A 2019 List of The Best Personal Loans for Fair Credit

By Mudassar Ali

All of us have made slip-ups, it’s human nature. But some of us slip up more than others and in different areas of our lives.

When it comes to finances some of us, due to circumstances out of control, have made bad decisions and suffered the consequences. This is particularly true when it comes to credits and loans. In fact, American debt levels reached $13.5 trillion in 2018. . Debt is a fact of life.

So what can you do if you have only fair credit?

Here’s how to get and what are the best personal loans for fair credit.

What is Fair Credit?

Fair credit is when your credit is not so bad that you’ve had a major financial catastrophe that it is hard to recover from. But it is not great either. It is mediocre.

It is defined in the famous Fair Issac Corporation or FICO scoring system who introduced the first credit card in 1981 as a credit rating between 630 to 689. The scale stretches from 300 which is the lowest score to 850 which is the highest.

Any score in the 600s, therefore, is fairly average.

Many of us recover, however, the very fact of us having problems can stay on our credit score for years and your recovery might be slow.

Do not fear, however, as there are specific fair credit loans for those who scores are still average.

Upfront Fees

If you are applying for loans for fair credit then you may be presented with some specific hurdles you have to cross. This is because credit companies see lending you money as more of a risk than a customer with a good or very good credit score.

One of these hurdles is an upfront fee. This is charged on top of interest payments. The good news, however, is often the higher the upfront fee, the lower the FICO score that is required.

Avant charges an upfront fee of 4.75% on the amount your borrow — between $2,000 – $35,000. But they only ask for a FICO score of 580. This is technically lower than is usually described as a ‘fair’ or ‘average’ credit score.

Lending Club also has a fee of between 1-6% on the amount you borrow as do upgrade. Though it is worth pointing out their FICO score requirements are higher.

A Higher APR

Another factor to look out for when applying for a loan for fair credit is the higher rate of interest. The lower the FICO score generally the higher interest repayment.

This is not only because you are higher risk but because there are fewer companies that offer loans tothose with fair credit scores meaning there is less competition.

If you have a FICO score of 720- 850 then you will be able to command a competitive rate of around 9.8% APR. If you have a good FICO score of 690 – 719 then you can secure a rate of around 15%.

Fair scoring creditors who average between 630-689 typically can get a rate of 20% to 21.3% whilst those who are on the poor credit score of less than 629 can be charged interest as high as nearly

30% APR.

When weighing up whether it is worth investing in a loan with a fair credit score you have to factor in the interest and whether you are going to be able to pay back the loan on time.

If you are not going to meet the repayment deadlines to pay it off in full each month then it might be worth holding out until you have managed to improve your score.

Personal Loans Can Be Tricky

If you are applying for a loan with a fair credit score than you might soon realize that it is easier getting a loan for something specific such as a mortgage or a car. Getting personal loans for fair credit can be tough.

This is because the intent of the loan is easier to determine and so it is easier to assess the circumstances of the applicant as to whether their lifestyle can accommodate a new car or the size of the mortgage.

A Higher Risk

What’s more, the bank or loan company has a good it can reclaim if the applicant defaults. A car can be towed and sold at auction and a house can be repossessed by bailiffs in the worst-case scenario.

With a personal loan, it is harder to determine what it is being used for and there is no security as there is with a mortgage for a house or a car. It is a riskier type of loan and it could well be used by the applicant to simply live above their means, with no intention of paying it back.

Fix Your Credit Score Before Applying For Best Personal Loans For Fair Credit

Before you even decide to apply for one of the best personal loans for fair credit be sure to do everything you can to fix your credit or FICO score.

The starting process for this is to purchase your credit score and to sit down with an expert of a financial advisor to ask their advice on how to improve it.

This could involve small steps like taking out a few new credit cards and doing your everyday spending on these for a few months, being sure to pay them back in full, on time.

Ultimately, whilst it is possible to get personal loans with fair credit, the lower your score the lower the interest rate will be and any extra charges will be waived.

Remember it is also harder to get a personal loan than it is a loan for a good such as a car or a house that can be ultimately reclaimed should you default on the loan.

To read more, be sure to check out our finance and money section on our website.