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If you need cash or are looking to consolidate debt, a personal loan is one option you might consider. These loans offer one-time, lump-sum payments, and you can use the funds for anything you like.
They’re also unsecured, meaning you don’t need any sort of collateral to qualify.
If you think you could benefit from taking out a personal loan you can get started today. You may be eligible to get cash in a lump sum quickly.
If you’re considering taking out 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 sits at 8.73%.
So if you can get that rate or lower? Then you’re on the right track.
Generally speaking, personal loans have higher rates than other types of loans — especially collateralized ones. Mortgage loans, for example, currently average just over 5%.
Personal loan rates do tend to be lower than credit card rates, though. This is why they’re often smart debt consolidation options for consumers with lots of credit card debt. The average rate on a commercial credit card, for example, was over 15% in May 2022 — well above the average personal loan rate.
If you want to see what kind of personal loan rate you qualify for, lenders are standing by to assist you.
What affects personal loan interest rates?
It’s important to note: The above rates are just averages, and they’re not necessarily reflective of what you’d get if you applied for a personal loan today.
In reality, your personal rate will depend heavily on your credit score, your history with repaying debt and the loan term you choose. Generally speaking, the better your credit score and stronger your payment history are, the lower rate you’ll 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 yourself in the running for the lowest interest rates you should first repair your credit. This is a process and won’t show results overnight so it’s better to get started soon.
How do you get the best personal loan rate?
The best way to get a low personal rate is to improve your credit score. Remember: the best rates are reserved for those with 800 credit scores or higher. If your score’s not quite at that point, you can improve it by paying down 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 that loans you the money can give you a lower rate. You might also get rate discounts for setting your account on autopay.
How to apply for a personal loan
To get a personal loan, you’ll need to find a lender first. To make sure you’re getting the best deal, apply for prequalification with at least a few different places— including your home bank or credit union, an online lender and one other. This will give you a full range of loan alternatives, as well as a variety of fees, terms and rates to consider.
When you apply, you’ll need to provide your Social Security number, date of birth, contact information, employment information, monthly mortgage or rent details and your gross monthly income. You should also know the loan amount and term you want. If you’re not sure, a personal loan calculator can help you zero in on what works for your budget and ideal monthly payment.
You might also be asked to provide the following documents:
- Copies of your most recent W-2s and tax returns
- A recent utility bill with the current address shown
- Your most recent pay stubs
- A copy of your driver’s license or Social Security card
There may be other items, too, but it depends on your lender and your unique financial situation. When you apply for a loan, you’ll be assigned a loan officer who will guide you through the process. They’ll let you know if any more documents are necessary.
Ready to get started? See what kind of personal loans you qualify for right now.
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