December 7, 2023


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Can You Get a Loan if Your Credit Score Is Below 650?

Your credit score is one of the factors that matters most during a loan application. If you plan to apply for a loan and your credit score is on the low side, you might be wondering whether you have a chance to get approved.

You can get a loan with a credit score below 650. In general, the credit score you need for a personal loan is 550 or higher. This does depend on the lender, as each has its own minimum requirements. Keep in mind also that lenders tend to offer smaller loan amounts and charge higher interest rates to borrowers with lower credit scores.

Although it will cost you more, it’s possible to get a loan even without a high credit score. Now, let’s look at how you can find a lender and get the loan you want.

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How to get a loan with a credit score below 650

Here’s the process to get a loan with a credit score below 650:

  1. Check your credit score
  2. Look for lenders with a minimum credit score you can meet
  3. Compare loan rates with the lenders you find

To start, you need to know your credit score. Specifically, you should look up your FICO® Score, because that’s the most widely used score by lenders. There are several free ways to get your credit score online.

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The next step is finding potential lenders. You can do that by checking out the best personal loans for fair credit. Under the FICO score system, fair credit includes scores from 580 to 669. If you look for loans aimed at consumers with fair credit, you should find lenders with minimum requirements that work for your credit score.

Once you have the lenders, it’s time to go rate shopping. Most lenders have a prequalification option on their websites. After you enter some basic information, the lender runs a soft credit check on you, which doesn’t affect your credit score. It then shows you the loan amount and interest rate that you’re prequalified for.

Use the loan amounts and interest rates offered to choose a lender. After you’ve picked one, you can apply for your loan.

Other ways to get a loan with a low credit score

There are some alternative loan options that may work better depending on your situation.

Get a cosigner

Some lenders allow consumers to apply for personal loans with a cosigner. A cosigner is another person who agrees to be responsible for your loan.

If you know anyone with a higher credit score than you who is willing to cosign on your loan, then this could help you get better loan terms. The lender will use the cosigner’s credit to determine the interest rate and amount it can offer.

Check with your bank or credit union

When you already have a relationship with a bank or credit union, they may be willing to issue you a personal loan with no credit or a low credit score. They have a better idea of your financial situation compared to a lender you’ve never used before. If they see that you have regular income and that you manage your money well, that could be your ticket to your loan.

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Provide collateral for a secured loan

Personal loans are usually unsecured loans, meaning there’s nothing for the lender to repossess if the borrower defaults. But it’s possible to get a personal loan with collateral. This can make it easier to get approved.

When you provide collateral for your loan, it’s a secured loan. Most items of value that can be professionally appraised are an option to use as collateral. Common collateral choices include:

  • Vehicles
  • Real estate
  • Jewelry
  • Bank accounts
  • Investment accounts

Saving money on your loan

A good rule to follow with personal loans is not borrowing more than necessary. This is even more important when you have a low credit score because of the higher interest rates.

Figure out how much money you need first. And then only borrow that amount, even if the lender offers you more.

Your loan’s term is also important. A longer loan term means lower monthly payments, but it also results in more interest charges. Pick the shortest term that works for you to minimize interest without having trouble making your payments.

If you pick the lowest loan amount and the shortest term you can manage, your loan won’t be more expensive than necessary. It may cost you interest, but you’ll have the money you need, and it can even help your credit improve as you pay back the loan.