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Did you run into an emergency and now have to make an unexpected payment? Do you want to explore credit card relief? While there are many options to finance these costs, personal loans are usually the best choice in these circumstances. They offer much lower interest rates than credit card loans. Plus, you can get a personal loan even if you don’t have stellar credit.
Around 13% of Americans have average credit, so you’re not alone in this situation. You might have thought that an average credit score makes you ineligible for a personal loan, but it’s far from true. Although it won’t be as easy as someone with excellent credit, it’s certainly worth a shot.
What qualifies as an average credit score?
Consumers in this range make up 13% of all debtors in the US.
How does an average credit score affect your eligibility for personal loans?
You need to first evaluate what category does your credit score fall in. Typically, a credit score of low to mid 600s is considered average in the range of 300 to 850 scoring scale.
If you have successfully received a mortgage or car loan with your average credit in the past, you might assume that getting a personal loan will be easy. However, it’s not as simple as it sounds. It depends on the health of your overall personal finances.
Mortgage and car loans fall under the category of secured loans, which means that the lender has the benefit of collateral in case you default. On the other hand, personal loans are unsecured loans and carry greater risk for lenders. For this, lenders base your eligibility on your history.
Lenders use your credit history as a means to assess your financial record. Payment history has more impact on your credit score, making up 35% of the weight. Therefore, timely payments play a vital role in a good credit score and history.
Consider improving your credit score before applying for a personal loan
If you assess your credit score and realize that you’re in the gray area that barely surpasses the bad credit margin, you should consider improving your credit score before applying for a personal loan. Although personal loans are offered to consumers even if they have a bad credit score, they come with difficult terms and high-interest rates.
According to research conducted by Syracuse University, borrowers with bad credit scores pay around $5,000 more in interest rates than borrowers with good credit scores. If you could improve your score even a bit closer to the good credit range, you can save thousands of dollars in interest on your personal loans.
The fastest way to improve your credit score is to try to get out of credit card debt. For a considerable difference, try to bring down the use of your available credit to 30% or less. Pay off any other personal loans that you might have taken before. Make sure you resolve any other dispute or discrepancies in your information on your credit report.
Which lenders offer personal loans to consumers with average credit?
There are several personal loan lenders available in the market these days. You should seek out lenders that offer favorable rates and have a reliable reputation. The debt consolidation process is not so easy these days and is full of bad actors.
We would recommend seeking out your local credit unions if you have a good relationship and account with them. Credit unions usually offer the best interest rates and terms.
Another option is looking for an online lender, as they are more flexible with average-to-bad credit consumers.
Personal loans with cosigners
There are a few online lenders that offer loan applications with a cosigner. If someone with an excellent credit score agrees to cosign on your loan, it can help you acquire better terms and much lower interest rates. However, only a handful of lenders provide this option.
How to compare personal loan options if you have average credit?
Even if you have a average credit score, you’ll still have several online lenders that would be willing to offer personal loans to you. Although these loans might have high-interest rates, they would still be much less when compared to payday loans and many other types of loans.
It is relatively easy to apply for a personal loan with an online lender. You can fill out an online application from the comfort of your home, and they usually respond within a day. If your application gets accepted, then funds get deposited in your account as shortly as a couple of days.
Make sure you apply with at least two lenders that accept borrowers with average credit, so you can compare offers and make the best choice for yourself. If your finances are in order, getting a loan to pay off $10,000 in debt is a definite possibility.
When you’re looking for a personal loan lender, make sure you compare APRs and the offered terms. Keep note of any additional fee charges to secure the best possible deal for you.