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How to get the best deal on a personal loan

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Getting the best deal on a personal loan usually comes down to one thing: APR. The interest rate equals your “cost of credit”. In other words, how much you’re going to pay to borrow this money.

When you take out a personal loan, your goal is to pay as little as possible. That means finding the lowest APR available to someone with your credit score and income. Here’s how:

  1. Never accept your first loan offer; always get two or more quotes.
  2. If your quoted rates are too high, try again next month (or even tomorrow).
  3. Choose the shortest repayment term you can afford.
  4. Refinance your loan if rates go down.

Money Under 30 has been reporting on financial services and credit products since 2006, and our editors vigorously analyze every product we recommend to ensure it’s trustworthy and secure.

Current personal loan rates can be as low as 5.50% for extremely well-qualified borrowers. That said, most borrowers can expect interest rates between 15% and 29% APR on unsecured personal loans.

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Which banks have the best personal loan rates?

The following lending partners offer some of the best interest rates on unsecured personal loans today. Keep in mind, your actual interest rate will depend upon your credit history. Check you rate now with no impact on your credit score.

What are personal loans good for?

Personal loans are ideal for debt consolidation or financing a large purchase such as a vacation, home renovation or medical expenses.

Unlike credit cards, personal loans typically have fixed interest rates and fixed monthly payments. That makes them perfect for credit card consolidation because you can usually save money on interest and pay off your debt faster.

Ultimately, you can use personal loan funds for any reason. Although the most popular reason to get a personal loan is, by far, consolidating debt, some people use personal loans to start a business or even buy a car, motorcycle or boat.

How do personal loans work?

When you’re approved for a personal loan, the lender will deposit all of the loan funds in your bank account or mail you a check. (For example, if you get a $30,000 personal loan, you’ll receive a direct deposit or check for $30,000). You can then use the loan funds for any purpose.

Your lender will notify you of your first payment due date, which is usually about a month after you originate the loan. As with any loan, you’ll be responsible for making a monthly payment by the due date each and every month until the loan is paid off. Your monthly payment will be the same each month, but as you pay down your personal loan, the amount of your payment that is applied to the loan principal will gradually increase.

The best personal loans have no prepayment penalty, which means you can pay off the loan, in full, at any time if you wish. Doing so will save you money in interest.

Some personal loans charge origination fees. Such origination fees could be a fixed dollar amount or a percentage of the loan amount — often between 1 and 2%. The origination fees will be added to the balance of your loan and taken out of your monthly payments.

Unsecured loans are attractive because, unlike auto loans or a mortgage, they are not secured by any asset. If the worst case occurs and you find yourself unable to repay your loan, the lender will asset late payment fees and report your lack of payment to the credit bureaus, which will negatively affect your credit score. Personal loan lenders may also take you to court in an attempt to win a judgement against you. But they cannot, for example, repossess your car or foreclose on your home just because you didn’t pay. That’s what having an “unsecured” loan is all about.

How to use personal loans for debt consolidation

Debt consolidation is one of the most popular reasons people take out personal loans.

Let’s say you owe $25,000 on three different credit cards that each have an annual percentage rate of 26%. Personal loan interest rates tend to lower than the annual percentage rate on credit cards. If you can get approved for a debt consolidation loan at 18%, you could save over $7,000 in interest over a 5 year loan term and reduce the monthly payment required to pay off your debt by $110 a month. (See for yourself with our loan calculator).

Another great reason to use a personal loan for debt consolidation is to simplify your monthly finances. Instead of keeping track of three different credit card payments, you can now just make a single debt consolidation loan payment each month.

Other unsecured personal loan lenders

One benefit of having a good or excellent credit score is the ability to obtain unsecured personal loans at reasonable interest rates. Using a personal loan instead of a credit card to finance a large purchase or consolidate debt can save you thousands in interest. (Although it’s possible to get personal loans with bad credit, the interest rates are much higher and it may be more difficult to get approved.)

The best loan rate you can qualify for is unique to every borrower. It depends upon your credit history, income, loan purpose, as well as today’s market interest rate. It could even depend on how many loans the lender has issued today and how badly (or not) they want to issue more!

So then, the best way to ensure you’re getting the best personal loan rate possible is to use a loan aggregator that per-qualifies you with multiple lenders. To use an aggregator, you’ll need to enter a bit of personal information about yourself and the reason you want a loan. But getting per-qualified is 1) free, 2) will not impact your credit and 3) creates zero obligation for you to apply for a loan.

Check your personal loan rates now with Money Under 30. We pull loan offers from as many as 30 banks and lenders, without impacting your credit score. Plus, depending on the lender and your loan terms, you could take as long as 12 to 144 months to pay off a loan. This can be a helpful option for people who need to borrow a large amount and keep monthly payments affordable.

As an alternative, Credible is a loan aggregator with a slightly smaller loan range, from $600 to $200,000. You can see all of the lenders available on the platform without even entering any personal information. 

One of the reasons Credible stands out is their Best Rate Guarantee — a current show of confidence in the lenders offered through the Credible website. Close with a better rate than you prequalify for on Credible and get a $200 gift card. Terms Apply.

Who are some of the best personal loan lenders?

The best online lenders offer competitive interest rates and offer easy underwriting processes to enable you to get your loan proceeds as quickly as possible.

SoFi

SoFi uses a variety of factors to approve loans, including your financial history, credit score, and monthly income vs. expenses. If you have a good debt-to-income ratio, you could qualify for a better rate than you’d get with a lender that uses credit scores alone. There’s also an autopay discount on your rate. And if you ever lose your job, you can pause your payments and get help from SoFi finding your next gig.

Lightstream

Lightstream is an online lender known for some of the absolutely lowest personal loan rates for borrowers with the best credit scores.

OneMain

OneMain’s online application process is simple and easy, but the lender really stands out by offering (and requiring) an in-person element to the approval process. You must visit a branch and speak to a loan specialist before getting funded. Also, note that OneMain personal loans do require collateral.

Peer-to-peer (P2P) lenders

The loans you get from these sources will often have higher interest rates and fees than what you’ll pay at a bank or credit union. But they still have certain advantages. For example, you can get a personal loan of up to $40,000 for any purpose. In addition, the loans are completely unsecured.

They can be particularly beneficial with large medical debts. But one area of special consideration is business financing. It can be difficult to get a loan for a business of any type. But if you’re trying to launch a new business, it will be virtually impossible to get one from a bank or credit union. Since P2P personal loans are made for any and all purposes, they can be a perfect source for new business financing.

LendingClub

LendingClub lets you borrow up to $40,000 with a fixed rate and monthly payments. It takes just a few minutes to apply and receive an offer. Then your loan will be posted to have investors fund it and you’ll get money in your bank account within a few days.

Prosper

Prosper lets you apply to borrow between $2,000 and $40,000. In order to qualify, you’ll need at least three existing credit lines on your credit report. However, there is some wiggle room on your actual credit score, with the minimum being 640. Of course, you’ll need a higher score in order to qualify for the best rates and higher loan amounts.

Best personal loans FAQ

What is the most I can borrow with an unsecured loan?

Some of our lending partners offer unsecured personal loans for up to $100,000 depending on your ability to repay. Most personal loan amounts, however, range from a few thousand dollars up to $50,000.

What is a good rate on a personal loan right now?

As of September 2023, a the best personal loan rates can be as low as 5.50% for extremely well-qualified borrowers. Most customers — even those with excellent credit — can expect a much higher interest rate on an unsecured loan. The interest rate range for borrowers with good credit is between 7 and 29%. Unfortunately rates for borrowers with average or poor credit can be even higher — we don’t recommend borrowing money at such high interest rates.

What is the best way to get an unsecured personal loan?

The best way to get an unsecured personal loan is to check your personalized interest rates from a variety of lenders. This will ensure you’re getting the best rate for you. Because it uses a soft credit check, there won’t be any impact on your credit score unless you decide to apply for the loan.

Unfortunately, many banks make it difficult to apply for a personal loan directly from their website. What’s more, if you do apply for a loan directly with a single bank or lender, you may receive an interest rate that’s much higher than you could qualify for elsewhere.

What type of personal loan is easiest to get approved for?

The easiest personal loans to get approved for are secured loans or high-interest loans.

With a secured personal loan, you need to have cash in a bank account equal to the loan amount that “secures” the loan. Although secured loans are not helpful when you need extra cash, they can be helpful if you have bad credit and are looking for a low-risk way to improve your credit score. Learn more about SELF, a recommended secured loan lender.

High-interest personal loans cater to borrowers on the lower end of the credit score range. They will generally be easier to get approved for, but may only offer loan amounts of under $10,000 and may charge interest rates as high as 150%. We do not recommend such loans.

Personal loan alternatives

While the best personal loans are a great choice for consolidating credit card debt or financing a large purchase, a personal loan may not be the best product in all situations. Sometimes, an alternative loan may offer a lower interest rate or be a better fit for your needs.

Personal loans vs. home equity loans

A home equity loan or home equity line of credit (HELOC) uses your home as collateral. As a result, borrowing against your home equity can often get you a lower interest rate than you could with a personal loan. You may also be able to secure a higher loan amount or longer loan term, depending on how much equity you have in your home.

While both home equity loans and HELOCs will offer lower interest rates and higher loan amounts than personal loans, a HELOC has the distinct advantage of being a revolving line of credit that you can borrow against more than once (similar to a credit card).

Personal loans vs. auto loans

Like home equity loans, car loans (or boat, motorcycle or RV loans) are secured; the car you purchase serves as a collateral for the loan and can be repossessed if you default. Like all secured loans, the interest rate on car loans may be much less than it is on a personal loan.

Car loans may also have a lower minimum credit score requirement than personal loans. So you may be able to be approved for a car loan when your credit profile isn’t good enough to get a personal loan. The only time you might have trouble is if your credit profile shows specific problems with a current auto loan, or if your income is insufficient to qualify for the loan agreement.

Personal loans vs credit cards

Personal loans have a number of advantages compared to credit cards, but it’s important to understand when a credit card may serve your needs better.

In general, the annual percentage rate on a personal loan will be less than the APR on a credit card, even for someone with the same credit history. You may also be able to get a higher loan amount on a personal loan than the credit limit on a credit card.

But, remember, when you get a personal loan, the loan funds are deposited into your bank account on day one and you will have a fixed monthly payment. There’s no flexibility to either increase your loan amount or reduce your monthly payment, even once. With a credit card, you can make smaller monthly payments if you need to or access additional funds up to your credit limit.

Although it’s possible to use a balance transfer credit card for debt consolidation, it may not be the best idea. While you may be able to find. credit card with a 0% APR for a year or more, the annual percentage rate after the intro period will almost certainly be higher than the interest rate on a personal loan. In addition, opening more credit cards may create a temptation to borrow more money against the credit card — something you can’t do with a personal loan — once the loan amount is paid out and you begin making loan payments, you cannot take more money out of that personal loan without applying for another loan.

Credit requirements for the best personal loans

The best personal loans typically require excellent credit, proof of consistent income, and a low debt to income ratio. What does that mean?

Excellent credit is defined as a credit score of 750 or above. If your score is above 800, even better.

Personal loan lenders often want to see at least two years of income from the same employer. It’s not a deal breaker if you’ve been working for less than two years or recently switched jobs, but it may result in a higher interest rate.

Finally, a good debt to income ratio is an important factor to qualify for the best personal loans. The total amount of your monthly debt payments should be less than 35% of your monthly pre-tax income, although the lower, the better.

To get a personal loan, you’ll likely need to provide the lender with the following:

  • Your most recent pay stub and W-2(s) to document your income.
  • Evidence of Social Security or pension income (award letter or 1099).
  • Contact information for your employer (the lender will verify your employment directly).
  • Copies of completed income tax returns for the past two years, if you’re self-employed or work on commission.
  • If you’re paying or receiving child support or alimony, list the amount you’re paying or receiving.
  • Bank or brokerage statements, or even retirement account statements.
  • Written explanations for late payments or other credit problems that may show up on your credit report.

Can you get a personal loan with fair credit?

The best personal loans require good credit, but it may be possible to qualify for a personal loan with fair credit, too.

The minimum credit score to get a personal loan varies by lender. Some lenders require at least a 700 credit score, some will work with applicants with scores above 650, and a few online lenders will approve applicants with less than a 650 credit score but only for lower loan amounts.

Secured personal loans are always an option for borrowers with fair credit or bad credit, but won’t be all that helpful because they can’t serve as debt consolidation loans or help you finance a purchase that you don’t already have the cash for. If you don’t have a good credit score, the best thing to do is to focus on improving your low credit score by making timely payments on your existing account, paying down existing debt and avoid applying for new credit for 1-2 years.

Summary

The best personal loans offer reasonable interest rates and large loan amounts that can be used for debt consolidation or a large purchase. Banks and credit unions offer personal loans, but your chances of getting the best personal loan rate increases dramatically if you compare personal loan options from online lenders first. Doing this won’t affect your credit (it uses s soft credit check) and you’ll be under no obligation to apply or take the loan.

» Check your personal loan rates now.

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