Best Personal Loans for Excellent, Good & Fair Credit Scores
Many people seek out personal loans without really understanding the mechanics behind the process. Getting accepted by a lender for a personal loan is determined by several factors, some of which you may not have control over. Lenders will look at a number of components before deciding whether or not to approve someone for a loan including debt to income ratio, credit history, and recent employment status. All these factors are important to note because they will not only affect whether or not you are accepted for the unsecured loan you are requesting, but these elements will also determine the interest rate you pay throughout the course of your loan.
One of the biggest influencers is a person's credit score. What exactly is credit score, how does it work, and what constitutes a good credit score? Let's learn everything there is to know about this all-important little number and check out a few of the industry leaders that work with each range of credit scores so you can know who to turn to for the best personal loan no matter where on the credit score spectrum you fall.
No credit score? Read about how you can still receive a loan without a credit score.
Credit Scores Explained
Your credit score is a combination of past loans received, repayment history, credit card spending habits, and other financial markers. Altogether, these indicators give lenders a rough idea of how responsibly you handle your money. Obviously, the more responsible you are with your money, the better your credit score will be and the more likely you are to receive the loan you are requesting.
While there is no guarantee that you will be approved or rejected for a loan, especially as terms and considerations fluctuate from one lender to the next, here is a general breakdown of credit scores and how those holding such scores will fair:
|Credit Score Rating||Credit Score Range||Average APR|
|Excellent||720 - 850||10.94%|
|Good||690 - 719||14.56%|
|Average||630 - 689||19.84%|
|Bad||580 - 629||28.64%|
|Poor||579 and below||Most lenders will not lend|
Note: Borrowers should also note that this information is true for personal loans. Such unsecured loans work differently than other types of loans such as a mortgage or a student loan, and those seeking these types of financial assistance should understand the differences.
Obviously, someone with excellent credit will have a much easier time getting approved for a loan and will also receive a more attractive interest rate to work with. And, though it is not impossible to find a lender that will work with someone holding a poor or bad credit rating, it is much harder to come by, and the interest rates you are going to pay will naturally be much higher as a result. Scores are generally checked by running a soft credit pull. Despite what you may have heard about pulls, soft credit pulls will not affect your credit score at all. Only a hard pull can lower your score temporarily.
An interesting concept that most people aren’t aware of is that avoiding debt completely is actually not good for building your credit score. Lenders and financial institutions like to see that you are using the financial system wisely and responsibly. Someone with little credit history will most likely have a lower score than someone who has taken out loans and paid them back responsibly. This is how you will create a good credit rating.
One final note, these scores are based on the FICO scoring system. Not every lender will use this system to rank your score, but the vast majority do. For this reason, we’ve used FICO as our scale.
Best Loan Providers for Excellent Credit Scores
A credit score above 720 is considered excellent in the eyes of a lender, and this is naturally what anyone should aim for when starting to build their credit. Such a score is accrued by taking out credit cards and paying bills on time, making smart financial decisions, and not exceeding a healthy debt to income ratio (staying below 36% at all times).
If you have excellent credit, of course, you can have your pick of the litter, but that doesn't mean you should choose your lender arbitrarily. In fact, since you have so many options, you want to make sure you are getting the best deal possible, and you’ll have plenty of offers to compare. Here are two great choices for borrowers with excellent credit scores to consider:
It isn’t easy to be approved for a loan by SoFi, but if you can, they are one of the top choices anyone with excellent credit should consider.
SoFi began its financial career primarily as a student loan refinancing institution, attempting to help young workers get a leg up in the competitive world while struggling under the weight of these substantial student loans. Today, SoFi is known for being one of the leading online lenders for all different types of loans including personal loans, mortgages, parent refinancing, and more. This lender is particularly popular for its fresh, different approach to money lending. Rather than being aloof, cold, and unapproachable like many of the other reputable financial institutions out there (think banks), SoFi has built a reputation for being friendly, understanding, and supportive to their customers. They’ve structured their lending system around basic social concepts, creating a social network for their borrowers to meet, network, and grow from one another. SoFi regularly hosts social events where clients can mingle, seek out new job opportunities, and learn about smarter financial practices so they can make better decisions in the future. All these factors combine to create a positive, successful, and welcoming atmosphere where borrowers feel like equals and not like they’re second-class citizens because they need a loan.
Other factors that make SoFi stand out include:
- Low APRs
- Variable or fixed rates
- No fees or prepayment penalties
- Unemployment protection
Another great option for those with excellent credit is LightStream. Since it is a division of the SunTrust Bank, LightStream is a trusted name in the industry. You know that your finances will be completely and securely taken care of if you choose to go with this lender. Their loans come with possibly the lowest interest rates in the industry, making it an attractive offer for any borrower. LightStream is also extremely flexible about what you can use their loans for. In fact, their catchphrase is “Loans for Practically Anything”; not a bad slogan. Wondering what makes LightStream stand out? Here are a few points that should give you reason for pause:
- APRs as low as 2.29% (with autopay)
- Loans up to $100,000
- Repayment plans ranging from 2 to 7 years
- No fees to worry about
Best Loan Providers for Good Credit Scores
Next, let's look at someone with good or average credit. Bear in mind; this is going to be where most people sit. If you are new to establishing credit or if you weren't as careful as you should have been in the past but didn't make any major financial mistakes, then you probably land in this category. Fortunately, there are still several lenders that will work with you and even offer competitive rates and loan terms for your personal loans. Here are a few of the best options to consider.
LendingClub offers a significantly different experience and service than the previous two lenders we mentioned. Unlike SoFi and LightStream, LendingClub is a peer to peer lender marketplace. This means that rather than finance their loans directly, LendingClub connects borrowers to investors who want to fund personal loans as a business investment. Via their online process, this lending portal allows borrowers to reach hundreds of possible lenders with one easy application. This cuts down on application and approval processes considerably, making the entire experience much easier on borrowers than it could be otherwise. Some reasons to choose LendingClub over the competition include:
- Fixed rates as low as 5.99%
- Up to 5 years for payment plans
- No processing fees (though fees will vary depending on the lender you choose in the end)
- Accepts borrowers with a credit score as low as 600
- Easy online process
Discover is a known name across the globe for being one of the major credit card companies that exists today. With decades of reputable service, people trust this company without a doubt, and Discover has given borrowers many reasons to rely on them. Unlike other top tier brands, Discover works with the lower range of borrowers on the scale, making personal loans with upper level benefits a possibility for those with less than perfect credit. Other reasons borrowers prefer Discover are:
- Generous 30-day money back guarantee
- No prepayment penalties
- Reliable and trusted name in the industry
- Available in all 50 states
- Green loans
Best Loan Provider for Fair Credit Scores
Finally, we'll address individuals with fair credit scores. This is obviously going to be the hardest category for someone to find a loan from, but all hope is not lost. There are still several lenders willing to work with these borrowers. Remember that a low credit score doesn’t automatically infer reckless spending habits. A lack of credit activity can also result in a low score. If you fall into this category, consider applying for a personal loan with Avant.
Avant is known for being a more discerning lender, using state of the art technology to judge the responsibility level of a borrower rather than traditional metrics. What is also nice about this lender is that you can borrow small amounts, as low as $2,000, in case you need a little bit of extra cash just to get out of a tight month.
- Rates as low as 9.99%
- Repayment plans up to 5 years
- Deal with individuals with low credit scores
- Available in most states
|Lender||Type of Credit Best For||Minimum Credit Score||Average APR Range|
|Excellent||No minimum FICO||5.17%-14.24%|
Personal loans are an excellent solution if you are looking to consolidate debt from several sources, improve your credit score, have an event or large expense to pay off, or take out a loan without having to worry about collateral or a co-signer. Look towards the right lenders for your credit score, and enjoy the success of approval as you take steps towards healthier financial stability today.