Can You Get a Personal Loan with a 650 Credit Score?

At Financial Canadian, we often receive questions about personal loans and credit scores. Many wonder if they can secure a personal loan with a 650 credit score.

This blog post will explore your options, explain how lenders view this credit score, and provide tips to improve your chances of approval.

We’ll also discuss ways to potentially boost your credit score for better loan terms in the future.

Understanding Credit Scores and Personal Loans

What’s a 650 Credit Score?

A credit score of 650 falls into the “fair” category on most credit score ranges. This score sits just below the threshold of “good” credit, which typically starts in the high 600s. While not terrible, a 650 score presents some challenges when you apply for personal loans.

The Impact on Personal Loan Approval

With a 650 credit score, you’ll likely face higher interest rates and stricter terms compared to those with good or excellent credit. As of May 2025, the average rate for personal loans for borrowers with good credit scores (690 to 719) was 16.48%, according to NerdWallet. This rate is lower than what borrowers with fair credit might expect.

However, a 650 score doesn’t automatically disqualify you from getting a personal loan. Many lenders, especially online platforms, cater to borrowers with fair credit. For instance, some lenders consider factors beyond just credit scores, which can increase your chances of approval.

Beyond the Credit Score

Your credit score plays a significant role, but it’s not the only factor lenders consider. Other aspects can influence your loan application:

Income and Employment

Lenders want to see a stable income and employment history. A strong income can sometimes offset a lower credit score. Prepare to provide proof of income, which may include pay stubs, tax returns, or bank statements.

Debt-to-Income Ratio

This ratio compares your monthly debt payments to your monthly income. A lower ratio (typically below 36%) appeals more to lenders. If your debt-to-income ratio runs high, try to pay down some debts before you apply for a personal loan.

Collateral (for Secured Loans)

Some lenders offer secured personal loans, where you put up an asset as collateral. This reduces the lender’s risk, potentially leading to better terms even with a fair credit score. However, you risk losing the asset if you default on the loan.

Each lender has its own criteria, so it’s essential to shop around and compare offers from multiple sources. As we move forward, we’ll explore specific personal loan options available to those with a 650 credit score, including traditional banks, online lenders, and peer-to-peer platforms.

Where Can You Get a Personal Loan with a 650 Credit Score?

A 650 credit score doesn’t close all doors to personal loans. While traditional banks might hesitate, other lenders offer more accommodating options. Let’s explore your choices.

Credit Unions: A Friendly Alternative

Credit unions often provide more flexible lending criteria than big banks. As member-owned institutions, they typically offer lower interest rates. Borrowers can take advantage of repayment terms with a bit more flexibility compared to that of some lenders, as terms range from 24 months to 60 months.

To join a credit union, you must meet specific criteria (like living in a certain area or working for a particular employer). Once you become a member, credit unions might work more willingly with your credit situation.

Online Lenders: Convenience and Flexibility

Online lenders have revolutionized the personal loan market. Many cater specifically to borrowers with fair credit. LendingPoint is an online lender that offers fast funding on loans for borrowers with fair credit. However, some lenders may also offer secured personal loans.

Online lenders often provide quick decisions and fast funding. LendingPoint, for instance, can approve loans within minutes and fund them within 24 hours.

Peer-to-Peer Platforms: A Different Approach

Peer-to-peer (P2P) lending platforms like Prosper connect borrowers directly with individual lenders. These platforms often have more lenient credit requirements. Prosper accepts borrowers with credit scores as low as 640.

P2P loans can work well if you have a compelling story for potential lenders. Your 650 credit score might result from a one-time event rather than a pattern of financial mismanagement. On P2P platforms, you can often explain your situation, which might persuade individual lenders.

Secured vs. Unsecured Loans: Weighing Your Options

Most personal loans don’t require collateral (unsecured loans). However, with a 650 credit score, you should consider secured loans. Offering collateral (like a car or savings account) can often get you better rates and terms.

OneMain Financial offers both secured and unsecured loans to borrowers with fair credit. Their secured loans often come with lower interest rates, making them more affordable if you feel comfortable putting up collateral.

Secured loans might offer easier approval and better terms, but you risk losing your collateral if you default. You’ll need to carefully evaluate this trade-off based on your financial situation.

While a 650 credit score might limit your options, it doesn’t exclude you from the personal loan market entirely. The next section will discuss strategies to improve your chances of loan approval and potentially secure better terms.

How to Boost Your Loan Approval Odds

Rapidly Improve Your Credit Score

Obtain your free credit report from Equifax or TransUnion. Review it for errors and dispute any inaccuracies. A Federal Trade Commission study found that 1 in 5 consumers have an error on their credit reports. Correction of these errors can quickly boost your score.

Pay down credit card balances. Credit utilization accounts for 30% of your FICO score. Try to use less than 30% of your available credit. If possible, pay off credit cards entirely before you apply for a loan.

Set up automatic payments for all your bills. Payment history makes up 35% of your FICO score. Even one late payment can significantly impact your credit score.

Lower Your Debt-to-Income Ratio

Lenders typically prefer a debt-to-income (DTI) ratio below 35% or less. To calculate your DTI, divide your monthly debt payments by your gross monthly income (before taxes). For example, if you earn $5,000 per month and have $1,500 in monthly debt payments, your DTI is 30%.

To lower your DTI, focus on paying off existing debts. Consider using the debt avalanche method (pay off high-interest debts first while making minimum payments on others). This approach can save you money on interest, but if the principal is large, it may take longer to pay off debt with the highest interest.

Increase your income to improve your DTI. Look for side gigs or ask for a raise at work. Every extra dollar earned lowers your DTI and makes you more attractive to lenders.

Explore Co-Signers and Joint Applications

A co-signer with a higher credit score can significantly improve your loan terms. They agree to take responsibility for the loan if you default, which reduces the lender’s risk. This can lead to lower interest rates and higher approval chances.

However, co-signing carries risks for both parties. The co-signer’s credit score could suffer if you miss payments. Make sure you can comfortably afford the loan payments before you involve a co-signer.

Joint applications, where two people apply together, can also boost your chances. This combines both applicants’ incomes and credit histories, potentially leading to better terms.

Compare Multiple Lenders

Don’t settle for the first offer you receive. Different lenders have varying criteria and may view your 650 credit score differently. Use online comparison tools to get quotes from multiple lenders.

Many lenders offer prequalification, which uses a soft credit check and doesn’t affect your credit score. This allows you to compare potential rates and terms without multiple hard inquiries on your credit report.

When you compare offers, look beyond the interest rate. Consider factors like origination fees, prepayment penalties, and loan terms. A slightly higher interest rate might be worth it if the loan has no origination fee, for example.

Final Thoughts

A personal loan with a 650 credit score is achievable through credit unions, online lenders, and peer-to-peer platforms. These alternatives often provide more flexible terms and consider factors beyond your credit score. You can improve your chances by paying down existing debts, correcting credit report errors, and maintaining a low credit utilization ratio.

Different lenders have varying criteria, so compare multiple offers to find the best terms. Consistent, on-time payments on a personal loan can help improve your credit score over time, potentially opening doors to better financial products in the future. At Financial Canadian, we understand the importance of a strong online presence, much like how improving your credit score can enhance your financial opportunities.

We recommend exploring options for professional web design services to boost your business’s credibility and reach. Make an informed decision based on your unique financial situation and goals when pursuing a personal loan with your current credit score. With careful planning and the right approach, you can navigate the world of personal loans successfully.