Personal loan rates increased slightly: for those with excellent credit, average interest rates on 60 month personal loans reached 14.58% and for 36 months 13.70%. But if your credit score isn’t among the cream of the crop, expect to pay more. For 36-month personal loans, average interest rates were 22.52%, while 60-month or 5-year personal loans were 23.83%, according to Bankrate’s latest data for the week ending. April 18. You can see the lowest personal loan rates you can qualify for here.
The basics of the personal loan
A personal loans — which you can get from a bank, credit union, or online lender — give borrowers a lump sum of cash that can be used for a number of reasons. Personal loans often follow a repayment schedule of one to seven years, with interest and principal being repaid at regular intervals. Personal loans tend to range between $1,000 and $100,000 and can be offered as secured (you provide collateral) or unsecured (no collateral), although the majority are unsecured, this which makes them easier for borrowers to qualify.
How do you know if a personal loan is right for you?
If you suddenly find yourself in a situation where you need a specific amount of money that you wouldn’t otherwise have access to, a personal loan can cover your needs – and quickly. Personal loans can take as little as a day to fund, making them incredibly useful in a snap. Often, people take out personal loans to consolidate high-interest debt, to pay for home improvement projects, or to cover unexpected costs or emergency medical bills. You can see the lowest personal loan rates you can qualify for here.
Although they have a wide range of uses and often fund themselves quickly, personal loans often come with higher interest rates than other types of loans that require collateral like a HELOC or mortgage loan. home equity. Experts urge caution when taking out a personal loan, simply because the process can be so seamless that borrowers tend to withdraw more money than they actually need, simply because they have the possibility. For this reason, borrowers should consider how much money they actually plan to use – and they should only withdraw that amount. Remember: withdrawing more money means paying back more money and earning more interest in the long run. While it may seem like withdrawing extra money for frivolous expenses won’t have much of an effect on your financial profile, defaulting on a personal loan can negatively impact your credit score, in addition to affecting your ability to qualify for future loans.
Another factor to consider before taking out a personal loan are the fees associated with taking out a loan. It’s not uncommon for origination fees to range from 1% to 8% of the loan amount, which means that if you’re taking out $100,000 and the origination fee is 5%, you’ll actually have to apply for a loan in the amount of $105,000 to cover the cost of fees which are usually reduced from the top of the loan. Making sure you allocate the appropriate amount for fees will ensure you don’t miss out when your loan is funded.
Get the best rates on personal loans
The higher your credit score and the better your finances are, the more favorable your rate will be. Prequalifying for a loan using a soft credit check can give you an idea of the rate you can expect to pay, without affecting your credit score. Plus, reading this guide will help you navigate the personal loan application process.