If you need cash or are looking to consolidate your debt, a personal loan is an option you might consider. These loans offer one-time lump sum payments and you can use the funds for anything you want.
They are also unsecured, meaning you don’t need any kind of collateral to qualify.
If you think you could benefit from a personal loan, you can start today. You may be eligible to receive cash fast in a lump sum.
If you’re considering getting a personal loan, here’s what you need to know about personal loan rates and how to get the best one.
What is a good rate for a personal loan?
Interest rates on personal loans fluctuate, but according to the Federal Reserve Bank of St. Louis, the average rate on a two-year personal loan currently stands at 8.73%.
So if you can get this rate or less? Then you are on the right track.
Generally speaking, personal loans have higher rates than other types of loans, especially secured ones. Mortgages, for example, currently average just over 5%.
However, personal loan rates tend to be lower than credit card rates. This is why they are often smart debt consolidation options for consumers with a lot of credit card debt. The average rate on a business credit card, for example, was over 15% in May 2022, well above the average personal loan rate.
If you want to see what type of personal loan rate you qualify for, lenders are there to help you.
What affects personal loan interest rates?
It is important to note that the above rates are only averages and do not necessarily reflect what you would get if you applied for a personal loan today.
In reality, your personal rate will depend heavily on, your debt repayment history and the term of the loan you choose. Generally speaking, the better your credit score and your solid payment history, the lower the rate you will qualify for.
Conversely, if you have a low credit score or a history of late payments, you can usually expect a higher interest rate. This is how the lender compensates for the extra risk you present.
To put you in the race for the lowest interest rates, you must first repair your credit. This is a process and won’t show results overnight, so it’s best to start early.
How to get the best personal loan rate?
The best way to get a low personal rate is to. Remember: the best rates are reserved for those with credit scores of 800 or higher. If your score isn’t quite that high, you can improve it by paying off your debts, disputing errors on your credit report, and paying your bills on time.
In some cases, having a pre-existing relationship with the bank or credit union lending you the money may give you a lower rate. You can also get fare discounts if you set your account to autopay.
How to apply for a personal loan
To get a personal loan, you must first find a lender. To ensure you get the best deal, apply for prequalification through at least a few different places, including your bank or credit union, an online lender, and another. This will give you a full range of loan alternatives, along with a variety of fees, terms, and rates to consider.
When applying, you will need to provide your social security number, date of birth, contact information, employment information, mortgage or monthly rent details, and gross monthly income. You also need to know the amount and term of the loan you want. If you’re unsure, a personal loan calculator can help you focus on what’s right for your budget and the ideal monthly payment.
You may also be asked to provide the following documents:
- Copies of your latest W-2s and tax returns
- A recent utility bill with current address listed
- Your latest payslips
- A copy of your driver’s license or social security card
There may be other elements as well, but it depends on your lender and your unique financial situation. When you apply for a loan, a loan officer will be assigned to you and will guide you through the process. They will let you know if any other documents are needed.
Ready to start? See what type of personal loan you qualify for right now.