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Sunday, September 4, 2016

What Are the Best Personal Loan Rates Today?

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Personal loans can be a valuable resource for improving your financial situation, especially when unexpected expenses come up.
However, in order to reap the maximum benefits from taking out such a loan, it’s important to get the best personal loan interest rates.
But how do you know what the best personal loan rates even are? And how can you make sure you qualify for the lowest personal loan interest rates available?
Here are five questions you should ask before signing on the dotted line for a personal loan.

1. What is a personal loan?

A personal loan is a type of unsecured debt. That means you don’t have an item that’s considered collateral to back up the loan.
Personal loans are similar to credit cards but different from mortgages or auto loans. Those types of loans are secured by the item you’re buying. A home or car can be repossessed by your lender if you don’t make your loan payments.
Personal loans are considered a riskier type of loan by lenders because they’re not backed by collateral. This means they may have a higher interest rate compared to secured loans.
Lenders may also have higher standards for making personal loans, so you may need a relatively high credit score in order to qualify for the best rates available.

2. What can personal loans be used for?

The beauty of a personal loan is that you can use the money for whatever you’d like.
However, responsible uses of personal loans pretty much entail using them to pay off higher-interest debt. Predictable monthly payments and fixed personal loan interest rates can also be a benefit for those looking to pay off other debts using personal loans.
Generally speaking, it’s best to save up for big purchases and make them in cash. Or, create an emergency fund so that you’re prepared to deal with the unexpected.
But if those strategies are impossible for one reason or another, then personal loans are preferable to payday loans, which are usually expensive and often predatory.

3. How are personal loan interest rates determined?

Generally speaking, a good credit score and proof of income will help you qualify for the best personal loan interest rates.
Most reputable lenders won’t issue a personal loan if your credit score is below the 640-660 range. Or if they do issue one, the interest rate will most likely be too high for the loan to be financially advantageous for you.
If your credit score and income are low, then putting up collateral to secure the loan may improve the interest rate you’re offered. Or, you may want to consider getting a cosigner for the loan. However, both of those approaches have their own risks.
Lender type may also affect the personal loan interest rates offered.
Credit unions, which are member-owned, may offer lower rates than big banks. Online banks, which don’t have to pay the costs associated with physical locations, may also offer lower rates.
Peer-to-peer lenders may take your entire situation (as opposed to just your credit score) into account, As a result, they may offer lower rates to some applicants than traditional lenders will.

4. What’s the average personal loan interest rate?

Personal loan interest rates don’t just depend on the type of lender and the creditworthiness of the borrower. They also depend on the Federal Reserve’s overnight interbank rate.
Although this rate has been at or near zero for several years, the Fed recently raised the rate slightly. And they are likely to continue doing so in a slow and measured way.
While shouldn’t rush into a personal loan before you’re ready, it may be better to get one now rather than wait later and risk higher personal loan interest rates.
Some lenders, such as SoFi and Earnest, are offering fixed rates as low as 5.95% APR and variable interest rates as low as 4.74% APR for borrowers with the best credit.
Those with average credit can expect rates in the 7.50% APR range from lenders like Peerform, Vouch, and Avant. Less creditworthy borrowers can expect personal loan interest rates as high as 35% APR.

5. How do I find the best personal loan interest rates?

The best way to find the best rate is to apply with multiple lenders and see what rates you’re offered. You’ll get a pretty clear idea of your range and will be able to identify the better deals.
If possible, try to avoid personal loan applications that require what is known as a “hard credit pull.” Those can lower your credit score slightly every time they occur.
And if some lenders you’re considering require hard credit pulls, time your applications so that they all occur within the same 45-day period. This will make it clear to credit bureaus that you’re rate shopping so that all inquiries count as a single “pull.”
Make sure you’re applying for loans with the same repayment term length as well as the amount. Otherwise, you’ll get different personal loan interest rates for loans with various characteristics.
Some lenders charge certain fees and others don’t so make sure to take those into consideration. Also, do you homework and read reviews on lenders you’re considering to make sure the company you’re applying with is reputable.
The more data points you have, the likelier you are to obtain the best deal possible for you. It’s not an overnight process, but it can improve your situation immensely if you get the lowest rate you can.

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