Best Personal Loan Rates for December 2021

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NextAdvisor’s Guide to Choosing the Best Personal Loan

Among the fastest-growing loan products in banking, personal loans became popular after the 2008 financial crisis as a flexible and (sometimes) cheaper alternative to high-interest credit cards. Borrowers can take out personal loans for any number of reasons, but the most common is to consolidate credit card debt.

Personal loan interest rates can vary drastically, both between and within lenders. This wide range depends on the loan terms (e.g., repayment period, amount borrowed) and your personal credit history. 

Why Trust NextAdvisor

Here at NextAdvisor, our mission is to help you determine your next best money move and make smart decisions that will have a big impact on your wealth. We strive to provide balanced editorial opinions backed by facts and expert analysis.  Our reviews and “best of” lists, like this one, are carefully researched by our staff writers and updated regularly to provide you with accurate, up-to-date information. 

Summary: Personal loans in December 2021

Best Personal Loan Rates in December 2021

InstitutionCurrent APRLoan Term RangeMin. Loan Amt.Max Loan Amt.Minimum Credit Score Required
LightStream2.49% to 19.99%2 to 12 years$5,000$100,000Not specified
SoFi4.99% to 19.53%2 to 7 years$5,000$100,000680
Payoff5.99% to 24.99%2 to 5 years$5,000$40,000640
Best Egg5.99% to 35.99%3 to 5 years$2,000$50,000640
U.S. Bank5.99% to 18.49%1 to 5 years$1,000$25,000660
Upgrade5.94% to 35.97%3 to 5 years$1,000$50,000620
Marcus by Goldman Sachs6.99% to 19.99%3 to 6 years$3,500$40,000Not specified
TD Bank6.99% to 21.99%3 to 5 years$2,000$50,000680
Discover5.99% to 24.99%3 to 7 years$2,500$35,000Not specified
Rocket Loans5.97% to 29.99%3 to 5 years$2,000$45,000540
Prosper7.95% to 35.99%3 to 5 years$2,000$40,000640
LendingClub8.05% to 35.89%3 to 5 years$1,000$40,000600
Upstart5.31% to 35.99%3 to 5 years$1,000$50,000580
Avant9.95% to 35.99%2 to 5 years$2,000$35,000580
OneMain Financial18.00% to 35.99%2 to 5 years$1,500$20,000Not specified

How We Chose These Lenders

This list does not represent the entire market. To rank the personal loan rates you’re most likely to be considering, we began by analyzing the 20 most commonly reviewed and searched-for personal loan rates. Then, we cut out any lenders based on the following criteria:

  1. We eliminated lenders that don’t make it easy to find the above essential loan information on their websites without entering an email or other personal information. Many lenders prominently display this information on their sites, making it easy to compare to other lenders. If you are in the market for a personal loan, we’d recommend a transparent lender that doesn’t require personal information for a rate comparison.
  2. We ruled out any lenders whose max APR exceeds 40%, which is well above the average APR you can find even if you have bad credit. A high APR will result in you paying more over the course of the loan.
  3. Our list only features direct lenders, rather than intermediaries or loan marketplaces. We also ruled out credit unions, which have unique membership requirements and limit the number of people who could easily consider them for a loan. Credit unions can offer competitive rates to those who qualify; check your local area or use a credit union locator to compare rates.
  4. Also, none of these banks charge any fees or penalties for early payments or otherwise paying off your loan early. We don’t think you should ever have to pay a fee to get out of debt faster, so will never recommend a personal loan that includes such a fee or penalty.

The above rates and loan information is accurate as of December 8, 2021. The NextAdvisor editorial team updates this information regularly, though it is possible APRs and other information has changed since it was last updated. Some of the lowest advertised rates might be for secured loans, which require collateral such as your home, car, or other asset. Also, some loan offerings may be specific to where you live.

Details: Best Personal Loan Rates in December 2021

Avant: Good for Fast Funding

Overview: Intended for customers with “fair” credit, Avant is an online lender known for its lenient qualifications and fast funding. 

Pros: Avant offers fast funding, with funds typically being deposited within one business day of loan approval.  The qualifications for a personal loan are also more accessible to those with less-than-stellar credit, as Avant accepts borrowers with “fair” credit (580+).

Cons: The APR range it offers is on the high side, so you’ll need to be extra careful not to miss a monthly payment. You also can’t add a cosigner to your application to boost your chances of approval.

Avant
Current APR9.95% to 35.99%
Loan Term Range2 to 5 years
Loan Amount$2,000 to $35,000
Prepayment PenaltyNone
Origination FeeUp to 4.75% 
Minimum Credit Score580
Minimum Annual IncomeNone specified
Co-Borrower Allowed?No
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansYes

Best Egg: Good Customer Ratings

Overview: Best Egg is an online-only lender offering unsecured personal loans for debt consolidation, credit card refinancing, home improvement, and other uses to customers with fair-to-excellent credit.

Pros: There’s flexibility in the terms you can get if you have solid credit. Borrowers with “fair” credit (640+) can qualify for Best Egg personal loans, which range from $2,000 to $35,000 and repayment term between three to five years. Another upside? No prepayment penalty is charged if you want to pay off your personal loan early or make additional off-schedule payments. Best Egg has an A+ rating with the Better Business Bureau and high average customer ratings. 

Cons: To get the lowest APR, you’ll need a minimum 700 FICO score and you’ll need to make at least $100,000 a year in individual income (not household income). You also can’t supplement your application with a co-borrower, cosigner, or collateral.

Best Egg
Current APR5.99% to 35.99%
Loan Term Range3 to 5 years
Loan Amount$2,000 to $50,000
Prepayment PenaltyNone
Origination Fee0.99% to 5.99%; 4.99% for loan terms longer than four years
Minimum Credit Score640; 700+ for the lowest APR
Minimum Annual Income$100,000 minimum individual annual income for the lowest APR
Co-Borrower Allowed?No
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

Discover: Good for Longer Repayment Terms

Overview: Discover is a major credit card brand that offers banking services and credit products — including a full-service customer hotline and a mobile app.

Pros: The APR range it offers its customers is competitive, and you can get a personal loan for a longer repayment term (seven years) than what’s offered by most other lenders. Discover also offers same-day decisions in most cases, with the funds routed to your bank account as early as the day after you accept the loan terms. You won’t have to pay an origination fee either, which is usually between 1% to 6% of the loan amount.

Cons: Your annual household income will need to exceed $25,000 to qualify for a Discover personal loan.

Discover
Current APR5.99% to 24.99%
Loan Term Range3 to 7 years
Loan Amount$2,500 to $35,000
Prepayment PenaltyNone
Origination FeeNone
Minimum Credit ScoreNone specified
Minimum Annual Income$25,000 household income
Co-Borrower Allowed?No
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

LendingClub: Good for “Fair” Credit 

Overview: LendingClub is a digital marketplace bank that offers personal loans through its online marketplace that connects borrowers and investors.

Pros: You can get a loan for as little as $1,000 or as large as $40,000 and won’t have to pay a prepayment penalty if you’re aiming to pay off your personal loan ahead of schedule.

Cons: The APR is higher than what you’d find with other lenders, so if you have excellent credit, you may be able to find a better deal elsewhere.

LendingClub
Current APR8.05% to 35.89%
Loan Term Range3 to 5 years
Loan Amount$1,000 to $40,000
Prepayment PenaltyNone
Origination Fee2% to 6%
Minimum Credit Score600
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Yes
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

LightStream: Best Overall

Overview: Lightstream is the online lender of Truist (out of the recent merger between SunTrust Bank and BB&T), promising personal loans and financing “for practically anything,” including hot tubs, IVF/fertility treatments, adoption, horses, and tiny homes.

Pros: The lowest APR offered by Lightstream is currently the lowest of all other lenders evaluated in this review. And the maximum loan amount is also the highest offered. If you’re not satisfied with your experience with LightStream, the company will send you $100 upon completion of a questionnaire asking how to improve its services.

Cons: There’s no way to see what your rate would be without going through the full application process (including a hard inquiry on your credit report).

LightStream
Current APR2.49% to 19.99% with AutoPay (0.50% higher if invoiced)
Loan Term Range2 to 12 years
Loan Amount$5,000 to $100,000
Prepayment PenaltyNone
Origination FeeNone
Minimum Credit ScoreNone specified
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Yes
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

Marcus by Goldman Sachs: Good for No Fees

Overview: Marcus, the online-only lender of Goldman Sachs, offers personal loans for debt consolidation and home improvement to customers with good-to-excellent credit.

Pros: The APR range for a Marcus by Goldman Sachs personal loan is competitive compared to other lenders. You can receive a 0.25% APR discount by enrolling in AutoPay, and you won’t have to pay an origination fee or prepayment penalty either.

Cons: The lender doesn’t specify a minimum credit score needed to be approved for its loans or get a favorable rate. But it does emphasize that borrowers with a “good” credit score (660+) can qualify for a competitive interest rate. You also can’t boost chances of getting a personal loan by adding a joint borrower, a cosigner, or a collateral to your application.

Marcus by Goldman Sachs
Current APR6.99% to 19.99% with AutoPay (0.25% higher if invoiced)
Loan Term Range3 to 6 years
Loan Amount$3,500 to $40,000
Prepayment PenaltyNone
Origination FeeNone
Minimum Credit ScoreNone specified; borrowers with scores of 700-850 can get lower rates and larger loan amounts)
Minimum Annual IncomeNone specified
Co-Borrower Allowed?No
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

OneMain Financial: Good for Secured Loan Options

Overview: OneMain Financial is an online lender geared toward borrowers who may not otherwise qualify for traditional personal loans. This lender is amenable to people with fair to poor credit, but this does mean the interest rates charged will be higher.

Pros: OneMain Financial is accessible to people who have fair-to-poor credit scores or are new to borrowing. You can apply as a joint borrower or provide collateral for a secured loan, and you may be able to receive your loan funds the same day you’re approved. You have the option to apply in-person at a local branch in addition to being able to apply online or over the phone.

Cons: The potential loan amounts are lower than what’s offered by major lenders, and the interest rates are much higher. Additionally, if you take out a secured loan, the collateral must be covered by an insurance policy.

OneMain Financial
Current APR18.00% to 35.99%
Loan Term Range2 to 5 years
Loan Amount$1,500 to $20,000
Prepayment PenaltyNone
Origination FeeDepends on U.S. state: Flat $25 to $400, or 1% to 10%
Minimum Credit ScoreNone specified
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Yes
Cosigner Allowed?Yes
Unsecured Personal LoansYes
Secured Personal LoansYes

Payoff: Good for Debt Consolidation

Overview: Payoff is an online lender that solely lends to borrowers with fair-to-excellent credit who are looking to consolidate high-interest credit card debt.

Pros: The APR range is relatively low for the personal loan industry. Payoff offers free monthly FICO score updates to its customers, and it doesn’t charge late fees if you’re accidentally late on a payment.

Cons: You need at least three years of established credit, plus a 640+ (“fair”) credit score to qualify. And loans aren’t currently available to borrowers in Massachusetts, Mississippi, Nebraska, and Nevada — or to people who want to take out a loan for anything other than credit card consolidation. 

Payoff
Current APR5.99% to 24.99%
Loan Term Range2 to 5 years
Loan Amount$5,000 to $40,000
Prepayment PenaltyNone
Origination Fee0% to 5%, included in APR
Minimum Credit Score640, and three years of established credit
Minimum Annual IncomeNone specified
Co-Borrower Allowed?No
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

Prosper: Good for Peer-to-Peer Lending

Overview: Prosper is an online-only, peer-to-peer lender offering personal loans for debt consolidation, home improvement, and more.

Pros: You can borrow as little as $2,000, and co-borrowers and cosigners are allowed when applying for a Prosper personal loan. The lender will also consider applicants with “fair” credit (640+).

Cons: The maximum APR is high, and you can’t put up collateral to boost your chances of getting a loan. You have only two repayment term options as well: three or five years.

Prosper
Current APR7.95% to 35.99%
Loan Term Range3 to 5 years
Loan Amount$2,000 to $40,000
Prepayment PenaltyNone
Origination Fee2.41% to 5%
Minimum Credit Score640
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Yes
Cosigner Allowed?Yes
Unsecured Personal LoansYes
Secured Personal LoansNo

Rocket Loans: Good for “Bad” Credit

Overview: Rocket Loans is a Quicken Loans company that offers unsecured personal loans for debt consolidation, auto expenses, and home improvement projects.

Pros: Rocket offers instant decisions when you apply for pre-approval and same-day funding for personal loans. And with a minimum credit score of 540, it’s open to people with “poor” credit, though you’ll likely end up with a high interest rate.

Cons: The repayment term is either three years or five years — nothing in between. You also can’t improve your chances of getting a loan with a co-borrower, cosigner, or collateral.

Rocket Loans
Current APR5.97% to 29.99% with AutoPay (0.3% higher if invoiced)
Loan Term Range3 to 5 years
Loan Amount$2,000 to $45,000
Prepayment PenaltyNone
Origination Fee1% to 6%
Minimum Credit Score540
Minimum Annual Income$24,000
Co-Borrower Allowed?No
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

SoFi: Good for Extra Membership Perks

Overview: SoFi is an online lender that caters to people with strong credit and established employment histories.

Pros: The lowest APR is very competitive, and the maximum loan amount is high ($100,000). As a perk, SoFi also offers “unemployment protection,” which means it will temporarily stop your payments and help you look for a new job if you become unemployed.

Cons: You need a good-to-excellent credit score (680+) to qualify, and you must either be employed, earn other income, or have an offer of employment to start within the next 90 days. Another downside: SoFi personal loans aren’t available in Mississippi.

SoFi
Current APR4.99% to 19.53% with AutoPay (0.25% higher if invoiced)
Loan Term Range2 to 7 years
Loan Amount$5,000 to $100,000
Prepayment PenaltyNone
Origination FeeNone
Minimum Credit Score680
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Yes
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

TD Bank: Good for Same-Day Approval

Overview: TD Bank offers unsecured personal loans and, in the past, has also offered lines of credit and secured loans. 

Pros: TD Bank has retail stores across 15 states and Washington, D.C., if you’d like in-person assistance. The lender doesn’t charge an origination fee or a prepayment penalty.

Cons: TD Bank’s personal loans are available only in Connecticut, New Jersey, Delaware, New York, Washington, D.C., North Carolina, Florida, Pennsylvania, Maine, Rhode Island, Maryland, South Carolina, Massachusetts, Vermont, New Hampshire, and Virginia.

TD Bank
Current APR6.99% to 21.99%
Loan Term Range3 to 5 years
Loan Amount$2,000 to $50,000
Prepayment PenaltyNone
Origination FeeNone
Minimum Credit Score680
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Not specified
Cosigner Allowed?Not specified
Unsecured Personal LoansYes
Secured Personal LoansNo

Upgrade: Good for Multiple Products

Overview: Upgrade is an online lender that offers a wide range of loans for borrowers with fair-to-excellent credit. In addition to personal loans, Upgrade also offers a rewards checking account, credit card, and credit monitoring services

Pros: You can borrow as little as $1,000 and as much as $50,000 with an Upgrade personal loan. Co-borrowers are also allowed if you want to improve your chances of getting approved or securing a low rate. If you’re interested in opening a credit card or checking account in addition to your personal loan, Upgrade offers options for both. You may also get a rate discount on your personal loan if you have an Upgrade checking account.  

Cons: The maximum APR is very high, and so is the origination fee, if you’re applying with fair credit. Personal loans through Upgrade are not available in Hawaii or Washington, D.C.

Upgrade
Current APR5.94% to 35.97%
Loan Term Range3 to 5 years
Loan Amount$1,000 to $50,000
Prepayment PenaltyNone
Origination Fee2.9% to 8%
Minimum Credit Score620
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Yes
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

Upstart: Good for Nontraditional Lending Requirements

Overview: Upstart accepts borrowers with less traditional lending backgrounds, using job history, college education, and its AI technology to supplement the credit history check.

Pros: Personal loans are accessible to people with fair-to-excellent credit (580+), and the application process looks not only at your credit history, but other factors too, like your job and educational history and where you live. In most cases, you’ll receive the funds the day after approval.

Cons: Upstart only offers three- and five-year repayment terms. The maximum APR is also very high. Residents of Iowa and West Virginia are not eligible at this time.

Upstart
Current APR5.31% to 35.99%
Loan Term Range3 to 5 years
Loan Amount$1,000 to $50,000
Prepayment PenaltyNone
Origination FeeNone
Minimum Credit Score580
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Yes
Cosigner Allowed?No
Unsecured Personal LoansYes
Secured Personal LoansNo

U.S. Bank: Good for Existing U.S. Bank Customers

Overview: U.S. Bank is a traditional brick-and-mortar that offers personal loans for existing customers only.

Pros: The lowest APR is competitive when compared to other major lenders. And you can borrow as little as $1,000, with no origination fee or prepayment penalty. U.S. Bank also offers separate home improvement personal loans and “simple” loans up to $1,000 for existing checking account users.

Cons: You have to be an existing U.S. Bank customer with a 680+ credit score to get a personal loan.

U.S. Bank
Current APR5.99% to 18.49%
Loan Term Range1 to 5 years
Loan Amount$1,000 to $25,000
Prepayment PenaltyNone
Origination FeeNone
Minimum Credit Score660
Minimum Annual IncomeNone specified
Co-Borrower Allowed?Yes
Cosigner Allowed?Yes
Unsecured Personal LoansYes
Secured Personal LoansNo

What is a Personal Loan?

A personal loan lets you borrow a fixed sum of money for a fixed interest rate to be paid over a fixed period of time. Typically unsecured (not requiring collateral like a car or home), personal loans can be used for debt consolidation, home improvement projects, and other large expenses that one may not want or be able to pay for in one go.

What Are the Current Personal Loan Rates?

As of September 8, 2021, the average interest rate for a personal loan is 10.46%, according to Bankrate.

Personal Loan Rates by Credit Level

Your FICO credit score has a big impact on your personal loan interest rate. While some lenders have rates outside the ranges listed below, those would be exceptions to the rule.

FICO Score RangeAverage Interest Rate
Excellent720 to 85010.3% to 12.5%
Good690 to 71913.5% to 15.5%
Average630 to 68917.8% to 19.9%
Bad300 to 62928.5% to 32.0%

Excellent

To have excellent credit and qualify for an interest of around 10% to 12%, you need to have no recent derogatory marks on your credit report, such as collections or bankruptcies. You should also use as little of your available credit as possible and pay all of your bills on time.

Good

A good credit score of 690 to 719 will likely get you a personal loan rate of anywhere from 13.5% to 15.5%. If you have this credit score you’ve probably paid almost all of your bills on time, with no late payments of 90 days or more.

Average

An average credit score of 630 to 689 means your personal loan is likely to have an interest rate of 17.8% to 19.9%. If you’re using more than 30% of your available credit and have a single derogatory mark on your credit report or a history of late payments, then you could have a score in this category.

Bad

With the lowest credit score of 300 to 629, you could have difficulty qualifying for a loan. The loans that you are eligible for will have the highest personal loan rates of 28.5% to 32.0%. If you have a recent bankruptcy, lots of unpaid bills, or a few maxed out credit cards, your credit score will suffer.

What is a Good Personal Loan Interest Rate?

Interest rates will vary depending on the terms of a loan and the borrower’s creditworthiness. What is considered a “good” rate varies from person to person depending on what you need the money for and what other options you have. If you’re using a personal loan to consolidate debt, then a good personal loan interest rate is one that is better than the interest rate on your credit card debt (or the aggregate interest rate if you have multiple credit cards). Otherwise, there’s no point in using a debt consolidation loan, since you won’t be saving money. The average credit card interest rate hovers around 15%.

The higher the interest rate for a personal loan, the more you could end up spending in the long term, and the greater the chance of getting locked into a cycle of debt. For example, on a $10,000 loan with a term of 5 years, the difference in overall cost between an interest rate of 10% and an interest rate of 25% would be $4,862.56 over a five-year period.

We recommend comparing offers from multiple lenders to get the best rate. All lenders weigh variables (e.g., credit history, credit score, income) differently, so it helps to have a variety of options. You can apply online or call a lender for a quote, though keep in mind these processes will require you to divulge your personal information. You will likely experience a small but temporary drop in your credit score as a result of the credit check that comes with the application.

How to Get the Best Personal Loan Rates

The exact personal loan rate you get will depend on several factors, including the lender you use, your credit score, debt-to-income ratio and other measures of creditworthiness, the amount and duration of the loan, and whether the loan is a secured or unsecured loan. 

Here are some things you can do to get the best rate:

  • Shop around. Many lenders will allow you to pre-qualify and see the rate you could get without a hard credit inquiry, allowing you to compare offers from different lenders without worrying about your credit score being affected. Be aware, though, that if you decide to move ahead with a formal application, the lender will require a hard credit inquiry which could lower your credit score. Some lenders might also offer special promotions, so it’s worth looking around on their website or asking a representative about any discounts. 
  • Improve your credit score. Improving your credit score can improve your chances of qualifying for a loan and getting a better rate. Ways to improve your credit score include always paying off your credit card balance on time and in full, keeping a low credit utilization ratio (ideally under 30%), and not applying for too many new credit accounts in a short period of time.  
  • Consider a secured loan. If you’re having trouble qualifying for good rates on an unsecured loan due to a low credit score, a secured loan could be another option. Unlike unsecured loans, secured loans require putting down an asset — like a house — as collateral. Secured loans tend to have better rates than unsecured loans because they’re less risky for the lender, but they’re also riskier for you. If you fall behind on your payments, you could lose your collateral. 

Personal Loan Rates at Banks vs. Credit Unions

If you’re a member of a credit union, you may find better rates than you would at other lenders. Because credit unions are run by members and not for profit, they may offer better rates to their members than a for-profit lender. If you have a less-than-stellar credit score, you may also have better chances of qualifying for a loan with your credit union since they’ll be more likely to consider factors beyond your credit score.

To be eligible for a loan from a credit union, though, you typically have to be a member. If you’re already a member of a credit union, it’s worth checking out their rates. Still, if you’re not a member, you might want to consider whether it’s worth signing up — which could include membership fees — for the sake of a potentially lower loan rate. Credit unions also tend to offer fewer options for getting pre-qualified compared to other lenders, which may make it harder to shop around for rates. 

Pros and Cons of Personal Loans

Pros

  • Fixed interest rate

  • Lower rates than credit cards

  • Unsecured – no collateral required

  • Consolidate high-interest debt

  • Can be used for any expense

Cons

  • Need high credit score for low rate

  • Difficult to get with poor credit

  • Higher monthly payment than credit card

  • Loan origination fees

  • Easy to overspend

How to Get a Personal Loan

  1. Check your credit history

Before you start looking for a personal loan, it’s a good idea to review your credit report. This will give you a good idea of how likely you are to be approved for a loan and what interest rate you may qualify for. 

By reviewing your credit beforehand you’ll have a chance to fix errors on your credit report, if you come across any. This can save money in the long run by improving your credit score and helping you secure a lower interest rate.

  1. Review all your options

Depending on what you’re trying to accomplish, a personal loan may not be the only financial tool that will help you out. If you have the collateral for a secured loan, then you may be able to borrow money at a lower cost. If you only need to borrow the money for a short period of time and can pay it back within 6-12 months, a 0% APR credit card offer could be a good option. 

So be sure that a personal loan is the best option for you before moving forward.

  1. Compare loans and rates

To get the best rate and terms, you’ll need to shop around. You should start with any bank or credit union that you have a pre-existing relationship with as they may offer better deals to existing customers.

As you’re comparing loans don’t only look at the interest rates. Be sure to consider loan origination fees, prepayment penalties, late fees, and whether the rate is fixed or variable.

  1. Get prequalified

Getting prequalified for a loan usually doesn’t have an impact on your credit because the lender will typically only do a soft pull. But, getting prequalified will let you know what lenders are willing to issue you a loan. This step in the process is less rigorous than submitting a full application. You typically only need to share you basic information, such as your date of birth, social security number, address and income.

  1. Apply for the loan

Once you’re ready, it’s time to apply for the loan. During this step in the process the lender will need to verify all of your personal and financial information. So you’ll need to provide a government ID, verification of your address, bank statements, pay stubs and documentation for any existing debt.

How to Choose a Personal Loan Lender

There are hundreds of personal lenders on the market, so how do you choose the best one for you? Which you decide on is a personal choice, but we believe a good personal loan lender meets the following criteria:

  • Upfront and transparent about interest rates, terms, and fees on its website
  • Responsive and helpful customer service
  • Positive reputation and track record
  • Offers an APR that doesn’t exceed 40% 
  • Doesn’t require personal information to be entered for a rate comparison
  • Doesn’t charge a penalty for paying off your loan early
  • Doesn’t have exploitative repayment terms (i.e., fast payback periods, high interest rates, exorbitant fees, confusing policies)

Reasons to Get a Personal Loan

While some have taken out personal loans for things like weddings, funerals, or even vacations, we don’t recommend it. Getting a personal loan for the wrong reasons could harm you in the long run.

However, a personal loan can make sense in certain situations, such as:

  • Consolidating high-interest debt
  • Home repairs or improvements
  • Switch from adjustable to fixed interest rate
  • Pay for emergency vehicle repairs

When You Should Get a Personal Loan

The best reason to get a personal loan is to consolidate debt. As long as you get a favorable interest rate and make payments on time, you’ll be benefitting from the simplicity and lower payments of a single loan that takes the place of multiple credit cards or other loans with varying and higher APRs. Home repairs, such as termite extermination and leaking roofs, are also sensible reasons for personal loans, but you need to have a solid plan for repaying the debt.

When You Shouldn’t Get a Personal Loan

Weddings and vacations are not good uses for personal loans. Ending up in debt for costly personal expenses can land you in deep financial trouble, so we don’t recommend personal loans for anything other than emergencies or focused self-improvement. It’s also not recommended that you consolidate student debt, as you could lose access to deferments, forbearances, and other types of payment arrangements.

Personal Loans FAQ

What is an APR?

APR means annual percentage rate. It’s the coast of borrowing money from a lender in the form of interest, plus fees. It’s essentially an annualized representation of the interest rate you’ll pay for the loan.

What’s the difference between a secured and unsecured loan?

Secured loans require collateral, such as a car, home, bank or investment account, or other asset, as part of the loan agreement. If you fall behind on payments and default on the personal loan, your collateral could be forfeited to your lender. Most personal loans, which are unsecured, do not require collateral.

What are repayment terms?

The length of time you agree to pay back the principal and interest of a personal loan. The shorter the repayment period, the higher the monthly payments.

How much can you borrow with a personal loan?

You can borrow as little as $1,000 and as much as $100,000 with a personal loan. Loan amounts will differ depending on the lender. And keep in mind the amount you’re eligible to borrow will depend on your creditworthiness. If you’re requesting $80,000 and have bad credit, you may not receive as large of a loan as you asked for.

What are the requirements for a personal loan?

To get a personal loan, you’ll likely need to have steady income, a decent credit score, and a track record of making payments on time. Most loans are unsecured, but some are secured, which means you would need to put up an asset (such as your house, car, or money in the bank) as collateral. If you have no credit, bad credit, or not established in your credit history, you may need to add a cosigner — someone with good credit who will be on the hook for the loan if you fall behind on payments.

How does my credit score affect my offer?

Lenders prefer credit scores in the good-to-excellent range. A high credit score tells a lender that the borrower can be trusted to handle credit and debt responsibly, so higher credit scores tend to merit a higher chance of loan approval and lower interest rates. A fair or poor credit score won’t disqualify you from getting a personal loan (some lenders even specialize in loans for bad-credit applicants), but it may be more difficult to get a low interest rate that’s competitive with credit card interest rates.

How does applying for loans affect my credit scores?

When applying for loans, lenders will do a credit check to determine if your credit history meets their standards. Usually, this “hard” credit pull will ding your credit scores a few points, but only in the short term.

What’s the difference between a fixed rate and a variable rate?

Most personal loans are offered at a fixed interest rate, which will not change throughout the length of the repayment term. Some personal loans are offered at a variable rate, but those loan products come at higher risk.

What is a good interest rate on a personal loan?

Typically, a good interest rate is lower than the interest rate on your credit card (or the aggregate rate if you own multiple cards). The average interest rate on a credit card is 15%. Rates are always changing on personal loans, so it really depends on what you’re able to afford in your budget and how urgently you need a personal loan. A high interest rate can get you into a cycle of debt if you’re not careful.

What is a prepayment penalty and why does it matter?

Some banks will charge fees if you pay off your personal loan before the repayment period is up. If you are in the market for a personal loan, we recommend avoiding lenders that charge early repayment fees or penalties.

What happens if I can’t pay back my loan?

If you don’t pay back a personal loan, you may be charged fees. The missed payments will be reported to the credit bureaus, resulting in a lower credit score. After not paying for several months, your loan would go into default — which could result in a bad credit score, wage garnishment, seized collateral, and trouble getting credit or even an apartment in the future.

Is a Personal Loan Worth It?

Personal loans are best used for debt consolidation, planned home repair projects, and emergencies — but only if the interest rate and repayment terms are favorable. If a personal loan is taken out without a clear plan for how to repay it, it is never worth it. If you have bad credit, no credit, or if you’re unemployed, personal loans are probably not worth it.

Personal Loan vs. Credit Cards with Promotional Rates

If you’re looking to consolidate debt, then you may want to consider credit cards with promotional rates instead of a personal loan. Many credit cards come with 0% introductory APR on purchases and balance transfers for as long as 15 months, and those go a long way in helping pay down debt if you can qualify for such offers. Keep in mind, however, that it’s strongly encouraged that you pay off the card within the introductory period. Otherwise you may face interest rates between 15% and 25%. Additionally, if you miss a payment, the 0% APR will revert to the regular purchase and balance transfer APR.

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