Having an excellent credit score and a good regular income is the easiest way to get a personal loan. But what about all those people with fair credit who need a loan. Is there such a thing as fair credit loans?
The good news is yes! Many lenders offer personal loans for fair credit customers.
What Is A Fair Credit?
A fair credit score is usually considered to be FICO® Score of 580-669.
Although not all lenders provide instant approval, finding a lender for a fair credit loan is still possible. Some lenders will look at alternative methods of confirming your creditworthiness, such as your income and assets.
You can compare multiple lenders at once to find the best personal loans for fair credit through our online loan comparison tool.
Loans For Fair Credit Can Cost More
Loans for fair credit will generally cost you more in fees and interest than personal loans for good credit. Borrowers with bad credit or fair credit will pay more than those with excellent credit.
This is because borrowers with excellent credit are considered more creditworthy and are more likely to not default on their loan repayments.
A personal loan that you pay off over the years can improve your credit score over time. It demonstrates that you manage money well by juggling your income and debt ratio.
How To Improve Your Chances for a Fair Credit Loan Approval
Prequalifying for a personal loan when you have fair credit is a great starting point when you don’t want to waste time on multiple potentially rejected applications.
Most online lenders will allow you to get preapproved for a loan through their online application process. They generally only conduct a soft credit check for preapproval, which will not damage your credit score any further.
Find a Co-Signer
If you have a close relationship with someone who is willing to co-sign on a loan with you, it will increase your chance of getting approved for a fair credit loan. Still, it will generally give you a lower fee rate.
The reason for this is that now there are two incomes and personal guarantees held against the one loan. The chance of someone defaulting that loan has reduced dramatically from the lender’s perspective.
A co-signed loan can be the best way toa personal loan for fair credit. Caution needs to be taken when co-signing. If you are unable to repay the loan, the responsibility of repayment will fall on the co-signer, and they run the risk of damaging their credit score through your unpaid loan.
Improve Your Credit Score
There are multiple ways for you to improve your fair credit to good credit over time. Lenders will always favor approval for good credit applicants over fair credit ones. Focusing on building your credit over 6 months may increase your chance of getting approved. Still, it will lower the fee rate you pay over the loan period.