How To Get A Good Interest Rate For A Personal Loan
Interest rates are rising as the Federal Reserve tries to fight record-high inflation. The central bank is doing this so it can make lending more expensive and try to slow down the economy, hopefully without sending it into recession.
However, rising interest rates mean that borrowing is now more expensive and less desirable compared to the record high demand since the pandemic began.
But can you still get a reasonable interest rate on a personal loan?
Select examines how to get the best possible interest rate on all loans going forward and how to improve interest rates on your current outstanding loans.
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How to get a low interest rate on a personal loan
The average interest rate on a 24-month personal loan is 8.73% according to the latest data Federal Reserve data. However, that average rate has fallen since 2018, when it was 10.32%. It’s also important to remember that these are just average prices. There are currently personal loans with annual percentage rates below 4%.
Here are the three main components to getting the best interest rate possible.
1. A good credit history
Getting the best interest rate on a personal loan is no secret – the better your credit score, the more likely you are to get a better interest rate. You usually need to have very good or excellent credit (740 and above) to qualify for the lowest interest rates. Also, a higher score can give you other benefits like a longer repayment period and a larger loan.
However, don’t let a less-than-perfect credit rating discourage you from applying. Even if you don’t have great credit, there are still ways to get a personal loan with a great interest rate. There are other factors that lenders consider to determine what you may qualify for, such as: B. Your work experience and educational background. In fact, there are personal loans specifically designed for people with bad credit, including:
Outstanding Personal Loans
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Annual Percentage Rate (APR)
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loan purpose
Debt consolidation, credit card refinance, wedding, relocation, or medical care
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loan amounts
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conditions
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credit needed
FICO or Vantage score of 600 (but will accept applicants with insufficient credit history to have a credit score)
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incorporation fee
0% to 8% of the target amount
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Penalty for Early Payout
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late fee
The greater of 5% of the monthly amount past due or $15
OneMain Financial personal loans
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Annual Percentage Rate (APR)
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loan purpose
Debt consolidation, big spend, emergency expenses
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loan amounts
-
conditions
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credit needed
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incorporation fee
Flat fee from $25 to $1,000 or percentage between 1% and 10% (depending on your state)
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Penalty for Early Payout
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late fee
Up to $30 per late payment or up to 15% (depending on your state)
If you’re unsure of your credit score, you can sign up for a credit monitoring service such as Chase Credit Journey or Capital One’s CreditWise®.
2. Your professional history
The second part is the work history. The lender will likely ask for an employment history to prove you have the funds to pay off the debt. To prove this, you will likely need to get a letter from your manager or Human Resources. Although it’s more difficult, it’s still possible to get a personal loan when you’re unemployed.
3. Verifiable income
Finally, you need some sort of verifiable income. Similar to employment history, the lender wants to see your current income to ensure you can make the loan’s monthly payments. This is especially useful if you’re still working on improving your credit score. Again, it might be a bit trickier, but you can still get a personal loan approved if you’re self-employed and have a fickle income.
Compare offers to find the best interest rate
As with anything else, you need to shop around to get the best deal and credit terms. So if you are looking for a personal loan to pay off credit card debt, Are you starting to renovate your home or just need some breathing space – it’s best to start by looking around to see what your needs are.
Even if you don’t need the money for several months, it’s useful to know what the installments are and how much your monthly payment will be to pay off the debt.
If a personal loan is in your future, consider our top lender picks:
LightStream Personal Loan
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Annual Percentage Rate (APR)
3.99% to 19.99%* when you sign up for Autopay
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loan purpose
Debt Consolidation, Home Improvement, Auto Financing, Medical Expense, Wedding and others
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loan amounts
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conditions
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credit needed
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incorporation fee
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Penalty for Early Payout
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late fee
Marcus of Goldman Sachs personal loans
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Annual Percentage Rate (APR)
6.99% to 24.99% APR when you sign up for Autopay
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loan purpose
Debt Consolidation, Home Improvement, Wedding, Moving and Moving or Vacation
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loan amounts
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conditions
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credit needed
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incorporation fee
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Penalty for Early Payout
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late fee
SoFi Personal Loans
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Annual Percentage Rate (APR)
7.99% to 23.43% if you sign up for Autopay
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loan purpose
Debt consolidation/refinance, home improvement, relocation assistance, or medical expenses
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loan amounts
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conditions
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credit needed
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incorporation fee
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Penalty for Early Payout
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late fee
Select also has a comparison tool and loan marketplace that allows you to easily review different loan offers. You’ll need to answer a handful of questions and Even Financial will find the best deals for you. The service is free, secure and will not affect your credit score.
This tool is provided and operated by Even Financial, a search and comparison engine that matches you with third party lenders. Any information you provide is provided directly to Even Financial and it may use that information in accordance with its own Privacy Policy and Terms of Use. By submitting your information, you agree to receive emails from Even. Select does not control and is not responsible for the policies or practices of third parties, nor does Select have access to the information you provide. Select may receive an affiliate commission from affiliate offers in the Even Financial Tool. The commission does not affect the selection in the order of offers.
bottom line
Personal loans are a solid option for consumers to pay down debt or even make ends meet during a crisis unexpected job loss.
However, before you apply, you should have a good understanding of the terms of the loan, including the interest rate, whether it is fixed or variable APR, and how long you have to repay the loan in full.
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Editorial note: Any opinion, analysis, review, or recommendation expressed in this article is solely that of Select’s editorial team and has not been reviewed, approved, or otherwise endorsed by any third party.