You may have seen the low personal loan rates that were announced recently, and you may be wondering: How can I get this personal loan for 5-6%, or even get it? Or maybe you’re just curious: What is a personal loan anyway? (Answer: A personal loan is a loan issued by an online lender, bank, or credit union, usually for a total amount of about $1,000 to $100,000.) Here’s what you need to know to find out if a possible personal loan is right for you, and if So, how do you get a low price on one.
Pros and Cons of Personal Loans
The first thing to remember, before we even talk about how to get a low rate, is that these loans have their pros and cons. One big advantage of personal loans is that they often finance quickly, sometimes within a day or two, and may have lower interest rates than a credit card. But they also usually have higher rates than equity loans or home equity lines of credit, and for those with poor credit, rates can be as high as 30%. This MarketWatch Picks guide will give you 101 on personal loans and who’s and who don’t.
How to get the best rate on a personal loan
In general, a credit score of 740 or higher will help you get the best rates and terms on a personal loan, says Ted Rossman, senior industry analyst at Bankrate. “It’s sometimes a little lower and sometimes a little higher, but we’re generally talking about the mid-70s and up on the best terms, which are in the 5% to 6% range for a personal loan,” Rossman says.
And that’s not all: “Lenders look at more than your credit score when determining your personal loan rate. Your income, other current debt, cash flow, and employment are all common factors that help a lender determine whether You qualify and what price does it give you.
As a rule, the absolute lowest rates are often reserved for the most qualified borrowers, which means that not everyone will get a very low rate. “Personal loan rates are tailored to the specific situation of the borrower, and what lenders consider to be worth a lower rate can vary, which is why it is so important to compare,” says Annie Millerbrand, personal loan expert at NerdWallet.
How to apply for a personal loan
Compare multiple offers from online financial institutions and local banks or credit unions, says Rossman. “The best deals are often offered by Internet-focused fintech companies. However, you may find better terms at a local bank or credit union, so it is always a good idea to shop. I bet a credit union or community bank is likely,” says Rossman. To offer a lower rate than any major national bank.”
For personal comparisons, Millerbernd recommends pre-qualifying with several lenders to see what each of them can offer. “Pre-qualification doesn’t hurt your credit score and can show you which lender you might get the lowest personal loan rate,” Millerbrand says.
With so many lenders offering mid-single-digit personal loan rates, it is not necessarily difficult to find an advertiser. “The hardest is to qualify. Just because lenders offer these low rates to some clients doesn’t mean everyone will qualify – for example, if your credit score is lower or your income isn’t as high as they like, you may be rejected or offered a higher rate amount,” Rossman says.