by which that particular lender determines personal loan worthiness.
Many personal lenders approve loans quickly – sometimes within a matter of minutes, depending on the institution. Once you receive loan approval, carefully review the terms of the loan, noting the APR, loan amount, repayment schedule and any additional fees.
If you’re satisfied with the information presented, you’ll be asked to accept the terms and finalize any additional loan paperwork. Many lenders will deposit funds in your account as soon as the following business day. Make sure to set up reminders or automatic payments to pay off your personal loan in a timely manner so you don’t incur late-payment fees or other penalties that will impact your fair credit score even further.
How to improve your odds for loan approval
1. Improve your credit score first, if you can
Trying to get a personal loan even with a fair credit score in the 580 to 600 range isn’t ideal. In some cases, you might need the extra cash immediately, so delaying your application isn’t an option. However, if you can wait to apply for the loan, this will give you time to work toward improving your credit score.
Some of the biggest ways to improve your credit score include making all payments in full and on time each month and avoiding debt altogether. As your credit score rises, so will your ability to get both a personal loan with attractive terms and a competitive interest rate.
2. Find a cosigner
If a family member or friend with a good credit score and a solid financial standing is willing to cosign your personal loan, this can be monumentally helpful. A cosigner agrees to assume financial responsibility for the loan if you don’t keep up with payments, which provides peace of mind to lenders. Consequently, this can help you qualify for a loan you might not get on your own merit and score a lower interest rate.
Just keep in mind that your missed or late payments will have a negative impact on your cosigner’s credit score in addition to your own.
3. Shop around
While it may be tempting to go with the first loan offer you receive, make sure to do your homework. Research lenders in your area as well as online – you may find that online lenders are a cheaper option, as they don’t have the overhead costs of a brick-and-mortar bank.
Peer-to-peer loans, which can be accessed through an online marketplace, may be another viable option. These unsecured personal loans for fair credit get funded either by groups of individuals or institutions and come with fixed terms and interest rates.
4. Consider secured loans
If you’re looking for a personal loan with a 600 credit score or lower, using collateral can help your case. Secured loans include collateral that you own outright, like your car or house. If you back your loan with assets a lender can seize if you default – i.e., your home or savings account – you’re considered a lower risk. This can help you qualify for a loan you otherwise wouldn’t get or secure a more competitive interest rate.
Types of secured loans include:
- Secured personal loans
- Home equity loans
- Car title loans
- Pawnshop loans
Make sure you can afford a new debt before taking out a secured loan. If you default, you’ll lose your collateral, on top of taking a credit hit.
Beware predatory lenders as you shop
1. Take note of added fees
A predatory lender could tack on several additional charges to the loan that you don’t actually need. For instance, you might be told services like credit insurance are mandatory. Stay alert by carefully reviewing any added fees, researching what those fees are and speaking up when something doesn’t seem right.
2. Read the fine print on the interest rate
It’s not uncommon for predatory lenders to advertise one interest rate and produce another at closing. Honest lenders are always upfront about interest rates, so if you’re informed at the last minute that a loan you thought was fixed-rate is actually variable-rate or comes with a hidden balloon payment, do not proceed with this arrangement.
3. Pay attention to the size of the loan
At first glance, being offered a secured loan that’s larger than the amount you expected might seem like a positive. However, some of the bad lenders out there use this approach (called “equity stripping”) to get you to default on a loan, thus entitling them to your collateral. Avoid falling into this trap by carefully calculating the amount you can afford to borrow.
4. See what other customers have to say
Be sure to seek out differing opinions about a particular lender. Take note of any patterns among positive and negative reviews. If there are red flags, you’ll likely see them again and again in the online reviews of the lender. Our personal loan comparison tool allows you to read customer testimonials in addition to viewing a variety of lenders’ terms.