How to choose a Good Credit Loan?
Having a good credit score pays off when it comes to finding the most competitive interest rates on loans. Generally, a score of 700 and above is considered “good credit”. This means lower interest rates, better terms, and it increases your chances of getting approved. If you have good credit, get started by comparing our recommended personal loans for good and excellent credit scores below.
What is a Good Credit or Excellent Credit Loan?
One of the biggest advantages of building up your credit is that it makes the process of applying for and acquiring an online personal loan much easier. Those who have low credit scores have the extra burden of searching for lenders with looser application requirements while also offering reasonable personal loan rates. They may even have to add a co-signer so they can get approved.
This is because most personal loans are unsecured, meaning they aren’t backed by any collateral like a home, vehicle, or other valuable assets. Lenders don’t like risk, and they want to lend money to borrowers who are most likely to pay them back. Having good and excellent credit demonstrates to lenders that your financial situation is sound.
For those blessed with good credit, there are personal loan lenders for you who offer low interest loans with good terms.
Recommended Good Credit Loan Lending Partners
What are the Requirements for a Good Credit Loan?
An important thing to keep in mind is that lenders (including peer to peer lenders and online personal loan lenders) typically look at an applicant’s entire financial profile when considering them for loans—not just credit scores.
While requirements will vary depending on the lender, here is a general list of requirements you can expect when shopping for the best interest rates on personal loans online:
Credit score
This is a major factor that will not only determine whether you get approved for an online personal loan, but what kind of interest rates for personal loans you’ll get.
As already stated, “good credit” is having a credit score of 700 and higher, but this number may vary slightly depending on which credit bureau (Equifax, Experian, TransUnion) your lender pulls the score from as well as the credit scoring model (VantageScore or FICO).
As you can see below, an excellent credit score is generally defined as 781 or higher.
Here are the score basics for Experian using the VantageScore model:
- Excellent credit: 781-850
- Good credit: 661-780
- Fair credit: 601-660
- Poor credit: 500-600
- Very poor credit: 300-499
Credit Report
Your credit report is a record of your credit history which lenders will glean insights from to ascertain how financially responsible you are.
Here are a few pieces of information you can find on your credit report:
- Identifying information, like your personal info, social security number, and date of birth
- Credit account information, like types of credit accounts you currently have (loans, mortgage, etc) and your payment history
- Inquiry information, like soft and hard credit pulls conducted when you submit applications for online personal loans
- Bankruptcies
- Collections accounts
You’re entitled to one free report each year from each of the three main credit bureaus. Even if you’re not ready yet to apply for online personal loans, it’s a good idea to review your credit report to understand your own financial history as well as to ensure there are no errors.
Proof of stable income
Having a good credit score will only get you so far when finding the low interest personal loans. Personal loan lenders require you to submit proof of income so they know you’ll be able to pay the loan back. You can verify your income by submitting a pay stub or bank statement as proof.
They’ll also look at your employment history. If you jump around from job to job every few months, that’s a red flag for most personal loan lenders since it gives them the impression that you may not be able to manage the payments on your loan.
Debt-to-income ratio
How much debt you have is another factor that personal loan lenders pay attention to when considering you for personal loans online.
To get this ratio, calculate what your current monthly debt payments are and divide that number by your gross monthly income. Lenders will typically look for a ratio that’s around 36% or less, but not always.
Even if your debt-to-income ratio is on the high-end you can still get approved, but the interest rates on personal loans may be a bit higher.
How to Choose a Good Credit Lender
Having a good financial profile means you get to be picky with who you choose to borrow from, whether it’s a bank, credit union, online personal loans lender, or peer to peer lending. There’s more involved than just getting approved for the loan amount you’re after.
When choosing a good credit lender, consider the following questions:
- What are you going to use the loan for? There are personal loans online that are designed for things like home renovation, debt consolidation, and so on. They’ll sometimes have useful perks that standard personal loans do not, like direct deposits to your creditor if you’re trying to consolidate debt.
- How much do you need to borrow? Most lenders have a minimum and maximum lending amount. Knowing how much you’ll need right from the beginning will help save you time on your search.
- What’s the amount you’re able to pay on monthly repayments? Before submitting any applications for low interest loans, it’s important to know how much you’re comfortable paying each month on your loan. Good credit lenders will have more favorable repayment terms. So if one lender quotes you a high monthly payment, continue with your search.
- Start comparison shopping. One easy way to compare quotes for personal loans online is by using online lending marketplaces. This lets you submit your information to get pre-qualified from several lenders in their network. From there, you can choose the best lender for personal loans.
- Get quotes from a credit union. Credit unions often have different business models than a bank and may charge less in fees and interest rates.
Online-only lenders vs. traditional lenders
If this is your first time searching for a personal loan, you may only be familiar with loans directly from your brick-and-mortar bank or credit union. You might be less familiar with online-only lenders and what they can offer as well. We've compared them below.
Traditional lenders | Pros
- Safe and secure, less likely to be scams: Larger banks often have brick and mortar where you can speak to someone in person
- You can qualify for a larger loan amount if you are already a customer. Sometimes you can get a discounted interest rate with a bank if you are an existing customer with a good record.
Traditional lenders | Cons
- Stricter qualifications
- More limited when it comes to interest rates and terms
- The application, approval, and funding process can be slower than with online lenders
Online-only lenders | Pros
- Online lending partners often make the loan process quicker and easier
- Offer pre-qualification, which runs a soft credit check only
- You can quickly compare offers from various online lenders
- Less strict qualifications
- Easy personal loans to obtain compared to banks
- Offer small personal loans and large personal loans
Online-only lenders | Cons
- It's recommended to check the credibility of the site and the level of security when sharing your personal information.
- If you are an existing customer of a bank or credit union, you might be able to get better terms.
- It's harder to speak with someone in person. Communication is typically limited to online chat, phone, or email.
One of the biggest reasons why people defer from online lending services is the trust factor. With large banking companies or even local banks in your area, you can feel more assured since you can usually go into the physical branch and speak with someone.
However, with just about everything online these days, an online lending option can be just as trustworthy or more than an in-person lender. With both online lenders and physical banks, you should be extra diligent in your search and do proper research.
FAQs:
1. What can I use my good credit personal loan for?
The beauty of a personal loan is that it can be used for virtually anything—medical expenses, a vacation, a major purchase, and so on. There typically aren’t any limits to what you can use it for.
2. Who qualifies for a personal loan?
It can be easier to qualify for a personal loan if it’s secured, but if you’re choosing an unsecured personal loan, lenders will determine your eligibility based on things like credit score, credit history, income, employment stability, and debt-to-income-ratio.
3. Will applying for a personal loan hurt my excellent credit score?
When pre-qualifying for a personal loan, lenders conduct a soft credit check, which does not harm your score. Once you move forward with a specific lending partner, they will conduct a hard credit inquiry, which can affect your credit score.
4. What information will I need when I apply?
Lenders will ask for your bank information, contact information, bank statements, pay stubs, and a driver’s license when you apply.
5. How much am I able to borrow and for how long?
How much you can borrow and for how long depends on your financial profile as well as the lender. Some lenders will have a loan minimum and maximum when it comes to loan amount, and a repayment term range, such as 36-60 months.
Conclusion
Finding good credit loans takes time and plenty of research. While there are tons of places you can find personal loans online, finding the right one comes down to what your loan is going to be used for, how much you need to borrow, and what kind of rates and terms you’re looking for.
Low interest personal loans are just a few steps away. Read through our expert reviews and get started on your search today.
Representative Examples
A 5‐year $10,000 loan with 9.99% APR has 60 scheduled monthly payments of $201.81 to a total amount of $12,108.6.
A 3‐year $5,000 loan with 5.99% APR has 36 scheduled monthly payments of $150.57 to a total amount of $5,420.52.
We value privacy
Filters
Clear
