A job loss or costly emergency can devastate your bank account and even affect yours credit-worthiness if you are behind with your bills. When you are not perfect Credit history, that doesn’t mean you have to rule out getting one private loan.
Most lenders rate borrowers based on theirs FICO credit score, the industry standard. The areas fall into these five categories:
- Poor: Below 580
- Industrial fair: 580 to 669
- Good: 670 to 739
- Very well: 740 to 799
- Unusual: 800 and more
According to FICO, lenders consider customers with a score above 670 to be creditworthy. If you have decent creditworthiness, you may not meet every lender’s approval requirements for personal loans, but some institutions will work with you. The process can be more difficult, but you can increase your chances for success when you know what to expect and where to look.
How to apply for a personal loan
When you apply for a personal loan, the lender will review your credit history to measure how long you have credit, how much credit you already have, how much of your available credit is being used, and how time you are paying your bills. And a small group of lenders are using a new type of credit rating called Ultra FICO that takes your cash transaction history into account.
If you fall into the fair credit zone, you may still be approved, but you will likely be charged a higher interest rate. While some borrowers may qualify for personal loans with an annual interest rate of only 4.99 percent, the average personal loan rate is 10.32 percent, according to the Federal Reserve. If you have decent credit, your rate will likely be higher. You may also be charged higher deployment fees.
Before you apply for a personal loan, ask if the lender will prequalify you. This process includes a gentle credit check that does not affect your credit score. You don’t want to accidentally take an action that further lowers your score only to find out that you don’t meet the lender’s requirements.
Consumer personal lenders with fair credit
While you are likely to pay more for a loan if you have adequate credit, you should still be looking for the best deal.
Check out a wide variety of lender types such as B. Online lenders and local banks and credit unions. Federal credit unions, for example, limit interest rates to 18 percent. Compare the loan terms; While you may get a better rate from one lender, another may offer you a higher rate lower fees.
Here are some of your options (As of February 2020):
Lender Minimum Credit Score APR area
Avant 580 9.95 percent to 35.99 percent
Lending Club 600 6.95 percent to 35.89 percent
Thrive 640 6.95 percent to 35.99 percent
Update 620 6.98 percent to 35.89 percent
upstart 620 6.53 percent to 35.99 percent
Note: Interest and credit requirements may vary. So be sure to check the lender’s website for the latest information.
What to do if your loan application is rejected
If a lender rejects your personal loan application, keep looking. It may be other options available. Carefully consider how the payment will fit your budget and do not choose a lender with difficult terms. If you are having trouble making the monthly payment, it could affect your creditworthiness in the future.
Take steps to fix your credit. Check your report for incorrect information and dispute any discrepancies you find. According to the Federal Trade Commission, one in five people has a mistake in their credit report.
Reduce debt. Lenders want the debt utilization rate – that is, the percentage of the available credit you are currently using – to be below 30 percent. And be careful about paying your bills on time.
By taking a few steps to improve your credit score, you can prepare for better interest rates in the future and one day become a member 800 credit score crowd.