What Credit Score Is Needed for a Personal Loan?
Personal loans are becoming more popular by the day.
These loans are usually unsecured and people seek them for various reasons. Their interest rates vary dramatically. Because of this, it is extremely important for you to improve your credit score before you can apply.
Your credit score determines whether your loan request will be approved and the interest rate they will charge you.
The Credit Score Required for a Personal Loan
When it comes to personal loans, the required credit score varies from lender to lender.
Some lenders only give loans to people with excellent or good credit scores. Their interest rates are low—sometimes lower than what you get with credit card accounts. They also give high loan amounts. These lenders are perfect if you meet their requirements.
You should always seek to work with lenders who specialize in your credit score range. There are lenders that work with every range; starting from average to poor credit.
Note that it is not a guarantee that a lender will approve your application just because they match your score range.
Minimum Credit Score Varies by Lender
Good or excellent score personal loans: if your credit score is good or excellent, you can apply for a SoFi personal loan. They require a minimum score of 680. Their maximum loan amount is $100,000 and their rates are from 5.99% to 21.08% APR.
Average score personal loans: Prosper is great for people with average credit scores. Their maximum loan amount is $40,000 and their interest rates start from 6.95% to 35.99% APR. The minimum credit score required is 640.
Fair or average score personal loans: Lending Club requires that you have a minimum credit score of 600. Their maximum loan amount is $40,000 and their interest rates start from 6.95% to 35.89% APR.
Good or poor score personal loans: if your credit score is lower than 600, these lenders may help you out; One Main Financial, Avant and Upstart.
The Credit Score Requirement Can Be Proprietary
Personal loans are a bit different from conventional loans. They are unsecured and carry fixed terms and interest rates. For this reason, the lender may look at other things, not just your credit score, to determine the interest rate.
Some of them will look at your recent activity, credit usage, credit inquiries, number of open accounts and other things.
Preparing Your Score for Approval
Before you apply for a personal loan, take some time to improve your credit score. A good credit score allows you to have options in terms of lenders. You will also have a better chance of getting a good interest rate.
Here are some of the things you should try:
- Monitor your credit
- Dispute the negative entries in your report
- Lower credit utilization ratio
- Pay due balances and collections
Why Is Your Credit Score Important?
You can get a personal loan even with a poor credit score. But you won’t have many options and you may pay a ridiculous interest rate.
