A personal loan is a versatile installment loan you can use to consolidate debt, fund a home renovation project, or for many other purposes.
Generally, a credit score in the mid-600s or higher is needed to qualify for a personal loan. But if your credit score is lower, you’re not necessarily out of luck.
Some lenders work with borrowers with less-than-stellar credit, so you may qualify for a personal loan with a 550 credit score. Here’s how:
You’re most likely to get approved for a personal loan with good or excellent credit — a good credit score is at least 670.
Still, many lenders will work with you if your credit falls in the mid-600s, and a few will consider your loan application with a 550 credit score. Of course, the better your credit is, the better your loan offers, meaning a lower interest rate and better terms.
Here is a general breakdown of the various credit score ranges:
If your credit score is under 550, getting a personal loan may be difficult. But some lenders, such as Avant, will consider a 550 credit score. That said, many lenders offering personal loans for bad credit borrowers require a credit score of at least 580.
Consider enlisting a cosigner with good credit to improve your chance of approval and lower your rate. Many personal loan lenders don’t allow cosigners, but some do.
If possible, take steps to improve your credit before applying for a personal loan. One of the best ways is to make consistent on-time monthly payments and reduce your debt-to-income (DTI) ratio. We’ll detail several credit-building steps in a moment.
Related: Learn more about getting a personal loan on Credible.com
Your credit score significantly influences your personal loan interest rate. A high credit score demonstrates a history of timely payments and indicates a low risk of loan default to lenders. In turn, lenders are more likely to offer you a low-interest rate.
For reference, here are average prequalified interest rates for borrowers using the Credible marketplace for personal loans.
The interest rate you receive may be higher or lower than these figures, depending on your credit score, DTI ratio, and other factors.
As with any credit product, it’s wise to weigh the benefits and downsides of personal loans for bad credit before proceeding.
If you don’t need the funds immediately, consider taking the steps below to improve your credit before applying for a personal loan. Boosting your credit can increase your odds of approval and lower your interest rate.
| Important: The amount of debt you have divided by the amount of credit you have available to you is your credit utilization ratio. This ratio measures the percentage of available credit you’re using, and makes up 30% of your credit score. |
Although personal loans provide quick access to funds, they’re not for everyone. Fortunately, you have other options, including the following:
Related: Learn more about getting a personal loan on Credible.com