If money’s tight and a financial emergency comes up, you may consider taking out a personal loan. Maybe your car is in need of a major repair or you need to cover a medical bill, or you may want to use the funds to pay off credit card debt without spending a fortune in interest. These are the best personal loans for 2018.
Traditional banks and credit unions offer secured and unsecured personal loans. But, you may want to consider online lenders as they have lower overhead. As a result, they can pass the cost-savings to you. Most online lenders also allow you to check your rate with no affect on your credit score.
Our top pick
Sofi (Social Finance Inc.)
SoFi offers personal loans to consumers with a steady income and excellent credit. Credit newcomers also are encouraged to apply because there’s no credit history requirement. And if you’re laid off, SoFi will pause your monthly payments and assist you with finding employment. It also offers mortgage loans and student loan products.
Key benefits: Fairly low APRs, no origination fee, no prepayment penalty, forbearance and job placement assistance if you’re laid off, social events (i.e. educational events and member dinners) exclusively for borrowers
For borrowers with excellent credit
LendingClub is the largest lending marketplace. Its loans are ideal for those with good or excellent credit.
Key benefits: No prepayment penalties, fixed rate loans, low APR for borrowers with excellent credit, joint applicants permitted
LightStream, the personal loan division of SunTrust Bank, caters to borrowers with excellent credit. It offers loans to fund a variety of projects. Borrowers must use the loan proceeds for the reason specified in the application.
Key benefits: No prepayment penalties, minimal fees, competitive interest rates
Prosper is another peer-to-peer lender that is ideal for borrowers with good credit. Borrowers also have access to the Prosper Daily app that lets you track account activity at various financial institutions. You can also check your credit score with the app.
Key benefits: Fixed term, no prepayment penalties, free access to Prosper Daily app
Personal loans for borrowers with fair credit
UpStart is an online marketplace that takes an unconventional approach to lending. If you have less than perfect credit, the lender takes your education, area of study and job history into consideration and so you may qualify. Credit newbies may also qualify for a personal loan with UpStart.
Key benefits: No prepayment penalties, potential earnings weighed during the decision-making process, applicants with minimal credit history considered
| Considers borrowers with less than perfect credit|
No prepayment penalty fees
Checking your loan options will not hurt your credit
| Charges an origination fee|
Well-qualified borrowers may find lower rates elsewhere
For borrowers with poor credit
Opp Loans has served more than 250,000 customers to date. It offers installment loans to those with less than perfect credit at a much lower rate than payday loans. Even better, the loans are unsecured, so you won’t be at risk of losing your asset(s) if you default on the loan.
Key benefits: Cheaper than payday loans
LendUp has branded itself as an alternative payday lender. It’s single payment loan product, is ideal for borrowers who don’t have perfect credit. Although interest rates are relatively high, borrowers have a chance to qualify for lower rates by managing their loans responsibly and moving up the LendUp ladder in certain eligible states.
Types of personal loans
There are two types of personal loans: secured and unsecured.
Secured vs. unsecured personal loans
|Secured Personal Loans||Unsecured Personal Loans|
Should you take out a personal loan?
The answer to this question depends on your personal circumstances. Some borrowers turn to personal loans to get out of a financial crunch, while others use the money to fund the vacation of a lifetime or complete that home improvement project they’ve been dreaming about for years.
If you can qualify for a decent rate and can afford to make timely payments, it may be worth a shot. But if the payments are too steep, you should pass to avoid putting your credit score at risk.
If you’re looking for a way to consolidate debt, a balance transfer credit card may be a more viable option, especially if you have good credit.
The true cost of personal loans
In most instances, the lowest rates go to the borrowers with excellent credit. The lower your score, the more you’ll pay in interest.
To illustrate, let’s say you take out a $5,000 fixed-rate personal loan for 36 months. The table below demonstrates how much you’d spend on interest, based on your credit rating, over the life of the loan:
|APR||Monthly payment||Total interest paid over the life of the loan|
When evaluating personal loan options, you should also be mindful of the type of interest rate you’re being offered and is it fixed or variable.
Fortunately, most online lenders allow you to check your rates with no affect on your credit score so you’ll know what rate you qualify for before moving forward.
You should also be mindful of the following fees:
- Origination fee: This fee is assessed by the lender to process the loan application and distribute the funds to you. Some lenders waive the fee, while others charge 1% to 6%.
- Prepayment penalty: Do you plan to pay off the loan early? Some lenders assess a prepayment penalty to do so.
- Processing fee for personal checks: If you plan to remit payment by check, you may be assessed a small monthly fee.
How to evaluate personal loans
When evaluating personal loans, there are several factors you should consider.
- Availability: Some lenders only operate in select states.
- Flexible use: Some lenders, such as LightStream, require that you use the funds for the reason specified in the loan application. If you need more flexibility, it’s best to seek other options.
- APR: How does the APR you’re being offered stack up against the competition? Most online lenders allow you to check your credit without affecting your credit score.
- Minimal fees: How much is the origination fee? Do prepayment penalties apply?
- Customer service: Is it difficult to reach a human in the customer service department? Can they answer all of your questions quickly and accurately?
- Application process: Is the application process seamless? And how long does it take to get funding once the loan application is approved?
- Reputation: Is the lender accredited by the Better Business Bureau? What are other customers saying?
Where to find the best personal loans
If you’re ready to get started with your search, use SuperMoney’s personal loans reviews and comparison tool. You’ll be able to view information about the loan products, read user reviews and compare loan options side-by-side.