Interested in a personal loan yourself? You may be wondering where to get the best personal loan rates online.
The amount and terms of your loan, as well as available lenders, depend on your credit score.
If you have excellent credit…
is an online lender that focuses on borrowers with excellent credit scores and high income. Its customers’ average credit score is 780. Their income, on average, is $150,000. As of January, SoFi has issued more than $15 billion in loans to more than a quarter million borrowers.
SoFi’s annual percentage rate (APR) ranges from 5.7% to 14.49%.
LightStream is an online lender offering personal loans to borrowers with good to excellent credit. Borrowers need to specify the reason for the loan, as interest rates are determined partly on the reason for the loan. LightStream is the personal loan division of SunTrust Bank, a Fortune 500 lender with more than $175 billion in assets.
LightStream’s APR ranges from 2.19% to 17.94%.
If you have good credit…
LendingClub is a peer-to-peer lender that offers personal loans to borrowers with good credit scores. LendingClub uses money from individual investors to purchase loans. Those investors are paid back via the borrower’s payments. Eliminating banks as middlemen allow lenders to save an average of 30% on their loans. As of December, LendingClub has made more than $22 billion in loans.
The APR on LendingClub loans ranges from 5.99% to 35.89%.
Prosper was the first online peer-to-peer lender in the United States. It offers fixed rate loans to borrowers whose credit scores are good to excellent. A 640 minimum credit score is required for its loans. Loans can be requested for any purpose.
The APR for Prosper’s loans ranges from 5.99% to 36%.
If you have fair to poor credit…
If your credit is fair (average) to poor, these three lenders are your best bet.
NetCredit is an online lender that has operated since 2012. Its APR ranges from 34% to 155%, depending on your credit history and other factors, such as job history. NetCredit will lend to people who are unemployed.
Applications are completed entirely online. You will know the APR you’re offered once the application is reviewed.
OppLoans provides fast personal loans to people with poor to fair credit. They do not access your credit score during the loan process. They will lend to people who are unemployed.
Its APR ranges from 38% to 199%.
Interest rates and APRs: Interest rates, as well as the annual percentage rates (APR), should be specified in writing. APRs factor in the interest rate plus any costs related to the loan, such as fees.
APRs are always given in percentages, just as interest rates are. Read the fine print to compare this figure among lenders.
The APR can be fixed or variable. Fixed rates remain the same for the term of the loan. If you get a 15% APR, it will always be 15%. That means you will always pay the same monthly amount, which makes it easier when planning a budget.
A variable APR rises and falls when interest rates do. If interest rates go up and your APR is a variable 10% rate, it may rise to 12% or above. That will make your monthly payment higher.
When you are factoring in your total costs on a personal loan, be sure to count the full amount. Many lending institutions charge fees when they approve a loan. Read their material carefully to determine if there are any fees.
Origination fees: Fees imposed to make, or originate, a loan. These are subtracted from the loan amount so that borrowers receive less than they borrowed.
Early termination fees: These fees charge a financial penalty on borrowers who pay off their loans early, before the term specified in the initial paperwork. If possible, get a loan without an early termination fee.
Re-issue or renewal fees: These fees are charged if borrowers are unable to repay their loans completely. Borrowers in these situations give a partial payment. Lenders refinance the amount still owed on a new loan. These also are known as rollovers.
Be sure to shop around to get the best deals on personal loans.
How can a personal loan help you?
Personal loans have lower interest rates than credit cards, yet can be used for many of the same things. Personal loan rates can range from 5.5% to 9.3%, on average, according to your credit score. Credit card rates are 16% on average.
Personal loans can be a great way to get money for unexpected expenses. If you or a family member becomes sick, for example, personal loans can pay for expensive treatments and high deductibles.
The interest rate you will be charged on a personal loan is highly dependent on your credit score.
Lenders determine what personal loan interest rates they will charge you by pulling your credit score. So let’s talk about the interest rates and your credit score.
Personal loan rates depend on your credit score
Interest rates on personal loans are determined by your credit score. To determine what a good interest rate for a personal loan online is, you need to understand your credit score and how lenders think about it.
As mentioned, interest rates are important because the lower the interest rate, the lower the monthly payment.
Most lending institutions will look at your credit score when you apply for a loan.
Credit scores are determined by five factors:
- On-time bill payments
- Credit utilization ratio
- Length of time you’ve had a credit history
- Types of credit
- New credit
Whether you pay your bills on time is the biggest single contributor to a credit score and makes up 35% of the score.
The credit utilization ratio is the second category, and makes up 30% of the score. This is what you owe as a percentage of the credit you have available. If you have $2,000 available right now, for example, and only owe $200, your credit utilization ratio is good. It is not good for your credit score to be maxed out on credit cards.
The third category is the length of your payment history. It makes up 15% of the score. The report looks at how long you’ve had credit. It’s good if you have established, rather than brand new, credit.
The fourth category is types of credit. It’s responsible for 10% of the score. The report looks at the mix, such as credit cards, mortgage, student loans and personal loans. They like to see that lenders have used various forms of credit responsibly.
The fifth and final category is new credit. It accounts for 10% of a credit score. It tracks how much new credit you’ve applied for recently. A lot of new credit applications all at once will ding your score.
If you want to apply for a personal loan, it’s a good idea to check your credit score first. You can get your credit score and credit report for free from Credit Sesame.
Lenders see you as a good risk to repay their money if your credit score is good to excellent. This also means you will be more likely to get the lowest personal loan rates.
What is a good interest rate for a personal loan online?
Let’s talk figures. Currently, if you have an excellent or good credit score, you may be able to get the best personal loan rates online, which are about 5.5%.
An excellent credit score ranges from 850 to 750. A good credit score is from 650 to 699 and very good is 700 to 749.
At an interest rate of 5.5%, your monthly payment on a $5,000 loan would be about $150 per month for three years.
If you currently have a fair score, personal loan interest rates online are in a 10% to 12% range. A fair credit score ranges from 600 to 649.
Payment on a $5,000 loan would be about $162 per month for three years at that interest rate.
If you currently have a poor credit score, interest rates on personal loans can be higher than the average, at 25% or above. This is because lenders see people with poor credit scores as riskier than people with better credit. A poor credit score falls in a range of 550 to 599.
Payment on a $5,000 loan would be $200 per month for three years.
Remember that these interest rates are estimates. With this guideline, you will be able to shop for personal loan rates online and get the best deal.
People with credit scores below 550 may have difficulty getting approved for a personal loan, or may have to pay rates higher than 25%.
How do you get personal loans?
Once you’ve found the best interest rate, it’s time to apply.
Many institutions, such as banks and credit unions, may offer a lower rate if you already have a bank account or loan with them. If you do have relationships with these types of institutions, it makes sense to try them first.
Many kinds of lenders make personal loans. They include:
- • Banks
- • Credit unions
- • Finance companies
- • Marketplace lenders (e.g. Prosper)
- • Borrower-specific lenders (e.g. military loans)
Generally, credit unions can offer members interest rates that may be lower than many banks.
What is the process involved?
Once you’ve compared APRs and found the most reasonable for your credit score, you will be able to apply.
The lending institution require information about your income and work history. You probably will have to fill out an application that gives your total assets (bank accounts, etc.) and debts.
It’s a good idea to have all this information ready when you decide to apply online.
The lenders will review this information and you’ll receive notice if you have been approved in one to five days.
What if you need to improve your credit score?
As you searched for the best rates on personal loans online, you might have realized it’s a good idea to make sure your credit score is the best it can be. There are a couple ways to do that.
First, if you have had some challenges on paying bills on time, review your budget so that you can improve. It’s the most important piece.
Second, not having any credit at all can actually hurt your loan approval potential. At least get a secured credit card or loan. Your score will go up.
It will hurt your score to be maxed out on credit cards, or to have a lot of credit cards with high amounts owed. It means your utilization ratio might be too high.
To fix this,
One way to pay down debt quicker is to consolidate your debt. Personal loans can be a great way to consolidate debt. If you have a lot of debt on several credit cards, a personal loan can pay off your credit cards and leave you with one bill. One bill is easier to pay than keeping track of many bills.
Personal loans can have much lower APRs than credit cards, which means that the monthly payment can be lower.
One caution, though: if you apply for several personal loans (or any type of loan) at one time, it also may hurt your credit score. Lending institutions may see these application clusters as a sign that you need money. They view that as risky.
So, if you want to increase your credit utilization ratio and types of credit, do it over time, not all at once. With careful planning, personal loans can be a very helpful way to manage your financial life.