Personal loan rates have fallen slightly: for those with excellent credit, average interest rates on 60-month personal loans have dropped to 14.36% and 12.95% for 36 months. But if your credit score isn’t among the cream of the crop, expect to pay more. For 36-month personal loans, overall average interest rates were 22.65%, while 60-month or 5-year personal loans were 23.71%, according to Bankrate’s latest data for the week. ending April 11. You can see the lowest personal loan rates you can qualify for here.
What is a personal loan?
Personal loans from banks, credit unions, and online lenders give borrowers a lump sum cash payment that must be repaid with interest between 1 and 7 years after the loan is funded. Personal loans most commonly range between $1,000 and $100,000 and are available as either secured (you provide collateral) or unsecured (no collateral), although most tend to be unsecured, which which facilitates the approval of borrowers.
Why take out a personal loan?
If you need some cash that you don’t have on hand, a personal loan can help you deal with high-interest debt consolidation, unexpected expenses, home improvement, medical debt and more. Personal loans are popular for many reasons, but one of the things that sets them apart from other types of loans is how quickly they are able to fund themselves. In fact, some personal loans take about a day before the money is available to the borrower. That said, personal loans often come with higher interest rates than loans like HELOCs or other types of loan services that require collateral.
Another thing to consider before taking out a personal loan is the exact amount you intend to use. Because it can be quite easy to get a personal loan, borrowers may tend to get more than they actually need or spend frivolously just because non-essential expenses suddenly become a close one. whenever someone has cash in hand. If you withdraw more money than you need, you will have to pay back a larger amount, which in turn will generate more interest and cost you more in the long run. For this reason, experts recommend using a personal loan for specific planned reasons, rather than just taking out a loan for extra cash. Failure to pay a personal loan can negatively impact your credit score as well as your ability to qualify for loans in the future.
Personal loans are not entirely headache-free. They can come with various fees, including origination fees that can range from 1% to 8% of the loan amount. This means that if you withdraw $100,000 and the origination fee is 4%, you will actually need to request to withdraw $104,000 to cover the cost of fees which are usually reduced from the top of the loan. Make sure you understand the fee structure of your loan so you don’t miss out when your loan is funded.
How to get the best rate on a personal loan
With any loan, the higher your credit score, the more favorable your interest rates will be. To get an idea of what you can expect to pay on a personal loan, experts suggest going through the prequalification process, which involves a soft credit check that doesn’t affect your credit score. This will tell you what type of interest rate you are likely to pay and can help you determine which loan best suits your needs. When it comes to the necessary documents and information you’ll need to get a personal loan, this guide will help you navigate the murky waters of applying for a personal loan.