When you apply for a personal loan, the lender will evaluate your financial health and credit profile before making a decision. Your credit score plays a vital role in whether you’re approved and, if so, what loan terms and interest rates you’ll be offered.

A fair credit score — one between 580 and 669 — doesn’t necessarily mean you won’t get approved for funding. However, you can expect slightly higher interest rates and, in some cases, higher fees than someone with good or excellent credit.

Can I get a loan with fair credit?

While you can still get a personal loan with fair credit, it’s likely that it will require some digging. That’s because lenders use credit scores to gauge the risk of default, and a fair credit score often indicates you’ve had some challenges in the past, so your choices may be limited.

You can also expect to pay higher borrowing costs, too, as lenders reserve their lowest interest rates and fees for those with excellent credit. As a fair credit borrower, it’s important to do your research before signing on the dotted line to find a lender that can offer you the most affordable loan for your situation.

Where can I get a personal loan with fair credit?

Personal loans for fair credit are available through traditional banks, credit unions, online lenders and peer-to-peer lenders, each with their own set of benefits and drawbacks.

When it comes to traditional banks, they tend to prefer borrowers with solid credit scores, so check the requirements before applying to make sure you meet the minimums.

If you’re a member of a credit union, you could get approved for a personal loan with a fair credit score based on the strength of your relationship with the financial entity. Credit unions also cap personal loan interest rates at 18 percent, which may be lower than what you’re offered from an online lender with a less-than-stellar score.

Online lenders tend to be the most lenient but most have interest rates as high as 36 percent and can charge origination fees of up to 10 percent for the flexibility they provide. Peer-to-peer lenders are also an option for those with fair credit, as they tend to evaluate other factors like your education and employment history to approve you for a loan, but these loans also come attached to higher borrowing costs.

How fair credit affects a personal loan

If you’re applying for a personal loan with fair credit, here’s what to expect:

  • Higher interest rates. The average personal loan has an interest rate just above 11 percent. But, as a fair credit borrower, you can expect to get an interest rate between roughly 18 percent and 32 percent, depending on the lender.
  • Steeper fees. Origination fees aren’t uncommon among online lenders, which tend to cater to those with fair credit. Some lenders charge a flat rate, while others assess the origination fee based on the borrower’s credit score, expressed as a percentage.
  • Shorter repayment periods. A fair credit score also means you may be offered a shorter loan term. This means you’ll save on interest and pay the loan off faster, but the downside is your monthly payment will be higher.
  • Lower loan limits. The lender may be reluctant to lend you a large sum of money with a fair credit score.

How to decide if a fair credit loan is right for you

Ultimately, a personal loan makes financial sense if you truly need to borrow the funds and there’s a loan with reasonable terms available to you. Assuming you make timely monthly payments, the loan will also help improve your payment history and possibly boost your credit score.

That said, you should explore other funding options if the loan offers you’ve received come with exorbitant interest rates or repayment periods that make the loan payments unaffordable. It’s not worth stretching your budget thin to afford the monthly payments. Furthermore, you could do more harm than good if you default on the loan, as you’ll likely damage your credit rating.

How to boost your credit before applying

It helps if you improve your credit score before applying for a personal loan. Doing so could open the door to loan options with more competitive terms and lower borrowing costs. Plus, you could save a bundle in interest, depending on how much you can boost your credit score.

To boost your score, there are three key steps you should take.

  • Make timely payments. Payment history accounts for 35 percent of your FICO credit score. So be sure to pay your bills on time and get current on any past-due accounts.
  • Pay down debt balances. Your credit utilization rate, or the amount of revolving credit in use, makes up 30 percent of your FICO credit score. If possible, aim for a rate of 30 percent to give yourself the best chance at a strong credit score.
  • Don’t close old accounts. Credit age is another important factor in the FICO equation. It accounts for 15 percent, and old credit accounts in good standing help this figure even if you only use the card for minimal expenses.

How to get a personal loan with fair credit

When you’re ready to apply for a personal loan, following these steps will help streamline the process.

  • Assess your needs. Use a personal loan calculator to determine how much you can comfortably afford to borrow. Include the origination fees and other costs the lender may charge in your calculation.
  • Check your credit. Knowing where you stand before applying is best to avoid surprises. If your credit score is on the lower end of the fair spectrum, consider bringing a co-signer on board to strengthen your approval odds and possibly qualify for more attractive loan terms.
  • Get prequalified. Each formal application for credit results in a hard inquiry and can ding your credit score by a few points. But you can avoid hard pulls by getting prequalified online with the lenders you’re considering to gauge the likelihood of being approved and avoid unnecessary inquiries.
  • Compare loan offers. Evaluate the prequalified offers you receive to determine which is most suitable. If the loan quotes don’t quite work for you, shop around with other lenders, including local banks and credit unions, as they may be able to offer you better terms.
  • Apply for a loan. Be sure to complete the loan application in its entirety, check for errors and upload any required documents to avoid an inadvertent denial.

The bottom line

It’s possible to get a personal loan with fair credit. However, you likely won’t qualify for the same favorable loan terms as you would if you had good or excellent credit. If possible, it’s worth improving your credit score before applying. But if you’re crunched for time and need funding soon, be sure to compare offers from at least three lenders to find the best deal for you.