Personal Loans for Fair Credit: Lenders, How to Apply and More
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It can be tough to achieve a perfect credit score, especially if you’re struggling financially. If you have fair credit, or a 640 to 679 credit score, you probably have a few dings on your credit report. For example, maybe you missed a payment or two, or your credit utilization is high.
Having fair credit may mean you’ll pay more to borrow money than someone with excellent credit. But sometimes, borrowing is unavoidable. If you’re looking for fair credit personal loans, you’ll want to make sure you evaluate your options carefully, so you can find the best rates and terms for your financial need.
4 personal loans for fair credit borrowers
|APR||Loan amount||Loan term|
|Payoff||5.99% to 24.99%||$5,000 to $40,000||24 and 60 months|
|Prosper||7.95% to 35.99%||$2,000 to $40,000||36 or 60 months|
|Upgrade||6.94% to 35.97%||$1,000 to $35,000||36 or 60 months|
|OneMain Financial||18.00% to 35.99%||$1,500 to $20,000||24 to 60 months|
|Lenders were selected based on minimum APR using the LendingTree personal loan marketplace and using the following filters: (1) $5,000 loan amount; (2) fair credit (640-679); (3) loan purpose is debt consolidation; (4) and location of Charlotte, N.C. Lenders were chosen on May 7, 2020.|
Payoff is an online lender that only provides loans for credit card debt consolidation. They require a minimum 640 credit score, so they can be a good debt consolidation option for fair credit borrowers. However, you’ll likely be charged an origination fee up to 5.00% of the loan amount. A 5% origination fee on a $5,000 loan is equal to $250.
Aside from an origination fee, Payoff doesn’t charge fees, including late fees or prepayment penalties. Potential borrowers can also prequalify with a soft credit check. Prequalification doesn’t guarantee you’ll be approved, but it’s a good way to see the loan terms you may get before you formally apply.
Payoff is available in most states, with the exception of Massachusetts, Mississippi, Nebraska, Nevada and West Virginia. Most loans are funded within two to five business days of loan approval.
Prosper is an online peer-to-peer lending marketplace, meaning your loan would be funded by individual investors. Depending on eligibility, you could access personal loans for OK credit that can be used for a variety of purposes, from home improvement projects to engagement ring financing. These loans come with a fixed rate and no prepayment penalty, so you’ll know what to expect from your monthly payments and can get ahead when you are able.
Compared with Payoff, Prosper charges a potentially higher origination fee between 2.41% - 5.00% of the loan amount. Its maximum APR is also higher, at 35.99%. If you have fair credit, you can expect your APR to be on the higher end, no matter the lender.
As is typical with peer-to-peer lending, the application process can take longer than if you worked with a direct lender. The formal loan approval decision takes up to five business days, and investors have up to 14 days to invest in your loan. (After 14 days, if your loan isn’t at least 70% funded, your application will be denied.) Upon loan approval, funds will be disbursed within one to three business days after loan approval. But you can prequalify without a hard pull on your credit.
Upgrade is a direct online lender that offers personal loans for almost any reason, from a major purchase to business expenses. As with other companies in this list, you can check your loan eligibility and potential terms online without affecting your credit score.
Upgrade charges a high origination fee between 2.90% - 8.00% of the loan amount. But beyond that, there are no upfront fees. There’s no prepayment penalty, either, but you will be charged for late payments or insufficient funds. Once you’ve been formally approved for a personal loan, you can expect to receive the funds within four business days.
OneMain Financial, a lender with an online application and 1,500 physical branches, offers fair credit score loans for a variety of purposes. If you need money for an auto repair or even a vacation, you can apply for a loan through OneMain Financial online to check your eligibility. A big drawback, however, is that in order to be formally approved, you’ll need to visit a physical location to verify your information.
OneMain Financial has higher starting APRs than many other lenders, but it’s still worth checking your rate. Since you have fair credit, you might find that the rates are comparable to what other lenders are offering. You can prequalify online without hurting your credit score. You may be offered a secured or unsecured loan, depending on your creditworthiness. (A secured loan requires collateral, such as your car, be used to back the loan.)
It’s also easy to get fast cash from OneMain Financial. It takes just ten minutes to complete the online application, and once you sign the agreement at your local branch, you can get the money as soon as the same day. But before you sign, there are some fees you should be aware of:
- Origination fee: $25 to $400, or 1.00% - 10.00% of the loan amount, depending on your state
- Late payment fees: $5 to $30 per late payment
- Non-sufficient fund fees: $10 to $50 per payment returned
- Governmental fees: Applies to loans secured with a vehicle’s title
What to expect when shopping loans for fair credit
When applying for personal loans with a low credit score, you should be aware that it could be costly to borrow money. That’s because typical personal loans are unsecured, and thus, lenders rely more heavily on your credit and financial information to make a loan decision. If approved, expect a higher interest rate; the starting APRs for these lenders are only available to borrowers with excellent credit. You can expect an origination fee as well.
You should only take out a fair credit personal loan if you need to borrow a larger amount and relatively quickly. For example, a credit card may have a lower cost depending on the loans you qualify for. If you do need a personal loan, it’s best to compare rates from multiple lenders before making a decision.
Should you wait to apply?
Financial emergencies can arise at any time, and you won’t always have the luxury of waiting to borrow. However, if you can hold off borrowing until you improve your credit score, you could save a significant amount of cash as offered APRs potentially improve. Consider the average offered APR for borrowers of different credit bands in May 2020:
|Credit Band||Average APR|
The difference in APR means you could save an average of $4,290 on a $10,000 loan with a 60-month term by raising your credit score from fair to excellent.
If you’re looking for debt consolidation loans for fair credit, you’ll want to ensure that the APR you get is lower than the APR on your existing loans. Otherwise, you’d likely only save money if you choose a shorter repayment period with higher monthly payments. In May, the average APR on a fair credit personal loan (24.89%) was higher than the average APR on a credit card that accrues interest (16.61%).
If you have high-interest debts, such as payday loans or auto title loans, a personal loan could help you get out of the cycle of debt by facilitating repayment with lower fees.
If you’re ready: Choosing your best loan for fair credit
With regard to your finances, the best loans for fair credit may have no or low origination fees and no prepayment penalty. Or, you may decide that getting the lowest interest rate is most important to you.
To accurately compare offers from multiple lenders, you’ll want to go through the prequalification process to see an estimate of what your rate and terms could be like with each lender. Prequalification only requires you provide basic information, such as your income and requested loan terms. It doesn’t affect your credit.
It’s easy to view multiple offers side by side with a personal loan marketplace like LendingTree. That’s because you could prequalify with several lenders after filling out one prequalification form.
As you compare lenders, consider the following factors:
- APR: Annual percentage rate indicates the total cost of borrowing, including interest, origination fees and application fees.
- Origination fee: This upfront fee for processing your loan may be charged as a flat fee or a percentage of the amount borrowed. It is taken out of the money you receive from the lender.
- Term: The term is the amount of time you’ll have to repay the loan. Longer terms mean lower monthly payments, but choosing a shorter term may be less costly overall.
- Prepayment penalty: Some lenders charge a fee for paying off your loan early. This will reduce the amount you can save on interest if you have enough money to pay your loan back faster than you expected.
- Other fees: While most lenders charge late payment fees and overdraft fees, some lenders waive these fees. If you’re worried about making your monthly payments on time, you might consider a lender that doesn’t charge for late payments.
- Time to funding: How quickly do you need the money? Make sure the lender you choose will be able to issue you the funds on time.
- Secured vs. unsecured: Secured loans require you to offer up assets, such as the title to your vehicle, as collateral. The lender can take your collateral if you fail to make payments. If you’re risk-averse, stick with an unsecured loan.
- Co-borrowers and cosigners: Different lenders have different rules about joint borrowing and cosigning. Make sure the loan you choose meets your needs.
- Restrictions: Pay attention to allowable loan purposes when choosing your personal loan.
- Online vs. in-person: If you want to avoid visiting a branch, choose an online lender. On the other hand, if you prefer in-person service, choose a lender with physical branches.
Remember that you should only take out a personal loan if you will be able to meet your monthly payments. Should you decide to borrow, make sure you secure enough additional income or trim your budget to better handle the expense. The good news is making regular payments on a personal loan will improve your credit score, so you’ll have better options for borrowing in the future.