When thinking about personal loans, who do you imagine as the most common borrower? Someone struggling financially with a low to average income, or a college graduate with a high-paying job and great credit? The answer may surprise you.
People with good credit (scores of 700+) are now increasingly taking out personal loans to buy cars, pay for weddings, consolidate debt and more. According to a 2016 survey commissioned by Discover Personal Loans, 60% of the people who take out personal loans are in good to excellent financial shape.
Why are personal loans so attractive to people with good credit?
Getting a personal loan has become extremely convenient. Gone are the days when you would have to visit your local bank to apply, wait to get approved, and then wait again for the funds. Now, you can take care of the whole process online from the comfort of your home.
There is a multitude of online loan providers just a few clicks away. You just find the loan with terms that you like, fill out an application online and wait for approval. In many cases, the process can take place in under 24 hours, with the money being deposited into your bank account on the same day that you apply. Furthermore, with most of the loans being unsecured, you don’t have to hassle with any kind of collateral; good credit and high income is all you have to show.
Another convenience of securing a personal loan online is that lenders often only perform a soft credit check to determine if you are eligible. Being so, you can find out what you qualify for in terms of loan amounts and monthly payments without worrying about marks on your credit report.
Competitive interest rates
The 2016 Discover survey also found good interest rates to be a key factor for people when choosing a lender, and borrowers with good to excellent credit stand to get the best rates.
What kind of rates are we talking about?
Well if your credit score is in the excellent range (720-850), the average interest rate charged on a personal loan is about 10.94%. If you’re in the good range (690-719), the rate increases to about 14.56%.
But those are just the averages. By shopping around, you can find online lenders that offer interest rates that are as low as 2.19%. How does that compare to other types of borrowing? In the third quarter of 2016, Bankrate reported the average interest rate on credit cards to be 12.51%. You may find a great introductory rate on a credit card that is beneficial for a limited time, but when you compare average rates, personal loans often can offer a better deal.
Interested in what interest rates are available on personal loans? Here are some of our top picks.
Low-interest personal loan lenders for good credit
LightStream: 2.19% to 17.49% APR
LightStream offers excellent low-interest personal loans to applicants who have a good credit rating and proof of sufficient income. Amounts range from $5,000 to $100,000 with repayment terms of 24 to 84 months. Note that your interest rate is based on your credit as well as the loan’s intended use; for example, rates are different for home improvements versus life events. If you’d like to apply, you can do so online and will usually hear back within a few minutes.
SoFi: 5.7% to 14.49% APR
SoFi is a marketplace lender with a range of personal loan options for people with good credit and proof of a high income level. Loan amounts of up to $100,000 are available for those who qualify, and payment terms are offered for 36, 60 or 84 months. You need to create an account on the SoFI website to apply, and then can receive loan offers from various lenders. Additionally, it provides benefits that include career assistance and business networking opportunities.
LendingClub: 5.99% to 35.89% APR
LendingClub is also a marketplace lender offering loans of $1,000 to $40,000 with repayment terms options of 36 and 60 months. You can apply for a personal loan on their website by filling out a short questionnaire. You then receive offers from several lenders and can choose the one that suits you best. There are no application fees, but you will be charged an origination fee that ranges from 1% to 6%.
Prosper: 5.99% to 36% APR
Prosper, which was the first marketplace lender in the U.S., offers personal loans with flexibility and no hidden fees or penalties. Any loan application can be tracked online and there is an extensive customer support network. Once you apply, you receive loan offers from various lenders; those with excellent credit are offered the lowest APRs. If you decide on a loan, there is an origination fee of 1% to 5% of the loan.
Upstart: 4.93% to 29.99% APR
Upstart’s marketplace lending product offers loans from $1,000 to $50,000 with repayment terms of 36 to 60-months. This platform is different from other lenders because it considers factors related to job history and education as well as credit history. This is a good option for you if you are a recent college graduate.
Best Egg: 5.99% to 29.99% APR
Best Egg is also a marketplace lender and is known for their fast processing time. You apply online and receive offers from lenders. Again, only those with good credit receive the low interest rates. Amounts range from $2,000 to $35,000 and there are many repayment options.
Review and compare low-interest lenders
Personal loans are attractive to people with good credit because they are convenient, have an easy application process, and are competitively priced. There is no shortage of lenders, so be sure to take your time to shop around to get the best deal.
By clicking here, you can browse and compare a whole collection of low-interest lenders, helping to make your final choice that much easier.