The rates for personal loans have risen slightly: with very good creditworthiness, the average interest rate for personal loans with a term of 60 months is 15.50% and with a term of 36 months is 14.05%. But if your credit isn’t in the top tier, expect to pay more. For 36-month personal loans, the average interest rate was 22.61%, while 60-month or 5-year personal loans averaged 23.69%, according to the latest data from Bankrate for the week ended May 15. You can check out the lowest personal loan rates you can qualify for here.
The basics of personal credit
Personal loans — which you borrow from either a bank, credit union, or online lender — give a borrower a lump sum. These loans are usually quick fun. They typically have a payback period of 1 to 7 years, which means that both interest and principal must be repaid during this period, beginning with the loan funding. Most personal loans range from $1,000 to $100,000 and can be used for a variety of needs, including major purchases, home remodeling or repairs, unexpected expenses, and even to fund a business. Although most personal loans are unsecured and therefore do not require collateral from the borrower, they can be secured by collateral for borrowers with significant assets.
Is a Personal Loan Right for You?
If you need a large sum of cash and you need it fast, a personal loan can help. Some personal loans are funded in as little as one business day. So if time is of the essence, you should find out how quickly the lender you are applying to generally makes money available. However, keep in mind that personal loans are often unsecured and tend to have higher interest rates than other types of loans. However, if you don’t have assets to use as collateral and need cash fast, paying a higher interest rate may be worth it.
Here are the lowest personal loan rates you can qualify for.
It’s also important not to get carried away when applying for a personal loan. Experts recommend withdrawing only as much money as is actually needed. While it can be tempting to withdraw more money to play with, remember that you’ll have to pay back all the money you borrowed – and a bigger loan means more interest and principal to pay back. Additionally, if you don’t repay your balance, you can expect your creditworthiness to suffer, along with your ability to borrow in the future.
Before you get a personal loan, find out about the lender’s credit structure and the fees associated with the loan. It’s common for personal loans to come with origination fees, and they often range from 1% to 8% of the total loan amount, so you’ll want to make sure you’re applying for enough money to cover the cost of the loan fees upfront. If you need a $100,000 loan but your processing fee is 5%, you should actually apply for a $105,000 loan to cover the fees and make sure you don’t come up short when the loan is funded .
How to get the best interest rate on a personal loan
The better your credit score, the lower your interest rate will be, so it’s a good idea to pre-qualify for a loan with a soft credit check. This way you can get an idea of what interest rate you will pay without hurting your credit score. This MarketWatch Picks guide can also help you navigate the personal loan application process.