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Find the best personal loan providers, check rates, and learn more about borrowing.
What is a Personal Loan?
A personal loan is a short-term loan that can be accessed via banks, credit unions, and private lenders. People use personal loans for numerous reasons such as solving family needs, debt consolidation or financing home renovations. These types of loans are repaid over a designated period and payments are made with interest based on the selected lender. They are unsecured loans that do not require any collateral from the borrower. People with urgent needs or ‘fast funds’ (distributed in a short period of time) may also consider personal loans. We encourage you to continue learning more and compare rates to get the loan that best suits your needs.
Comparing Offers from Multiple Personal loan Lenders – Which Is Right for You?
The rates and terms of personal loans depend on your credit score, credit history, debt-to-income ratio, and income. While some lenders tend to favor applicants with higher credit scores, others will work with borrowers with subpar scores and still offer reasonable interest rates. It will require some effort to compare and shop around.
When comparing personal loan companies, the first thing to consider is comparing the monthly payments. Ask yourself what you can afford. This will help you narrow your search. Review the terms and rates offered by the different providers. One should also compare the APR. Legally, lenders must supply you with the APR, which includes the interest for the loan and any fees.
Customer service is important when applying for personal loans as it helps in reviewing the terms and rates, APR, and also in case an issue occurs in repayment of the loan. It is important to choose a lender offering the best customer service as this will help in understanding the lender and excellent service delivery.
How Your Credit Score Determines the Terms of your Loan
Your FICO score or credit score will be used to determine the APR for your personal loan and the amount you will receive. Along with your debt-to-income ratio, your credit score will be the determinant of your loan terms and interest rate. The following information reviews the credit score ranges. If you have a higher credit score, it represents less risk to the lender, and therefore the APR is lower.
Average Personal Loans Interest rates by Credit score
720 – 840
680 to 719
640 to 679
Reasons To Get a Personal Loans
A personal loan can be used for one of the various reasons, as follows:
Debt Consolidation – Many people take out a personal loan in order to consolidate existing debt. Compare the best debt consolidation companies to find the solution that suits you.
Weddings – Wedding loans are a new trend that is becoming more & more popular. If you do, personal loans can help you finance the costs. You can use the loan to pay for your wedding expenses and your honeymoon.
Auto Financing – If you are in the market for a car, motorcycle, or RV, personal loan finance can help you get the type of transportation you desire. Plus, you can compare interest rates to see which of the best car loan APRs works best with your budget.
Vacation – Personal loans for vacations allow you to get money for your vacation without having to worry about paying it back until after the vacation is over.
Home Purchase and Improvement – If you are spending most of your time at home, you might consider taking a personal loan to buy a house or a piece of land. While looking for the best solution out there, whether it is for the best land loans or the best home improvement loans for your needs, use a loan calculator to see if you can pay off the personal loan.
Emergency expenses – In cases where you have a medical condition that requires immediate treatment and you do not have sufficient funds to cover it, getting the best medical loan might be the best solution for you.
Financing a Major Purchase – Personal loans are loans that are issued to an individual for large purchases, like a car or a home. These loans can be used for any personal purchase but are usually used for major purchases such as home improvement, buying cars, and vacations.
Loan Amounts and the Repayment Terms
Personal loans come with set times to pay off a loan. Therefore, repayment terms may span from 12 months to 60 months or more. While longer terms will spread out the payments and lower the monthly amount, you will also pay a higher amount of interest. Know your loan terms so you can make the best decision for repayment.
Documents You Will Need to Get a Personal Loan
To obtain a personal loan, you will often need some or all of the following documentation and information:
Government-issued I.D. (for proof of address and age)
Payment stubs from your last 2 most recent paychecks
Bank account information and bank statement
IRS W-2s for employment and income proof
Collateral (if the personal loan is a secured loan)
The lender needs the above information to verify your income, age, and banking details.
Personal Loan Payment Terminology
Prepayment Penalty – A prepayment penalty is a charge incurred on a loan that is paid off before its due date. Because an early payoff prevents the lender from making money from the interest assessed on loan, this type of penalty is sometimes enforced.
Origination Fees – These fees usually represent a percentage of the total loan amount and are represented in the form of upfront charges. These amounts are assessed for processing the loan request.
APR – Annual Percentage Rate assessed for the loan, including any fees. Therefore, you need to examine this percentage closely when comparing personal loan lenders.
Late Fees – Late fees represent charges you must pay if you miss a loan payment or your payment becomes past due. When comparing lenders, check out the late fees and review the grace period for making a payment on the financing.
Next Steps for Securing a Personal Loan
After having decided to take a personal loan, start with the following steps to get things moving:
Determine the loan amount based on your financing needs.
Get prequalified – For most lenders, prequalification is conducted on the credit score through a soft inquiry. This will determine whether or not you qualify for a loan.
Compare rates – Comparing rates is recommended when searching for the best loan provider in the market. It helps you gauge the total cost of the loan which provides insights into the extent to which the loan will help you in your financial goals.
Start applying – Once you have researched and chosen the best in the market, it’s now time to apply. Different lenders have distinct application thresholds. Follow the required steps and wait for the stated time for vetting and approval.
Often, all of this information can be overwhelming and a lot to take in. For this reason, we encourage readers to use a personal loan guide as a reference for clear, concise, and relevant information.
FAQs on Comparing Personal Loans
What is needed for a personal loan?
You will need to provide a bank statement, bank account information, government-issued ID, and W2 tax forms. These documents are need to show proof of earnings, age, and residence.
What is the APR on a personal loan?
The APR is the interest charged on the financed amount. It may also include fees and other charges for processing the loan.
What is the average rate for a personal loan?
To determine the average amount for a personal loan, you have to determine the average amount for your credit score. If you have excellent credit (750 to 820), the average rate falls at 12% while the average rate for a good credit score (680 to 719) hovers around 14%. If your credit is fair (640 to 679), the average rate is around 18%. Poor credit scores (300 to 619) have average APRS of about 28%.
What should I consider when reviewing personal loan options?
When comparing personal loan vendors, look at the terms of the loans and the average monthly payment. Also, review the average APR for your credit score. Consider what the lender offers in a grace period and find out if the loan comes with a prepayment penalty.
Do all lenders provide loans for all purposes?
Most personal loan lenders will provide financing for just about any purpose. However, some lenders prefer to lend money for a specific reason. For example, some lending sources gear their loans to people who only wish to consolidate debt. However, in most instances, you can obtain a personal loan for almost any reason.
What affects personal loan approval?
When a lender assesses your requirements for a personal loan, he or she looks at your payment history, your utilization of credit, your debt-to-income ratio, your work history, your income, and how long you have lived at your place of residence. All these factors play a part in a personal loan approval.
What Is a credit score?
A credit score is a credit rating provided by the 3 main credit bureaus that reveals your ability to pay back a loan. Therefore, most of the credit rating, also called a FICO score, is based on your ability to pay and your debt-to-income ratio. Scores range from 300 to 850, and are categorized as Excellent, Good, Fair, and Poor. If you have a higher credit score, you will enjoy better terms and a lower interest rate on any financing you receive.
What Types of Personal Loans Exist?
Personal loans are represented by secured and unsecured financing. If a personal loan is secured, it means that you must provide a form of collateral to receive funding. Another name for this type of loan is a collateralized loan. Collateral may take the form of jewelry, art, or a type of vehicle (or title loan for a car).
Most personal loans featured online are unsecured or uncollateralized. Therefore, they come with a higher rate of interest. As a result, the APR is based on the credit rating of the borrower.
Can a personal loan be used for debt consolidation?
Yes, a personal loan can be used to consolidate credit card debt. This can be advantageous if the APR of the personal loan is less than the interest you are paying for your credit cards. Also, this type of loan makes it easy for you to pay off your credit cards and submit 1 easy payment each month. You can also use a debt resolution service, such as Freedom, to get rid of the debt you can no longer manage.
Can a personal loan be used for a student loan refinance?
No, not usually. A personal loan usually is not designed for this purpose. However, one popular personal loan provider, called Credible, will help you with refinancing a student loan or consolidating the debt at a lower APR. You can quickly fill out a form on the Credible site to see if you qualify.
Will applying for a personal loan hurt my credit score?
It does affect your credit score, but only slightly. When you apply for a personal loan, it triggers a hard credit check, which entails a more thorough assessment of your credit history. This inquiry slices about 5 points from your FICO score. All in all, any new credit application accounts for 10% of your credit rating.
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