Short-term personal loans can be obtained from credit unions, banks or private lenders such as online marketplace lenders or peer-to-peer lender. You can use the loan funds for almost any purpose: paying off debts, financing home renovations, or paying for family members’ needs like a wedding or an adoption.
Personal loans are repaid monthly, much like a home loan or car loan. Loan terms can range from 24 to 60 months, or even longer. Personal loans are usually unsecured. They are not secured by collateral like a house, car, or other assets. These loans can be a great option if you have a need for cash quickly. The approval and funding process are often quicker than those of a home equity credit line. This allows you to borrow funds as you require them, rather than as a lump sum.
What are the current personal loan interest rate?
Based on your credit score, personal loan interest rates range from 3 percent to 36 per cent. The average personal loan interest rate was 10.28 percent as of January 31, 2022. Your credit score will determine how likely you are to be approved for a personal loan at the lowest interest rate. Compare personal loan offers before you apply for a personal loan.
Loans for excellent credit
Loans for excellent credit are loans designed to borrowers with excellent credit. Typically, these borrowers have credit scores between 720-850. High credit scores can bring many benefits. For example, the average APR of a loan is as low as 10.3 per cent. However, some lenders will go lower. Look for lenders that offer low rates and minimal fees if your credit score is in this range.
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Loans for good credit
A good-credit loan offers low fees and competitive interest rates. If you have credit scores between 690-719, you are considered to be in good credit. With such high credit scores, you might qualify for an average APR of 13.5 percent. If you are looking for a personal loan and have good credit, you might be eligible for a lower interest rate.
Fair credit loans
It can be difficult to find a personal loans with reasonable fees and rates if you have a low credit score. Your credit score is considered average if your credit score falls between 689 and 630. This is a low credit score that can still be used to get a personal loan. The average APR for this type of personal loan is 17.8 percent. This list includes lenders who offer personal loans to fair credit for people with scores between 600 and 600.
Bad credit loans
Even if you have bad credit, you can still get approved for a loan. However, the best APRs won’t be available to you. The best interest rate is around 28.5 percent if your credit score falls between 300- 629. A bad credit loan is better than a payday loan. Compare rates from several lenders to find out what they offer.
Personal loans: pros and cons
Pros:
A lump sum with a fixed interest rate is usually used to keep your monthly payments on track.
You can get money fast, sometimes in as little as one day depending on which lender you choose.
Unsecured loans are often available. This means that your house or car can’t be used to borrow money.
Payday loans charge up to 400 percent, but interest rates are lower.
Personal loans are less risky than payday loans that can be very dangerous. They allow you to repay the loan in a reasonable time frame.
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Cons:
The APRs of secured loans are typically higher than those of regular loans.
You might not be eligible if you have low credit scores.
Lenders may charge fees such as origination, late, and prepayment fees. Higher credit scores mean higher fees.
Co-signers are not allowed by all lenders. This means that you will need to use your credit history and credit score to get approved.
This adds another bill to your monthly payment, which could make or break your budget.
Types of personal loan and their uses
Except for loans from niche lenders like Payoff and others, personal loans can be used to fund any purpose. There are a few types of personal loans.
Consolidate your debt
Consolidating debt is when you consolidate multiple debts and then take out a personal loan to pay it off. The personal loan will then be repaid monthly.
It’s best for: People who have multiple high-interest debts through credit cards, such as personal loans for debt consolidation, are the best candidates.
You need to be careful to ensure that your debt is less expensive in the end. If you are unable to get a better rate on your debt consolidation, make sure to check that any fees do not increase the loan’s cost.
When to start: This is a good option if you have high-interest debts (usually credit cards) and are able to qualify for a personal loan with a lower interest rate.
How to start: First, evaluate which debts you want to consolidate and how much interest rate savings you could make. Next, get quotes from lenders who specialize in debt consolidation.
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