Personal Loans for People With 580 to 669 Credit Scores
How to Borrow With Fair Credit
Personal loans can help you fund major purchases and consolidate debt. But borrowing may be challenging when you have less-than-perfect credit. If you have blemishes in your credit history or you’re still building up your credit profile, it’s smart to apply with multiple lenders, compare offers, and select the best deal.
Borrowing With a Credit Score Between 580 and 669
Credit scores are a critical factor for borrowers. The highest credit scores help you qualify for loans with the lowest rates, and you have more options available with excellent credit. With fair credit, you may need to pay higher rates on personal loans, but you shouldn’t need to turn to high-cost loans like payday loans.
You have multiple credit scores, and your FICO credit score is the most widely used scoring model. FICO scores range from 300 to 850, and the higher your score, the better. For the highest scores, you need a history of borrowing and repaying debts consistently, but that takes time.
According to the credit reporting company Experian, most people have credit scores between 600 and 750. With a credit score between 580 and 669, you fall into that large target market, and plenty of lenders are willing to help borrowers in that range.
Review your free credit reports to make sure there are no errors dragging down your credit scores.
How Much You Pay for Personal Loans With Fair Credit
Your borrowing costs depend on several factors. In addition to your credit history, lenders may evaluate factors like your income, your monthly expenses, how long you want to borrow for, and more. You typically pay for personal loans in two ways:
1. Interest: Your lender charges interest on your loan balance. A higher interest rate leads to higher costs.
2. Origination fees: Some personal loans require that you pay an upfront fee when you receive funds. Other lenders don’t charge origination fees, but those loans aren’t necessarily less expensive—you need to compare the loan terms carefully.
When you shop for loans, remember that the lowest advertised rates are typically only available for borrowers with high credit scores. With scores between 580 and 669, expect to pay higher rates or origination fees that raise your cost of borrowing (or both).
Some lenders tell you what rate you qualify for before you formally apply for a loan. To get that information, you may need to provide basic information, including your Social Security number, which allows lenders to check your credit. In many cases, they use a “soft” credit pull, which does not affect your credit. Look for terminology like “check your rate” to pre-qualify, and find out if the process will impact your credit scores.
Lenders for Borrowers With Fair Credit Scores
LendingClub (6.95% to 35.89% APR): LendingClub was a pioneer in peer-to-peer (P2P) loans, and the service evolved to include marketplace lending. Funds come from individuals who have extra money available, as well as financial institutions and other investors willing to lend money on the platform. With P2P loans, each lender can provide a small amount of their total investment to numerous borrowers. You receive the full amount you need if enough lenders contribute to your loan.
There's a minimum required credit score of 600 to qualify, and LendingClub reviews multiple factors, such as your debt-to-income ratio (your debts compared to your gross income), to determine your creditworthiness. LendingClub charges an origination fee of 1% to 6% if you move forward with your loan.
Upstart (20% Average APR): Helmed by former Google executives, Upstart’s personal loan service launched in 2014 and reports an average APR of 20% for borrowers. The minimum credit score to apply is 620, and origination fees range from 0% to 8% of the amount you borrow.
SoFi (5.99% to 17.67% APR): With a required minimum credit score of 680, SoFi might be a reach goal if your credit is improving from fair to good. SoFi bases the approval decision and interest rate on multiple factors, including your debt-to-income ratio, your other monthly expenses, and more. SoFi does not charge an origination fee, and rates are relatively low, but your finances need to be in good shape to qualify.
Prosper (6.95% to 35.99% APR): Prosper.com began as a P2P lender, and individuals still lend money on the platform. In addition, the service sources funds from larger investors. Like other lenders, Prosper evaluates your credit history, income, and other factors to determine your creditworthiness. Depending on your credit score and your “Prosper Rating,” which is Prosper’s internal risk rating system, you pay an origination fee of 2.4% to 5%.
Local Banks and Credit Unions (Rates Vary): Credit unions, which are customer-owned financial institutions, may offer competitive rates due to their nonprofit status. Community banks are also worth a look. At small banks and credit unions, lending rules may be more flexible than at big banks, and you might even speak directly with the person reviewing your finances. Doing so could give you the opportunity to explain your finances and your ability to repay.
How Personal Loans Compare to Other Options
When you have fair credit, personal loans are an attractive borrowing source, but you may have other options available. Two of them are credit cards and home equity loans.
Credit cards: If you already have a credit card, it may be tempting to use your available credit to fund your needs. After all, there’s no need to apply for a new loan, and you can charge purchases on your card without upfront fees (like origination fees on personal loans). But credit cards often have high-interest rates, and because they’re variable rates, you never know what your interest rate will be in the future. Plus, maxing out credit cards can hurt your credit scores.
Home equity: If you have a significant amount of equity in your home, you may be able to borrow against your home through a second mortgage. Home equity loans and home equity lines of credit (HELOCs) could have lower interest rates than unsecured personal loans, but you may pay closing costs like origination fees, appraisal fees, and more. Plus, you risk losing your home in foreclosure if you can’t repay the loan.
Pros and Cons of Personal Loans
Possibly lower rates than those available on credit cards
Fixed interest rate enables you to predict and control your borrowing costs
Repayment schedule allows you to pay off debt over a specific timeframe
No risk of losing your home in foreclosure if you can’t repay
One-time borrowing only (you can’t revolve the debt if you need more)
Typically higher interest rates than secured loans like second mortgages
Origination fees might not make sense for short-term borrowing
The Bottom Line
A personal loan can help you borrow money at a reasonable cost. To get the best deal, compare several lenders. For an accurate quote detailing rates and fees, you’ll need to provide information about yourself and allow the lender to pull your credit report. In some cases, those preliminary inquiries do not affect your credit, but verify with the lender if you’re concerned about credit inquiries.
After getting pre-qualified with several lenders, you’ll get more familiar with the pros and cons of each option, and a clear winner should emerge.