Personal loan rates have increased slightly: for those with excellent credit, average interest rates on 60-month personal loans have reached 14.68% and for 36-months at 13.77%. But if your credit score is less than excellent, expect to pay more. For 36-month personal loans, average interest rates were 23.18%, while 60-month or 5-year personal loans were 24.12%, according to Bankrate’s latest data for the week ending. April 4. , the rate you’ll pay depends on a variety of factors, including your credit score. You can see the lowest personal loan rates you can qualify for here.
What is a personal loan?
Personal loans typically range from $1,000 to $100,000 and are borrowed from a bank, credit union, or online lender. They are generally repaid over a fixed period, often from 1 to 7 years, with interest. Personal loans are offered as secured (you provide collateral) or unsecured (no collateral), although most are unsecured.
Why should and shouldn’t you take out a personal loan?
Although personal loans have a wide range of uses, they tend to be most popular for debt consolidation and large one-time expenses or unexpected costs like home repairs and medical emergencies. Personal loans are some of the fastest loans to fund, as some release money within a day or so of an application being approved. But personal loans tend to have higher interest rates than HELOCs or other types of loans (see the lowest home equity rates you can claim for ite) which require collateral to help protect the lender from a borrower who may not be able to repay his debt.
Personal loan borrowers should proceed with caution when taking out a loan due to how easy it can be to raise the money. For this reason, borrowers may be tempted to ask for more than they actually need or to use the money for non-essential expenses that they otherwise could not afford. Experts advise to only use a personal loan for the originally intended reasons for which you borrowed the funds, as defaulting on a personal loan can affect your credit score and affect your ability to qualify for a loan. or a competitive interest rate in the future.
Although relatively easy to obtain, at least compared to many other loans, personal loans often come with fees, such as origination fees, which can range from 1% to 8% of the loan amount. To determine the amount of money you will need for your personal loan, you need to make sure that you have enough money to cover the charges levied on the loan amount. Planning this in advance will set you up for success so that you don’t run out of funds once your loan has been funded.
How to get the best rate on a personal loan
You’ll want to have the highest possible credit score to benefit from the most competitive interest rates. Experts recommend prequalifying for a loan to get an idea of the rate and terms you can expect to pay. Pre-qualification involves a smooth check of your credit score, so your score will not be affected by the process – but you will have a better understanding of which lender will offer you the best rate for your personal situation. In addition, this guide will help you understand the necessary documents and information you need to obtain a personal loan.