What is a good interest rate on a personal loan?


Educate yourself and make smart choices to get the best possible interest rate on a personal loan.

A Personal loan is a type of loan that is funded quickly and has monthly payments. You can use a personal loan for high interest debt consolidation, pay off a large purchase, or face a financial emergency, among other main reasons. As a general rule, the repayment period for a personal loan can be between two and five years, with loan up to $ 100,000.

According to Credible data, personal loan interest rates vary widely, from 4.99% to 36%, depending on your credit and other personal finance factors. As a general rule, the higher your credit score, the better your interest rates will be.

The Federal Reserve has kept benchmark interest rates close to zero during the Coronavirus pandemic. Such low interest rates bode well for borrowers, although they may face tighter lending standards from lenders who have felt the pinch of the economic downturn.

Still, if you have good credit and a reliable income, you may be able to save thousands of dollars with a Low Annual Rate Personal Loan (APR).
Credible can help you find reputable personal lenders who provide timely financing.


What is the best interest rate for a personal loan?

“The ideal rate for a personal loan is if you can get one below the national averageSaid Karen Condor, former banker and current financial expert at Loans.org.

Currently the the nationwide average interest rate is 9.65%, according to the most recent data from the Federal Reserve. In contrast, the average interest rate for personal loans is significantly higher than the average interest rate for credit cards, which currently stands at 16.28%. These figures show that personal loans generally have lower rates and are one of the cheapest ways to borrow.

Credible is a good resource for anyone who wants compare interest rates for personal loans and multiple lenders in one place.


What factors determine the interest rate on a personal loan?

Interest rates for personal loans vary widely, in part due to the different ways that lenders assess risk. Generally, most lenders assess their credit scores strongly when determining interest rates. For a lender, a high credit score equates to less risk, which translates into qualifying for lower personal loan rates.

Lenders also take a close look at your debt-to-income ratio (DTI), which is a percentage that reflects the portion of your gross monthly income spent on paying off your total monthly debt payments. Your DTI calculation includes all of your debt and credit card loans. Having a lower DTI ratio tells lenders that you have the budget in your personal finances for a new payment with a lower interest rate.

“Your interest rate is also factored into your proof of income because higher and more stable income will put you in a best position to guarantee a lower interest rate”Condor said.

In addition, the type of personal loan you apply for has a direct correlation with its interest rate. “A unsecured loan will have a higher interest rate because it is not backed by anything other than the borrower’s promise to pay, ”Condor said. “This means that there is virtually no collateral a lender can claim in the event of default, so an unsecured loan is a higher risk product for them.”

When it comes to personal loan purchases, Credible can do the heavy lifting for you. With the click of a button, you can view multiple lenders, rates, and terms in one place. Get a boost in your personal loan purchases today.


How can I get the best interest rate on a personal loan?

Here are some ways to get the best possible interest rate for your personal loan:

1. Improve your credit

You can get a lower interest rate by holding a high credit rating that demonstrates a history of timely payments. If your credit history and credit score are less than ideal, consider taking personal finance steps that can increase your score, such as:

Confused about where you fall on the credit score spectrum? You can start using a credit monitoring service to track changes in your credit score. Credible can set you up with free service today.

2. Reduce your debt ratio

If your DTI is 36% or more, consider lowering it before applying for a personal loan. Go through your budget and look for ways to reduce your debt balances, starting with your highest interest accounts.

You can also improve your DTI ratio by increasing your annual income through a promotion at work or by earning extra money with a secondary fuss.

3. Shop with multiple lenders

Shop and compare several lenders in a market like Credible to find the most competitive interest rates and loan options.

“As you do your research, keep an eye out for seasonal offers for lenders,” Condor said. “These can allow you to get discounts for a limited period on the interest rate.


Next steps

It is useful to know the personal loan interest rates that you want and what your credit profile suggests you might receive. Most importantly, make sure that the loan you are considering is the best fit for your needs and that you can afford the monthly payments. Make personal loan payments on time each month, so you’ll be in a good position to get the lowest rates on any financial products you pursue in the future.

If you have any questions, such as loan options or rates and fees, contact a experienced personal loan officer at Credible to get the answers you need.


Have a financial question, but don’t know who to ask?  visit https://bridgepayday.com/ to learn more about loans.

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