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Personal loans are a type of installment credit where the borrower receives a lump-sum payment and then repays the loan in monthly installments over the duration of the loan. The best personal loan interest rates currently range from about 3 percent to 36 percent. The actual rate you receive depends on multiple factors, such as your credit score, annual income and debt-to-income ratio. To find the best personal loan for your financial situation, compare personal loan rates from multiple lenders.
5 easy steps to apply for a personal loan
Being knowledgeable about your financial situation and researching lenders can help you find the best loan for your needs. Here are six steps for getting a personal loan:
Determine how much you need. Calculate how much money you need, and actor in any origination fees that may be deducted from your loan proceeds.
Check your credit score. The higher your credit score, the better APR you'll receive. Consider a co-signer if you have fair or bad credit for more favorable rates.
Get prequalified. This lets you check your rates with multiple lenders without hurting your credit score.
Compare rates and loan terms. Look at a variety of lenders, including banks, credit unions and online lenders, to see which offers you the best deal.
Complete the application process. You’ll need to submit documents such as pay stubs, tax returns and personal identification.
Methodology
To select the top personal loan lenders, Bankrate considered factors that help consumers decide whether a lender is a good fit for them, such as credit requirements and minimum APRs. We sought lenders with low fees and a range of loan amounts for borrowers with varying budgets and credit profiles. We also looked for conveniences like online applications and fast funding.
In addition, the lenders featured here were evaluated for notable features like customer discounts and flexible repayment options.
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Filters
Check Your Personal Loan Rates
Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.
We guarantee your best-funded loan experience ever
*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are .50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment example: Monthly payments for a $25,000 loan at 5.74% APR with a term of 12 years would result in 144 monthly payments of $240.61. Truist Bank is an Equal Housing Lender. Copyright 2021 Truist Financial Corporation. SunTrust, Truist, LightStream, the LightStream logo, and the SunTrust logo are service marks of Truist Financial Corporation. All other trademarks are the property of their respective owners. Lending services provided by Truist Bank.
Personal loans up to $50,000 with low fixed rates that will never change
Affordable monthly payments that fit your budget and no prepayment penalties
Fast funding, money is sent to your bank account within a day of clearing any verifications
No obligation and no impact to your credit score when you check your rate
Use your loan through Upgrade to pay on high interest credit cards, make a large purchase, finish that home improvement project, or almost any life event!
Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's lending partners. Information on Upgrade's lending partners can be found at https://www.upgrade.com/lending-partners/.
**Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds sent directly to you should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor.
Get a personal loan up to $50,000 with a fixed APR from 4.99% to 29.99%,Get money in as little as one business day, upon approval and verification,Join more than 450,000 customers at a trusted company with an A+ BBB rating,Use it for almost anything: consolidate debt or other unexpected expenses
DISCLOSURE UPDATE AS OF 07.2021
Trustpilot TrustScore as of June 2020.
Best Egg personal loans, including the Best Egg Secured Loan, are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender or Blue Ridge Bank, a Nationally Chartered Bank, Member FDIC, Equal Housing Lender. "Best Egg" is a trademark of Marlette Holdings, Inc., a Delaware corporation. All uses of "Best Egg" refer to "the Best Egg personal loan", "the Best Egg Secured Loan", and/or "Best Egg on behalf of Cross River Bank or Blue Ridge Bank, as originator of the Best Egg personal loan," as applicable.
The term, amount, and APR of any loan we offer to you will depend on your credit score, income, debt payment obligations, loan amount, credit history and other factors. Your loan agreement will contain specific terms and conditions. About half of our customers get their money the next day. After successful verification, your money can be deposited in your bank account within 1-3 business days. The timing of available funds upon loan approval may vary depending upon your bank's policies. Loan amounts range from $2,000 - $50,000. Residents of Massachusetts have a minimum loan amount of $6,500; New Mexico and Ohio, $5,000; and Georgia, $3,000. For a second Best Egg loan, your total existing Best Egg loan balances cannot exceed $50,000. Annual Percentage Rates (APRs) range from 4.99% - 35.99%. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0.99% - 5.99% of your loan amount, which will be deducted from any loan proceeds you receive. The origination fee on a loan term 4-years or longer will be at least 4.99%. Your loan term will impact your APR, which may be higher than our lowest advertised rate.
You need a minimum 700 FICO® score and a minimum individual annual income of $100,000 to qualify for our lowest APR. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.
Low fixed rates (with AutoPay) and no origination fees
Checking your rate will not affect your credit score
Simple online application and live customer support
Fixed rates from 5.99% APR to 19.63% APR (with AutoPay). SoFi rate ranges are current as of July 30, 2021 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
Personal loans from $500-$50,000,Low fixed rates,Terms up to 60 months,No origination or hidden fees
Federally Insured by NCUA. *Annual Percentage Rate (APR) effective 08/27/2021 and subject to change. To receive any advertising product, you must become a member of PenFed Credit Union.
No Fees. Ever. We don't deduct a sign-up fee from your loan amount.
Loans from $3,500 to $40,000 and fixed rates from 6.99% to 19.99% APR. Only the most creditworthy applications qualify for the largest loan amounts and lowest rates.
Discount when enrolled in Autopay
You may be required to have some of your funds sent directly to creditors to pay down certain types of unsecured debt
Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. The availability of a loan offer and the terms of your actual offer will vary due to a number of factors, including your loan purpose and our evaluation of your creditworthiness. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans). Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.
Receive an APR reduction when you enroll in AutoPay. This reduction will not be applied if AutoPay is not in effect. When enrolled, a larger portion of your monthly payment will be applied to your principal loan amount and less interest will accrue on your loan, which may result in a smaller final payment. See loan agreement for details.
Join America's largest personal loan marketplace with over 3 million members
Choose the most experienced personal loan company that has helped issue over $50 billion in loans since 2007
Get fixed monthly payments with no prepayment penalties
Take control of your debt and circle the date your loan will be paid off
Select your offer and verify your information so LendingClub can look for your investors. If your loan is funded, you could have your money in just a few days!
A representative example of loan payment terms is as follows: you receive a loan of $13,411 for a term of 36 months, with an interest rate of 12.16% and a 5.30% origination fee of $711, for an APR of 15.99%. In this example, you will receive $12,700 and will make 36 monthly payments of $446.46. Loan amounts range from $1,000 to $40,000 and loan term lengths are 36 months or 60 months. Some amounts and term lengths may be unavailable in certain states. APR ranges from 7.04% to 35.89% and is determined at the time of application. Origination fee ranges from 3% to 6% of the loan amount. Lowest APR is available to borrowers with excellent credit. Advertised rates are subject to change without notice.
Loans are made by LendingClub Bank, N.A., Member FDIC ("LendingClub Bank"), a wholly-owned subsidiary of LendingClub Corporation, NMLS ID 167439. Loans are subject to credit approval and sufficient investor commitment before they can be funded or issued. Certain information that we subsequently obtain as part of the application process (including but not limited to information in your consumer report, your income, the loan amount that your request, the purpose of your loan, and qualifying debt) will be considered and could affect your ability to obtain a loan from us. Loan closing is contingent on accepting all required agreements and disclosures at Lendingclub.com. "LendingClub" is a trademark of LendingClub Bank.
9 out of 10 customers would recommend Prosper to friends or family*
Co-borrower option available. Applying with a co-borrower could help improve your rates
Get your money in as few as 3 business days, your monthly payment stays the same
For example, a three-year $10,000 personal loan would have an interest rate of 11.74% and a 5.00% origination fee for an annual percentage rate (APR) of 15.34% APR. You would receive $9,500 and make 36 scheduled monthly payments of $330.90. A five-year $10,000 personal loan would have an interest rate of 11.99% and a 5.00% origination fee with a 14.27% APR. You would receive $9,500 and make 60 scheduled monthly payments of $222.39. Origination fees vary between 2.41%-5%. Personal loan APRs through Prosper range from 7.95% to 35.99%, with the lowest rates for the most creditworthy borrowers.
Eligibility for personal loans up to $40,000 depends on the information provided by the applicant in the application form. Eligibility for personal loans is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All personal loans made by WebBank, Member FDIC.
Competitive rates from 9.95% - 35.99% APR and terms from 24 to 60 months
Checking your loan options has no impact to your credit score.
Fast Decisions, see your loan options in minutes
Funding as soon as next business day
*A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33. Minimum loan amounts may vary by state. If approved, the actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. An administration fee of up to 4.75% will be deducted from the loan proceeds. Avant branded credit products are issued by Webbank, member FDIC.
Stilt is a mission-driven fintech company focused on providing credit to international students, immigrants and the underserved. We build products to improve financial inclusion and democratize access to the credit through providing accessible and reasonable personal loans.
Immigrants, international students, other visa
holders and those underserved by the traditional banking system often encounter many struggles while trying to build credit, apply for personal loans and build their financial future. Stilt’s services allow them to take a step forward in their path to financial health by applying for a personal loan with a unique qualifying process like Stilt’s.
Stilt is focused on improving financial inclusion and access to credit at reasonable rates.
Stilt loans are originated by Stilt Inc., NMLS#1641523. Terms and conditions apply. To qualify for a Stilt loan you must reside in an eligible state and meet Stilt’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have excellent credit, a responsible financial history and meet other conditions Stilt requires. Rates and terms are subject to change at anytime without notice and are subject to state restrictions. Not all amounts and rates are available in all states. To check rates and terms Stilt may be able offer you a soft credit inquiry that will be made. This soft inquiry will not affect your credit score. However, if you choose to accept a Stilt loan offer, a hard inquiry from one or more of the consumer reporting agencies will be required. A hard inquiry may affect your credit score. There will be an origination fee charged for the loans for up to 8% of the loan amount. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, repayment ability, income and other factors. All applications are subject to additional terms and conditions. If you could receive a $10,000 loan with a term of 18 months with an APR of 13.00%, the monthly payment will be $614.48. No down payment is required. The minimum loan amount in $6,001 in MA, $3,001 in GA and $10,001 in CA.
Take just two minutes to answer questions about yourself and the loan you need. This service is free, and it won't affect your credit score.
2
Compare your offers
Get prequalified and compare loan or other product offers based on the things that matter to you, like APR and monthly payments.
3
Lock in your rate
Choose a lender and visit its website to complete the application process. If you're approved, you could get cash in your account as soon as the next day.
The Bankrate guide to choosing the best personal loan
Why trust Bankrate?
At Bankrate, our mission is to empower you to make smarter financial decisions. We’ve been comparing and surveying financial institutions for more than 40 years to help you find the right products for your situation. Our award-winning editorial team follows strict guidelines to ensure the content is not influenced by advertisers. Additionally, our content is thoroughly reported and vigorously edited to ensure accuracy.
When shopping for a personal loan, compare APRs across multiple lenders to make sure you’re getting a competitive rate. Also look for lenders that keep fees to a minimum and offer repayment terms that fit your needs. Loan details presented here are current as of the publication date. Check the lenders’ websites for more current information. The personal loan lenders listed here are selected based on factors such as APR, loan amounts, fees and credit requirements.
Why SoFi is the best overall personal loan: SoFi offers a wide range of benefits that go beyond just funding your personal loan, including an autopay discount and unemployment protection in case you lose your job and need to pause payments on your loan.
LightStream: Best loans for generous repayment terms
Why LightStream is the best personal loan for generous repayment terms: Its loan terms range from two to seven years for most loans (and up to 12 years for loans for home improvement, swimming pools and solar energy systems), which means you can take longer to pay off your loan and benefit from lower monthly payments.
Lender
LightStream
Bankrate Rating
4.6 / 5.0
Min. Credit Score
Not specified
Est. APR
2.49%–19.99% (with autopay)
Loan Amount
$5,000–$100,000
Term Lengths
2 to 12 years
Min. Annual Income
Not specified
Fees
None
Additional Requirements
Several years of credit history with multiple types of credit; Payment history with few delinquencies; Retirement savings, investments or other savings showing the ability to save money
Why Avant is the best personal loan for people with bad credit: Avant specializes in lending to people with fair or poor credit. Most of its customers have credit scores between 600 and 700.
Lender
Avant
Bankrate Rating
4.5 / 5.0
Min. Credit Score
580 FICO and 550 Vantage
Est. APR
9.95%–35.99%
Loan Amount
$2,000–$35,000
Term Lengths
2 to 5 years
Min. Annual Income
Not specified
Fees
Administration fee: up to 4.75%; Late fee: $25; Dishonored payment fee: $15
Why Marcus by Goldman Sachs is the best personal loan for debt consolidation: Marcus specializes in debt consolidation loans with broad loan amounts and a relatively low APR cap of 19.99 percent. With a debt consolidation loan, you borrow money with one loan to pay off many smaller loans or credit cards that were charging much higher interest rates.
Why Best Egg is the best personal loan for low APRs: Best Egg’s interest rates start as low as 4.99 percent APR for those with the best credit. At 35.99 percent, its rate cap is roughly 6 percentage points lower than that of some lenders profiled on this page.
Lender
Best Egg
Bankrate Rating
4.6 / 5.0
Min. Credit Score
640
Est. APR
5.99%–29.99%
Loan Amount
$2,000–$50,000
Term Lengths
3 to 5 years
Min. Annual Income
Not specified
Fees
Origination fee: 0.99% to 5.99% of the loan amount; Late fee: $15; Returned payment fee: $15
Why Payoff is the best personal loan for paying credit card debt: While the average rate for credit cards currently hovers around 16 percent, Payoff loans start at 5.99 percent, which could save borrowers money on interest and help them get out of debt faster.
Lender
Payoff
Bankrate Rating
4.5 / 5.0
Min. Credit Score
640
Est. APR
5.99%–24.99%
Loan Amount
$5,000–$40,000
Term Lengths
2 to 5 years
Min. Annual Income
Not specified
Fees
Origination fee: 0% to 5%
Additional requirements
Minimum three years of credit history; at least two open credit accounts; no bankruptcies within last two years; zero credit delinquencies
Why Upstart is the best personal loan for little credit history: While Upstart has minimum credit score requirements, it evaluates more than just your credit score when you apply. The lender looks at your education, your job history and some credit score factors when determining your eligibility.
Lender
Upstart
Bankrate Rating
4.5 / 5.0
Min. Credit Score
600
Est. APR
6.76%–35.99%
Loan Amount
$1,000–$50,000
Term Lengths
3 to 5 years
Min. Annual Income
$12,000
Fees
Late fee: greater of 5% of monthly amount past due or $15; Origination fee: up to 8%; Returned check fee: $15; One-time paper copies fee: $10
Why LendingClub is the best personal loan for using a co-borrower: If you’re struggling to find a lender that will let you borrow, you might need to enlist the help of a co-borrower. Not every lender offers the option to do this, but LendingClub lets you submit a joint application to help you qualify for a loan or get a better interest rate.
Lender Partner
LendingClub
Bankrate Rating
4.3 / 5.0
Min. Credit Score
600
Est. APR
7.04%–35.89%
Loan Amount
$1,000–$40,000
Term Lengths
3 to 5 years
Min. Annual Income
Not specified
Fees
Origination fee: 3% to 6%; Late fee: greater of 5% or $15
Why PenFed is the best personal loan for small loan amounts: You can get a PenFed personal loan for as little as $600, which is ideal if you don’t need a lot of cash and don’t want to incur much debt.
Lender
PenFed
Min. Credit Score
Not specified by the lender, but individuals report at least 600
Why TD Bank is the best personal loan for few fees: TD Bank charges only one fee: a late payment fee of 5 percent of the minimum payment due or $10, whichever is less. It doesn't have any origination fees, monthly fees, annual fees, prepayment fees or insufficient funds fees.
Lender
TD Bank
Bankrate Rating
4.9 / 5.0
Min. Credit Score
None
Est. APR
6.99%–21.99%
Loan Amount
$2,000–$50,000
Term Lengths
3 to 5 years
Min. Annual Income
Not specified
Fees
Late fee: 5% of minimum payment due or $10, whichever is less
Why PNC Bank is the best personal loan for in-person banking: Sometimes you just need to see someone face-to-face. PNC Bank has nearly 2,300 locations across 23 states and Washington, D.C., making it a good choice for people who prefer in-person banking.
Personal loans are short-term loans that consumers can receive from banks, credit unions or private lenders like online marketplace lenders and peer-to-peer lenders. The loan funds can be used for just about any purpose, such as paying off other debt, financing a home renovation or paying for family needs, like a wedding or adoption. A personal loan is repaid in monthly installments, similar to a car loan or home mortgage, with loan terms ranging from 24 months to 60 months or even longer. Personal loans are typically unsecured, meaning they are not backed by collateral such as a car, house or other assets.
If you need cash fast, these loans are a good choice because the approval and funding process is often faster than that of a home equity line of credit, which lets you borrow funds as you need them rather than in a lump sum.
What are current personal loan interest rates?
Personal loan interest rates currently range from about 3 percent to 36 percent, depending on your credit score. As of September 8, 2021, the average personal loan interest rate is 10.46 percent.
The better your credit score, the more likely you are to qualify for a personal loan with the lowest interest rate available. Compare personal loan offers to see what you are eligible for before applying for a personal loan.
Average personal loan interest rates by credit rating
Average personal loan interest rates range from 10.3 percent to 12.5 percent for “excellent” credit scores of 720 to 850, 13.5 percent to 15.5 percent for "good" credit scores of 690 to 719, 17.8 percent to 19.9 percent for "average" credit scores of 630 to 689 and 28.5 percent to 32.0 percent for “poor” credit scores of 300 to 629.
Credit Band
Credit Score Range
Average Personal Loan Interest Rate
Excellent Credit
720–850
10.3%–12.5%
Good Credit
690–719
13.5%–15.5%
Average Credit
630–689
17.8%–19.9%
Bad Credit
300–629
28.5%–32.0%
Excellent-credit loans
Excellent-credit loans are loans that are geared toward borrowers with excellent credit, typically with credit scores between 720 and 850. Having such a high credit score can come with many benefits, including average APRs as low as 10.3 percent — though some lenders go even lower. If your credit score falls into this range, look for excellent-credit lenders with low advertised rates and few fees.
Good-credit loans
Good-credit loans offer competitive interest rates and generally low fees. You're considered to have good credit if you have a credit score between 690 and 719, and with such a high score, you may qualify for average APRs as low as 13.5 percent. However, if you have good credit and are interested in a personal loan, shop around; you may be able to qualify for an even lower interest rate.
Fair-credit loans
If you have a fair or average credit score, it can be hard to find a personal loan that offers reasonable rates and fees. If your credit score falls between 630 and 689, your credit score is average. While this is considered a less-than-stellar score, you still may be able to qualify for a personal loan with an average APR as low as 17.8 percent. This list of the best personal loans for fair credit features lenders that cater to people with scores in the mid-600s.
Bad-credit loans
You can get approved for a loan even with bad credit, although you won't qualify for the best APRs. If your credit score is between 300 and 629, the best interest rate available could be around 28.5 percent. However, a bad-credit loan, even one with a rate close to 30 percent, is a better financial option than a payday loan; to see what rates are available, compare offers from a few bad-credit lenders.
How does the coronavirus affect personal loans?
The impact of COVID-19 has left millions of Americans without a reliable source of income, and many may be searching for personal loans to cover emergency expenses. In response to unprecedented market conditions, some banks have announced new loan offerings and lower interest rates, though many have also tightened their eligibility requirements.
For existing borrowers, some lenders have extended their loan relief programs into 2021, waiving fees or letting customers temporarily defer payments. Long-term unemployment will mean some borrowers continue to rely on these programs, says Greg McBride, Bankrate’s chief financial analyst. He encourages those who are having trouble making payments on their personal loans to contact their lenders rather than ignoring the problem.
Who gets a stimulus check?
The American Rescue Plan Act brought a third stimulus check in March 2021, when the IRS started sending eligible Americans payments of up to $1,400.
Between July and December, eligible families will also receive half of their child tax credit as monthly payments. The other half will be paid out in 2022, and those who don’t want monthly payments can instead get a lump sum next year. Families could receive a total of $3,600 for children aged 5 and under, $3,000 for children between the ages of 6 and 17 and $500 for 18-year-olds and full-time college students who are 19 to 24.
What are coronavirus hardship loans?
Coronavirus hardship loans are short-term personal loans designed by lenders specifically to help people affected by the coronavirus pandemic. These loans are typically less than $5,000 and may have to be repaid within three years or less. Coronavirus hardship loans are popular among credit unions, in particular; if you need short-term relief, ask your local credit union about its offerings.
Pros and cons of personal loans
Pros:
One lump sum, usually with a fixed interest rate, which helps keep monthly payments on track.
Get money quickly, sometimes within as little as a day, depending on the lender you choose.
Many are unsecured loans, which means your home or car isn’t used to borrow money.
Interest rates are much lower than those of payday loans, which charge upward of 400 percent.
Unlike highly risky payday loans, personal loans give you a reasonable amount of time to repay the loan.
Cons:
APRs are generally higher than those of some secured loans.
If you have a low credit score, you might not qualify.
Some lenders charge fees, like origination, late and prepayment fees. The lower your credit score, the more likely you are to have a lender that charges more fees.
Some lenders don’t allow co-signers, which means you can only use your credit score and history to qualify.
You’re adding another bill to your monthly payments, which might stretch or even break your budget.
How to choose the best personal loan lender for you
It's always best to get quotes from a few lenders before applying for a personal loan. When comparing lenders, keep an eye on the following factors.
Approval requirements. Every lender has its own threshold for approving potential borrowers, considering things like your income, credit score and debt-to-income ratio. If you have below-average credit, look for lenders that utilize other approval criteria; some will take into account things like your area of study or job history.
Interest rates. The lowest advertised rate is never guaranteed, so compare your actual quotes. When comparing interest rates, also make sure to incorporate any fees or penalties; origination fees or application fees can significantly add to the overall cost of your loan.
Loan amounts. If you need a loan for something small, like a minor car repair, you'll look at different lenders than you would if you need to pay for tens of thousands of dollars in medical bills.
Repayment options. A good personal loan lender usually offers multiple repayment terms so you can choose the one that makes the most sense for your situation. If you're borrowing a lot of money, you may want to look for a lender with long repayment terms to decrease your monthly payment. If you have a smaller loan, a shorter repayment term will cut back on the amount of interest you pay overall.
Unique features. Keep an eye out for lenders with any unique perks (or restrictions). Be sure to check that any lender you're considering will allow you to use your loan for the purpose you're intending. Some, like Payoff, restrict their personal loans to specific uses, like debt consolidation.
Customer service. It's also wise to investigate a company's customer service options, particularly if you prefer in-person service to online. If you need more information, you can always look up reviews about the company or check out its Better Business Bureau profile.
Types of personal loans and their uses
With the exception of loans from a few niche lenders, like Payoff, most personal loans can be used for any purpose. The most common types of personal loans are:
Debt consolidation: If you have multiple lines of credit card debt, for instance, you can pay them off with a personal loan and repay the loan over time, often with a better interest rate.
Emergency expenses: Unexpected expenses like a car repair or hospital bill can throw off your monthly budget, and a small personal loan can alleviate the immediate cost.
APR stands for annual percentage rate. It refers to the extra amount borrowers pay on top of their loan amount, or principal. APR is different from your interest rate; it equals your interest rate plus any loan fees.
What's the difference between a secured loan and an unsecured loan?
Secured loans are backed by a piece of the borrower’s property as collateral, typically a vehicle or house. Because the borrower stands to lose personal property if they default, secured loans tend to have lower interest rates.
Unsecured loans are not backed by collateral, but instead by the borrower’s creditworthiness. Because the lender takes on more of a risk with an unsecured loan, interest rates tend to be higher. Lenders also require that borrowers seeking unsecured loans have higher-than-average credit scores.
Learn more about the key differences between secured and unsecured loans.
What's a repayment term?
A repayment term refers to the length of time borrowers have to repay their loans. A personal loan's repayment term is typically between one and 10 years, depending on the lender.
How does my credit score affect my offer?
Because personal loans are often unsecured, they may come with higher APRs than other types of loans. With unsecured loans, lenders tend to pay extra attention to a borrower's credit score.
The lower a borrower's credit score is, the more they'll have to pay in interest. Lower credit scores can lead to APRs in the double digits. Loan rates differ by lender, but opting for a secured loan can often help lower the loan's APR, even for someone with bad credit. In some cases, secured loans can offer APRs up to 6 percent less than unsecured loans.
Will a personal loan hurt my credit score?
A personal loan can temporarily hurt your credit score since lenders will do a hard credit check when you apply. However, you should be able to recover and even improve your credit score if you make on-time payments for the duration of your loan. If you miss payments or make consistently late payments, be prepared to see a more significant dip in your score.
What’s the difference between fixed and variable interest?
Depending on the loan and the lender, you may have a choice between a fixed-rate loan (which stays the same over the life of the loan) and a variable rate (which can rise or fall depending on changes in the market).
The interest on a variable-rate loan often starts low but may increase over time. The terms of the loan agreement will specify how often the lender is allowed to raise the interest rate, and some loans cap the maximum rate at a certain percentage. By contrast, the payments and interest charges on a fixed-rate loan will remain the same.
Base your decision on whether you prefer the stability of a fixed rate or the possibility of saving on interest with a variable rate.
Is a personal loan worth it?
A personal loan could be a good option for you if you need a large sum of money upfront and the stability of a predictable monthly payment. Personal loans typically have better APRs than credit cards or lines of credit, and most personal loans maintain that fixed rate over the life of the loan.
However, before committing to a personal loan, weigh the APR you're offered to make sure that a monthly loan payment fits into your budget. Some loans have repayment periods as long as 10 years, and some companies charge a fee if you choose to pay your loan off early. It's also important to take out only as much as you need for your project or expense; borrowing extra will increase your monthly payments and the total amount you'll pay in interest.
If you're unsure if you can afford a loan, try using a personal loan calculator to see how much you'll pay in interest on top of the cost of your loan,
What is a good interest rate on a personal loan?
A "good" interest rate on a personal loan depends on your credit score. In general, you should look for a rate below the average APR — 10.3 percent to 12.5 percent for excellent credit, 13.5 percent to 15.5 percent for good credit, 17.8 percent to 19.9 percent for average credit and 28.5 percent to 32 percent for bad credit.
The rate you are quoted depends on many factors, including your credit score, credit history and annual income. Many lenders offer prequalification, a step that allows you to see if you're eligible for a loan without a hard pull on your credit score. Checking your rate with a few companies can help you determine which will offer you the best APR.
What are the requirements for a personal loan?
While every lender's requirements will vary, you may be granted a personal loan based on three factors: your credit score, your income and your payment history. While all of these elements are important to overall financial health, lenders typically focus more heavily on your credit score. The lower your credit score, the less likely you are to get approved for the loan and the higher your interest rates if you are approved. It's important to assess your credit and financial history to determine if a personal loan is the right fit for you.
When you're applying for a personal loan, the lender may also require you to show documentation, such as proof of your identity, employer, income and address.
What is better: Personal loans or low-interest credit cards?
When it comes to debt consolidation, both personal loans and credit cards could be useful in paying off high-interest debt. With a personal loan, you'll be able to borrow a specific amount from the bank and then pay it back in monthly installments. With a credit card, you'll be able to complete a balance transfer, a method in which you transfer your existing debt to a new credit card.
Both options have drawbacks and benefits. With a personal loan, you're given the security of knowing the total loan costs, and you'll pay a fixed monthly amount, making it easier to budget and keep track of your expenses. The downside is that in some instances, a personal loan could have more up-front fees and a higher starting APR.
With a balance-transfer credit card, many card issuers will offer a 0 percent APR introductory period, which gives you the opportunity to pay down debt without accruing interest for a certain number of months. However, if you still have debt remaining after the introductory period, the APR could be higher than that of a personal loan, which may put you at risk of accumulating even more debt.
Before choosing a method, compare the rates and fees of each option and evaluate how much flexibility you're looking for when consolidating debt.
How much can you borrow with a personal loan?
The amount you can borrow with a personal loan depends on the lender and your credit score. Many lenders offer loans between $5,000 and $50,000, but some may offer loans as low as $500 or as high as $100,000.
Can I pay my loan off early?
There are some situations where you may want to pay your personal loan off early; if you get a raise or receive a cash gift, putting those funds toward your personal loan can help you save on interest and eliminate the loan from your monthly expenses. Many lenders will even let you pay your loan off early without charging a prepayment penalty.
If you'd like to make extra payments on your loan, let your lender know that you'd like the extra payment to go toward the principal — otherwise, the lender may apply the funds toward your next payment.
Keep in mind that paying your loan off early may not be worth it if you have other higher-interest debt on your plate, like credit card debt, or if you don't have emergency savings built up. In those cases, it may be better to put extra funds toward those projects instead.
What happens if I can't pay back my loan?
If financial hardship means that you can't pay back your loan, your loan will eventually fall into default. With some lenders, default could happen as soon as you miss a payment, while with others it could happen after a few months of missed payments.
With a defaulted loan, you'll likely rack up late fees and see a dip in your credit score. If you miss enough payments, your loan may also be sent to collections. To minimize the impact of a defaulted loan, contact your lender as soon as you know that you won't be able to make a payment; your lender may be willing to work with you on an adjusted payment plan.
