Applying for a large personal loan with a credit score ranging from 580 to 669 may not feel like a walk in the park. The loan application process is crucial. You don’t want to pick the incorrect lender and be turned down or pay a greater interest rate than you need to. Therefore, pay attention to important points discussed in this article.
You can still get the loan you seek if you have a fair credit score. Follow these guidelines to get your loan approved in no time.
- Know What Fair Credit Means
- Look for lenders whose credit score requirements you can meet
- Pay off any outstanding debt before applying
- Find a co-signer if possible
- Seek pre-approval if possible
- Beware of loan scams
Ready? Let’s dive in!
1. Know What Fair Credit Means
What is regarded as fair credit may differ depending on which credit scores you’re looking at. According to the FICO system, fair credit ranges from 580 to 669. Fair Credit scores are considered average in the United States. However, lenders still approve loans for borrowers with fair credit
2. Look for Lenders Whose Credit Score Requirements You Can Meet
Do not get confused. “Credit score” and “FICO score” imply the same thing.
Your FICO score is just the industry standard for a credit score model. Your lender uses it to make fair and accurate decisions about your creditworthiness.
Remember that every lender has a baseline credit score requirement. Some lenders may accept a credit score of 580, while others may accept a score equal to or higher than 660.
Therefore, choose a lender with credit score requirements you can satisfy, so you can improve your chances of getting your loan approved at the best APR.
3. Pay Off Any Outstanding Debt Before Applying
As you can imagine, a good credit score enhances your chances of loan approval. However, having a fair credit score does not mean the odds are against you.
But if you can improve your credit score, do so. The slightest increase in your credit score can lower your interest rate, saving you hundreds of dollars potentially. Paying off any outstanding credit card bill before the last day of your monthly billing cycle, for example, can help you improve your credit score.
You can do this through your credit utilization ratio—which is the amount of revolving credit you’re currently using divided by the total amount of revolving credit you have available. Said otherwise, it’s how much you currently owe divided by your credit limit.
Your credit utilization ratio tells a lender that you use less of your available credit, indicating that you are doing a good job.
So for every $1,000 in credit, you should only utilize $300. It’s best to maintain a ratio of around 30% if you want to see a consistently decent uptick in your FICO score. Anything more can be a red flag to your potential lender or credit card issuer. However, note that every time you pay your credit card bill, you affect your credit usage ratio, in turn affecting your credit score.
Here are two ways you can utilize your credit utilization ratio to your advantage:
- Request a credit limit increase from your card issuer
- If you are a monthly earner, try to pay up your credit card balance at the end of the month—or a few days before. Bear in mind that having no balance or a very low balance is the ideal path, as it will help you increase your FICO score in the long run
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4. Find a Co-Signer if Possible
A co-signer is someone willing to share loan repayment responsibilities with you. He or she must have a good credit score and meet all other creditworthiness requirements.
If you can find a co-signer, use his or her data to determine whether your loan request and the offered rate are approved. Finding a reliable co-signer can be tricky, though.
Taking a loan with a co-signer with a better credit score than yours may result in a bigger loan amount, reduced interest, or both. Your co-signer is taking a chance on you. So he or she will be accountable for the debt just as you will be. Be sure you are taking a loan you can repay. Otherwise, you may ruin the good relationship you have with your co-signer.
Furthermore, ensure that you pay on time to keep your credit rating intact. If you are a monthly earner, you could include a payment schedule in your expenses to make payments more manageable and stress-free.
5. Seek Preapproval (If Possible)
Most lenders have preapproval options available online. These options are used to check your loan rates without affecting your credit score. However, preapproval comes after pre-qualification. Once you pre-qualify for a loan, then you can seek preapproval.
To seek preapproval, submit some basic information—including your name, residential address, earnings, and requested credit sum. Note that all lenders will also ask your Social Security number, so they can properly identify you.
On another note: Foreign nationals working or doing business in the United States can get loans and credit cards if they have ITINs, or individual tax identification numbers.
Once you have submitted all of the needed information, your lender will perform a mild credit analysis on your account. This will determine your approval. Once you are preapproved, the amount and interest rate you are applying for will appear likewise.
Note that preapproval for a large personal loan with fair credit isn’t always a guarantee. However, with preapproval, you have a higher chance of securing a loan.
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6. Beware of Loan Scams
No matter how urgently you may need a loan, never be in a hurry. Just as there are genuine lenders, there are also dishonest lenders willing to capitalize on your urgent need for a loan.
Unfortunately, there are several exploitative loan offerings out there. Payday loans and automobile title loan providers are two examples. They frequently demand exorbitant interest rates, with APRs exceeding 500 percent in some areas. Because they have basic standards, they can attract customers.
Check the reputation of any lender whose loan you want to apply for. Before agreeing to the loan, examine the contract—particularly the repayment conditions and interest rate. Continue exploring other choices if the loan cost will make repayment extremely unattainable.
Conclusion
You can definitely get a large personal loan with fair credit. Just follow through with the steps mentioned above—look for lenders within your credit score, pay off outstanding debt, get a co-signer if you can, and be hopeful for a pre-approval. With this, you can get the loan you seek.
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