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.
|Lender||Type of Credit Best For||Minimum Credit Score||Average APR Range|
6.54% - 16.24%
5.74% - 16.99%
6.95% - 35.89%
8.85% - 29.99%
9.95% - 35.99%
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|
720 - 850
690 - 719
630 - 689
580 - 629
579 and below
Most lenders will not lend
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 35.99% 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, it is one of the top choices anyone with a credit score of 680 or more should consider.
SoFi started out 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. 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 its customers. It has structured its lending system around basic social concepts, creating a social network for its 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:
Rates from 6.54% - 16.24%
Variable or fixed rates
No fees or prepayment penalties
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. Its 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 its loans for. In fact, its catchphrase is “Loans for Practically Anything”. Here are a few highlights that make LightStream stand out:
APRs from 5.74% - 16.99%
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.
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 its online process, this lending portal allows borrowers to reach hundreds of possible lenders with one easy application, making it an ideal choice for borrowers with good credit. This cuts down on the 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 from 6.95% - 35.89%
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
Upstart is easily one of the fastest growing lending marketplaces in the industry. Working quickly and professionally, Upstart matches up borrowers with the right lenders for their situation and needs. Best of all, Upstart works with borrowers with less than perfect credit. In fact, you can get a loan through Upstart partners with as little as a 640 credit score (and sometimes even lower).
Best of all, Upstart is fast. You can receive approval in two minutes. And once you're approved, you can have the money deposited into your account as soon as the next business day. By the way, Upstart doesn't limit you to what you can spend your loan money on. It's a personal loan with no strings attached. Here are some other reasons Upstart is the best choice for you:
Get your money the next day
No prepayment penalties
A+ rating with BBB
Lax credit requirements
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 as a more discerning lender, using state of the art technology to judge the responsibility level of a borrower rather than traditional metrics such as credit scores, which means that it accpects borrowers with less than ideal credit. What makes it stand out 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. This is especially good if you have poor or fair credit because you won't be penalized when it comes to the terms and rates offered.
Rates from 9.95% - 35.99%
Repayment plans up to 5 years
Deal with individuals with low credit scores
Available in most states
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.