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How to Get a Personal Loan with Low Credit

The average U.S. credit score is 711 in 2021, which is considered a “good” credit score by lenders and creditors.

On the downside, any credit score hovering around the 600 level – or worse – is considered a low credit score, and can lead to some problems in obtaining a personal loan, or at best, getting a personal loan with higher interest rates.


That’s the problem with low credit scores and personal loans. Either the credit score is so low you can’t get a loan at all. Or, the borrower’s score is high enough to earn a personal loan that comes with higher interest rates attached, which leads to the overall cost of taking out a personal loan.

Consider two borrowers looking for a $20,000 personal loan with a five-year repayment period.

  • Borrower “A” has a credit score of 750. This borrower earns a loan approval with a 8% interest rates
  • Borrower “B” has a credit score of 620. This borrower earns a loan approval with an 12% interest rate.
  • Borrower “A” would pay a total interest amount of $4,332 over the entire loan period.
  • Borrower “B” would pay a total interest amount of $6.693 over the entire loan period.

Borrower “A” earns the lower interest rate because her stellar credit history. Borrower “B” has a mixed credit history however, which makes him a riskier bet for personal loan lenders, which is why they’ll only green light a loan with a higher interest rate. 

The higher interest rate signifies the payment risk the lender will take on for approving the loan.


How to Get a Personal Loan with a Low Credit Score

By and large, a personal loan lender will clear a loan to borrowers with a credit score of 670 or better. Anything lower than that and the lender may either reject the loan outright or okay the loan, but only at a significantly higher interest rate.

There’s a world of difference between a FICO score of 600 and 700,” said Ann Martin, director of operations of Credit Donkey, a personal financial platform in Pasadena, Cal. “A 600 score is not considered to be a good credit score, and will certainly limit your abilities to access credit and loans. A score of 700 is generally considered to be good credit.”

RELATED: Can’t Qualify for a Personal Loan? Here’s How to Fix the Problem

In general, you can access most major credit cards, as well as many auto loans and personal loans at decent rates, with a score of 700, while a credit score of 600 will limit your ability on all these fronts. “670 is a good credit score threshold, Martin said. “Once your credit score is around 670, lenders will start to become available.”

If you’re not at that level, don’t give up hope, you can still get a personal loan if you get creative. Use these strategies to get the job done.

Talk to a lender and explain your situation. “It’s difficult to qualify for a personal loan with low credit scores because lenders have a significant risk that they will not be repaid in full,” said Matthew Jimenez, owner of My Credit Repair Clinic in Miami, FL. “There are many people who get approved for credit packages, though, and if you try contacting lenders about your financing goals, they may have some insight on steps you can take to make it more likely to get approved.”

RELATED: Don’t Fall For These Credit Score Myths

Expand your loan options. Look at alternatives to personal loans to get that money and don’t make any purchases with your credit cards or overdraft. “For example, get a co-signer,” said Jimenez. “Work on improving your credit score to increase the size of the loan you qualify for. You could also apply for a secured loan, which will require collateral if you withdraw more than what was extended in the original agreement.”

Get active about paying down your debt. About 90 days before you apply for a personal loan, get proactive and start addressing why your credit score is so low, and start doing something about the situation. “Start paying down any old outstanding debt, keep making timely payments on current debt, check the number of open lines of credit), and trimming them down,” Jimenez said.

Understand how a credit score is calculated and act accordingly. Knowing how FICO scores are formulated can help you recognize and improve a low credit score. That will help you get on the road to a personal loan at a good rate.


“The FICO score is the most common scoring model used by consumer lenders,” said Brian Martucci, a personal finance editor at Money Crashers, in Minneapolis, MN. “In declining order of importance, these factors are used in the formula:

Martucci advises checking your credit report and note your relative weaknesses and strengths with regards to the following factors.

  • Set up autopay for all your credit accounts so that you always pay your bills on time.
  • Make a plan to pay down debt balances that you’re currently carrying from month to month. 
  • Keep your credit balances low.
  • Don’t close old credit card accounts (and other credit lines) even if you no longer use them regularly.
  • Don’t apply for new credit on a whim.


Apply Some Discipline and Land a Personal Loan with Low Credit

Borrowers with low credit scores have to face reality and know that a personal loan approval can be an uphill climb.

That doesn’t mean it can’t be done, however. By being transparent with lenders and working hard on improving your credit score, a personal loan can clear lending hurdles and land in your bank account.

If you apply the tips and strategies listed above, that day can come sooner than you may think.

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Brian O'Connell
Brian O’Connell

Brian O'Connell has been a finance writer at TheStreet, TheBalance, LendingTree, CBS, CNBC, WSJ, US News and others, where he shares his expertise in personal finance, credit and debt. A published author and former trader, his byline has appeared in dozens of top-tier national publications.

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2021-06-24T07:59:45-07:00May 30th, 2021|Personal Loans|
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