Getting a Personal Loan with a 520 Credit Score: Options and Tips

If you have a credit score of 520, you may be wondering if it’s possible to get approved for a personal loan. While a 520 credit score is considered poor and will limit your options, there are still lenders who may be willing to work with you. This article will explore your loan options, provide tips for improving your chances of approval, and offer guidance on rebuilding your credit.

Understanding a 520 Credit Score

A 520 credit score falls into the “poor” credit category. For context, here’s how FICO credit score ranges break down:

Credit Score Range	Category
300-579	Poor
580-669	Fair
670-739	Good
740-799	Very Good
800-850	Excellent

With a 520 credit score, you’re near the top of the “poor” range, but still below the 580 threshold where more loan options start to become available. This means getting approved for a personal loan will be challenging, but not impossible.

Personal Loan Options for a 520 Credit Score

Here are some potential personal loan options to consider with a 520 credit score:

1. Bad Credit Personal Loans

Some online lenders specialize in offering personal loans to borrowers with poor credit. These loans typically have high interest rates and fees to compensate for the increased risk. Examples include:

Avant – Minimum credit score of 550
OneMain Financial – No minimum credit score
Upgrade – Minimum credit score of 560

While your 520 score may fall below some of these minimums, it’s worth checking if you pre-qualify, as other factors like income are also considered.

2. Secured Personal Loans

Offering collateral, such as a vehicle or savings account, can improve your chances of approval. Secured loans are less risky for lenders, so they may be more willing to work with lower credit scores.

3. Credit Union Loans

Credit unions are often more flexible than traditional banks when it comes to credit requirements. If you’re a member of a credit union, inquire about their personal loan options for those with poor credit.

4. Peer-to-Peer Loans

Peer-to-peer lending platforms like Prosper and Peerform connect borrowers directly with individual lenders. While most have minimum credit score requirements above 520, some investors may be willing to take a chance on a borrower with a compelling reason for needing a loan.

5. Payday Alternative Loans (PALs)

Some federal credit unions offer payday alternative loans, which are small, short-term loans designed to help borrowers avoid predatory payday lenders. PALs often have more lenient credit requirements.

Tips for Improving Your Chances of Approval

When applying for a personal loan with a 520 credit score, consider these strategies to increase your odds of approval:

Add a co-signer: Having a co-signer with better credit can significantly improve your chances of approval and potentially secure a lower interest rate.
Offer collateral: As mentioned earlier, securing your loan with an asset can make lenders more comfortable working with a lower credit score.
Improve your debt-to-income ratio: Paying down existing debts or increasing your income can make you appear less risky to lenders.
Explain extenuating circumstances: If your credit score was impacted by a one-time event like a medical emergency, explaining this to lenders may help your case.
Shop around: Different lenders have different criteria, so don’t give up if you’re rejected by one. Use a loan comparison site to explore multiple options.

Alternatives to Personal Loans

If you’re unable to qualify for a personal loan with a 520 credit score, consider these alternatives:

1. Credit Card for Bad Credit

While not ideal for large expenses, a secured credit card or credit card designed for bad credit could help you build credit and provide a small line of credit for emergencies.

2. Home Equity Line of Credit (HELOC)

If you own a home with equity, you may be able to qualify for a HELOC even with poor credit, as your home serves as collateral.

3. Borrowing from Family or Friends

While this can be risky for personal relationships, borrowing from someone you know may be an option if you’re unable to qualify for a traditional loan.

Rebuilding Your Credit

While seeking a loan, it’s crucial to work on improving your credit score to expand your future borrowing options. Here are some strategies to rebuild your credit:

Make all payments on time: Payment history is the most significant factor in your credit score.
Reduce credit utilization: Try to use less than 30% of your available credit limits.
Become an authorized user: Ask a family member with good credit to add you as an authorized user on their credit card.
Use a secured credit card: These cards require a deposit but can help you build positive payment history.
Check your credit report: Dispute any errors you find to potentially boost your score.

According to Experian, consistent positive credit behaviors can start to improve your score in as little as a few months, though significant changes may take longer.

Understanding the Costs of Bad Credit Loans

It’s important to be aware that personal loans for borrowers with a 520 credit score will come with higher costs. Here’s a comparison of potential rates:

Credit Score Range	Average Personal Loan APR
720+	10-12%
690-719	13-15%
630-689	17-19%
300-629	28-32% or higher

With a 520 credit score, you can expect to pay towards the higher end of the 28-32% APR range, or potentially even more. This makes it crucial to borrow only what you absolutely need and to have a solid repayment plan in place.

While getting a personal loan with a 520 credit score is challenging, it’s not impossible. By exploring options like bad credit lenders, secured loans, and credit union offerings, you may be able to find a loan that meets your needs. However, it’s crucial to carefully consider the high costs associated with these loans and to have a solid plan for repayment.

In the long term, focusing on rebuilding your credit score will open up more favorable borrowing options. The Consumer Financial Protection Bureau offers additional guidance on rebuilding credit and making informed financial decisions.

Remember, while a personal loan can provide needed funds in the short term, it’s important to address the underlying factors that led to a low credit score to improve your overall financial health.