Best Personal Loan Interest Rates For 201907/12/2019
If you are planning to get a personal loan to meet some of your financial goals, here is what you need to know. Personal loans are a short-term loan that can be used for any purpose, such as debt consolidation, emergencies, medical bills, renovation etc. You receive a single lump sum which can be repaid in monthly instalments over a period of time, which can be from 12 months to 60 months. The interest rates for personal loans is usually a fixed interest rate.
Personal loans usually are unsecured, but you can apply for a secured loan. Secured loans are backed by collateral such as a house, a car or other assets and unsecured debt are secured by your creditworthiness and they do not require collateral. Whether your loan is secured or unsecured, it is a factor that will affect your interest rates.
Interest rate is the percentage of the amount charged by the lenders for loaning you the money. For example, you can borrow $2000 for 48 months and end up paying back $2500 or as much $3000 after the four years. Your interest rate will determine whether you are charged $500 or $1000 for the loan.
Factors that Affect your Interest Rate
When considering a personal loan, you should know what factors can affect your interest rate. Because personal loans are based your creditworthiness, how you handle your finances is very important in your ability to obtain a loan. Understanding your credit scores and the factors beyond your credit score is instrumental in you getting a loan. Lenders will review your credit scores, employment and your financial profile.
The credit score, which is a three-digit number, is a summarization of the information on your credit report. The credit report is a detailed report created by the credit bureaus to capture daily financial transactions. Your credit reports should be reviewed yearly for accuracy because lenders use this information to determine your creditability.
Your income and your income plays a critical role in determining your creditability. Lenders must know if your income will cover your old debts and your potential new debt. They will need to know that your income is stable. If there are gaps in your income, this can be a concern.
In addition to your income stability, your employment is reviewed by lenders as well. Your employment history includes not only your current job but your past jobs or lack thereof. If you are continual changes jobs or there are gaps in your employment history, the lender will be concern about your ability to repay the loan and might deny the loan. A good track record for work history is two years or more.
A credit profile includes your entire financial situation. It dives a little deeper in your credit report to take a look at other factors such as foreclosure, bankruptcies, tax liens, outstanding debts and recent inquiries. The number of inquiries shown on your credit report is a factor that affects your interest rate. Credit inquiries are requests by potential creditors to review your report. The lenders will see this as a red flag especially if they are made close together.
Other factors that can affect your interest rate are foreclosure, bankruptcies and tax liens. These judgements can stay on your credit report for a minimum of seven years and a maximum of ten years.
Some lenders are utilizing technology to review your public behaviour. Lenders can use your behaviour as a factor in their decision to approve your personal. So, be cognizant of what you do on social media because getting the lowest interest rate is your goal.
Best Bank Loan Rates
If you prefer to get your personal loan from a traditional bank or financial institutions, here is what you should know. There is not a single lender that provides personal loans with the lowest interest rates for everyone. But different lenders tend to offer low interest rates than others.
Personal loans are not available at all banks. Bank of America, Chase and Capital One do not make personal loans. However, if you prefer your bank, and you have a significant investment at the bank and an excellent credit score, you may be able to get a personal loan from a traditional bank or financial institution.
Traditional banks and financial institutions that do offer personal loans normally offers competitive interest rates, rate discounts and an easy application process. Personal loans made through banks can be used for debt consolidation, emergencies expenses and home improvement. However, the reasons for your loan can determine your interest at a bank.
According to Nerdwallet below are some best banks for personal loans:
- American Express offers the best interest rate for debt consolidation. The interest rates are as low 6.90% to 18.98%.
- LightStream has the best interest rate for home improvement. The interest rates range from 3.99% to 16.99.
- U.S. Bank has the best interest rate for secured personal loans. The interest rate range from 7.4% to 17.99%
Note: Interest rates can change daily.
Average Rates by Credit Score
The interest rate for a personal loan depends on your credit score and the factors beyond your creditor score. Your interest rate can range from 6 per cent to 36 per cent, depending on your financial situation.
According to Bankrate.com, below is an example of average rates by credit score.
- If your credit scores are between 720 and 850, the average interest rate is 9.90 per cent.
- If your credit scores are between 690 and 719, the average interest rate is 15.00 per cent.
- If your credit scores are between 630 and 689, the average interest rate is 21.00 per cent.
- If your credit scores are between 300 and 629, the average interest rate is 28.00 per cent.
Note: Interest rates can change daily.
Cheapest Loan Rates
The loan with the cheapest rate and is typically the best choice. But other features like no fees, fixed rates, soft credit checks, autopay and lender paying creditors directly can set some personal loans apart for the rest.
So, you know how to get money today. Good Luck!