When it comes to personal loans, credit rating requirements vary from lender to lender. Generally, lenders prefer borrowers with good or excellent credit scores (690 or higher). However, some lenders may accept applicants with poor credit (scores lower than 630). Eligibility criteria may differ, but the most common ones include a minimum credit score and income.
It's important to consider taking out a personal loan only if it will benefit you financially, especially if you have a low credit score. Not all lenders offer joint loans, but adding someone with good credit and a steady income can help you get a lower interest rate or a larger loan amount. If you have high-interest credit card debt, it may be wise to pay it off with a personal loan instead of using the maximum of your credit card. Be wary of lenders who don't check credit ratings, have exceptionally high rates, or require title to your vehicle. Applying for credit when you don't know what your credit rating is or what lenders will accept can be very stressful. If applying for a personal loan, even with a slightly higher interest rate, will help you pay off credit cards with an even higher interest rate, then it can be beneficial.
If you have bad credit, you may not qualify for the lowest rates, but taking out a loan and paying it off can help improve your credit score. According to lenders surveyed by NerdWallet, the typical minimum credit score to qualify for a personal loan is 560 to 660. Even if you have less-than-good credit, you could still qualify for a personal loan with a lower interest rate than what your credit cards offer. You can use WalletHub's free prequalification tool to see which personal loan providers are likely to approve you. If you have bad credit, Upstart may be an option since they don't require a minimum credit score.
While lenders consider several factors in a loan application, your credit rating is often given the most importance. It's possible to have a good credit score but still not qualify for a loan due to too much debt, no assets, or an income that isn't high enough to support the extra payment. The personal loan you qualify for will likely have a much lower interest rate than your credit card, saving you hundreds or even thousands of dollars in the long run.