The average interest rate for personal loans is 9.58%, according to the Fed reports, but you could benefit from a lower rate
Personal loans are commonly used to consolidate debt, finance home renovations, and make major purchases, as they tend to have lower rates than credit cards. Corn personal loan interest rates vary widely depending on a number of factors, including the length and amount of the loan, as well as the borrower’s credit rating and debt-to-income ratio (DTI).
The average interest rate on a two-year personal loan was 9.58% in May 2021, according to the Federal Reserve. This is a slight increase from 9.46% in the first quarter of 2021, but still a downward trend year over year.
If you are looking for a personal loan, it is important to shop around with several lenders to get the lowest possible interest rate for your financial situation. You can compare interest rates on personal loans on Credible without affecting your credit score.
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How To Get Low Interest Personal Loans
Personal loans are lump-sum loans repaid in monthly installments over a specified period. They have fixed interest rates which means that you will have a clear idea of your repayment plan. Since interest rates vary widely, it’s important to do your research when taking out a personal loan. Here’s how to get a low-interest personal loan:
- Check your credit score. The interest rates on personal loans offered to you will depend greatly on your credit history, and the best rates will be reserved for borrowers with a high credit rating. Another lender may have a specific minimum credit score requirement.
- Build up your credit, if necessary. If your FICO score is below 670, it is considered fair or bad. You should consider getting a higher credit score before you apply for a competitive rate.
- Get prequalified from multiple lenders. Personal loan prequalification allows you to check eligibility and estimated interest rates without affecting your credit.
- Compare your offers. Typically, you’ll want to choose the personal loan with the lowest annual percentage rate (APR), which includes the interest rate as well as any charges.
- Formally apply for the loan. The lender will perform a credit check to confirm your financial and personal information, and may request pay stubs and other forms to verify your identity.
These steps may seem overwhelming, but the process is straightforward when you use Credible’s online loan market to search for a good interest rate. You can complete only one form for get prequalified from multiple lenders without affecting your credit score, so you can compare the lowest rates without any strings attached. Check out some popular personal loan lenders and their typical APRs in the rate table below.
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Why getting a good rate on a personal loan is essential
Personal loan rates affect the total cost of taking out a loan, as well as your monthly payment. Simply put, a lower interest rate means a cheaper loan and even smaller monthly loan payments. See how the repayment terms for a two-year $ 10,000 loan are affected by different interest rates in the analysis below:
- 12% interest rate: Monthly payment of $ 471 and total interest of $ 1,298
- 10% interest rate: Monthly payment of $ 461 and total interest of $ 1,075
- 8% interest rate: Monthly payment of $ 452 and total interest of $ 855
The interest rates used in the example above are hypothetical and you may be eligible for a personal loan interest rate as low as 2.49% APR on Credible if you have an excellent credit rating. Check your potential rates on Credible and use a personal loan calculator to estimate your monthly payment and the interest paid. You can compare personal loan offers in just two minutes, all without impacting your credit score.
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