A Complete Beginners Guide to Finding the Best Personal Loans

Filed in Loan by on November 5, 2020 0 Comments

This page provides detailed information on finding the Best Personal Loans for debt consolidation, small business, home repairs and many more. Here, you will be guided through what personal loan is, where you can get a personal loan, what is the interest rate on a personal loan, requirements to access loans, and all other important information you may need to know. Please, stay tuned.

What Is a Personal Loan?

A personal loan is money you borrow from a bank, credit union, or online lender that you pay back in fixed monthly payments or in installments, usually over two to seven years. Lender rates can vary from 6% to 36% APR (Annual Percentage Rate).

With a personal loan, you can borrow money to cover the cost of home improvements, pay off medical bills or consolidate high-interest debt. In many cases, it’s possible to get a personal loan for just about anything you want.

Types of Personal Loans?

There are basically two main types of personal loans:

1. Secured Personal Loans

This type of personal loan requires some type of collateral. If you get a loan from your bank, you might have to put a certain amount in a CD as security. Or, you might secure a personal loan with your car or some other asset. If you don’t make payments, the lender can take your collateral to offset what you owe.

2. Unsecured Personal Loans

One of the biggest benefits of getting an unsecured personal loan is that you aren’t risking an asset. If you can’t pay, the lender has little recourse beyond sending your account to collections or suing you to try to collect what it owes. You haven’t tied the debt to an asset, so there’s a little less risk to you.

However, because of this, lenders may require charger a higher interest rate or require a better credit score. Just remember, when you miss payments, it is reported to the credit bureau and can cause your credit score to decrease.

However, there are many lenders willing to provide unsecured personal loans at reasonable rates. Carefully consider which type is likely to best fit your needs.

“Before making a choice, you should compare rates from several lenders. The loan with the lowest annual interest rate is the least expensive and therefore usually the best option”.

Benefits of Getting a Personal Loan?

There are several personal loan benefits to consider when deciding if getting one is the right way for you. Flexibility is one of the great benefits of getting a personal loan, but there are other benefits as well.

1. Personal loans can be used for multiple purposes.

When you get a personal loan, it can be used for almost any personal expense. There are a few exceptions, but, for the most part, you can use the money how you want. Some of the ways you can use personal loans include, Debt consolidation, unexpected expenses, making a big purchase, paying for a wedding, going on vacation, buying a car, etc.

2. Personal loans tend to have lower rates and higher borrowing limits.

In many cases, it’s possible to get a personal loan for a larger amount than you might have available on your credit cards. Additionally, many personal loans can have rates that are lower than credit card rates, though this is not always the case.

3. A personal loan can help to improve your credit score.

Another benefit of getting a personal loan is the fact that it can improve your credit score. When you make your payments on time and pay the full amount required, you build your credit history.

4. Personal loans follow a predictable payment schedule.

The set payment schedule offered by personal loans can let you see exactly when you’ll be done paying off your debt, and it also allows you to see exactly how much interest you’ll pay.

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Best Interest Rate on a Personal Loan?

The average personal loan rate is 9.82%.

Generally, a good interest rate for a personal loan is one that’s lower than the national average. When you shop around for the best personal loan rate, you can save. Compare personal loan offers with national average personal loan trends to know whether you’ve found a competitive interest rate.

Your credit score, debt-to-income ratio and other factors all dictate what interest rate offers you can expect to receive.

Where to Get a Personal Loan?

Personal loans are available everywhere from brick-and-mortar banks and credit unions to online lenders. Review the pros and cons of each type of lender.

A bank or credit union could offer personal service, especially if a location is nearby. But online lenders sometimes offer more convenience, especially if you prefer to apply, close and manage your personal loan online.

Ensure to obtain preapprovals from a variety of lenders so you can compare rates, terms and other factors for different types of personal loans.

How to Choose the Best Personal Loan Lender?

Before you apply for a personal loan, make sure you understand what you want in a personal loan as well as how much you really need because each lender has distinct terms and conditions.

“Consumers can choose the best personal loan by doing their research, shopping around between multiple lenders, reading the fine print and only selecting a loan that they know they can afford to repay,” says Jared Kaplan, CEO of OppLoans, an online lender for bad credit loans.

An easy place to begin is to check that a lender is licensed in your state. Make sure each lender can offer personal loans where you live.

Best Personal Loans

There are hundreds, if not thousands, of personal loans. We researched and reviewed dozens of them before selecting the best competitors. We have selected these specific personal loans as the best personal loans based on the loan amount, loan term, associated fees, interest rate, and application process.

SoFi: Best Overall

SoFi personal loans combine attractive interest rates with impressive benefits, like the ability to temporarily pause your payments if you lose your job. Interest rates start as low as 5.99% with autopay. Qualified borrowers may receive up to $100,000 in funding, making SoFi a solid all-around choice.

Other important information:

  1. Minimum/maximum amount you can borrow: $5,000 to $100,000
  2. APR range: 5.99%–18.53% (with AutoPay discount)
  3. Fees: None
  4. Minimum recommended credit score: 680 or higher is recommended
  5. Other qualification requirements: Besides your credit score, SoFi will also consider your credit history, income, employment, and other factors when reviewing your loan application
  6. Repayment terms: Choose two- to seven-year repayment options
  7. Time to receive funds: It may take several days between the time of your application and when funds are deposited into your account
  8. Restrictions: To be approved you need to be 18 or older and a U.S. citizen (or permanent resident or visa holder). SoFi loans are currently available in every state except Mississippi 

Marcus by Goldman Sachs: Best for Debt Consolidation

Marcus by Goldman Sachs offers personal loans that may work well for debt consolidation, due in part to long repayment terms of up to 72 months. If you have excellent credit, you may qualify for an interest rate as low as 6.99% with zero fees attached. Loan amounts are available up to $40,000 for qualified applicants. Together, these features might save you money if you can consolidate your expensive credit card debt for a lower rate.3

Other important information:

  1. Minimum/maximum amount you can borrow: $3,500 to $40,000
  2. APR range: 6.99%–19.99%
  3. Fees: None
  4. Minimum recommended credit score: A minimum credit score of 660 is recommended.
  5. Other qualification requirements: You’ll need to be 18 or older (in most states) plus have a valid bank account and Social Security or Individual Tax I.D. Number to apply.
  6. Repayment terms: Loan terms between 36 and 72 months are available.
  7. Time to receive funds: Allow one to four business days to receive your funds once approved.
  8. Restrictions: You can’t use a personal loan from Marcus to refinance student loan debt.

LightStream: Best for Good Credit

LightStream, an online division of SunTrust Bank, offers low interest rates to borrowers with good credit, starting as low as 3.99% for certain types of unsecured personal loans. Well-qualified borrowers may be able to take out a personal loan from LightStream for up to $100,000. Between the stellar interest rates and high maximum loan amounts, LightStream may be a great fit for applicants with solid credit ratings.

Other important information:

  1. Minimum/maximum amount you can borrow: $5,000 to $100,000
  2. APR range: 3.99%–19.99%* (with AutoPay discount)
  3. Fees: LightStream doesn’t charge origination fees, prepayment penalties, late fees, or any other type of fees. (Loans issued in Florida are subject to a documentary stamp tax.)
  4. Minimum recommended credit score: Reported to be 680 (not confirmed on LightStream’s website).
  5. Other qualification requirements: You’ll have a better chance of approval if your credit reports show several years of credit history, a good mixture of account types (e.g., credit cards, installment loans, etc.), and few to no late payments. You should also be able to prove stable, adequate income to repay a new loan and evidence of savings (e.g., bank deposits, bonds, stocks, etc.).
  6. Repayment terms: LightStream may offer you repayment terms between 24 and 144 months.
  7. Time to receive funds: Once approved, you may be able to access your funds as soon as the same day.
  8. Restrictions: You cannot use a loan from LightStream to pay for college, refinance a student loan, or fund a business.

Upstart: Best for Fair Credit

Upstart is an online lending platform founded by a group of former Google employees. Because the platform uses artificial intelligence to consider alternative data, you may be more likely to qualify for a loan even if your credit is less than perfect, making Upstart a solid option for borrowers with a fair credit rating.

By using alternative data in its applications, Upstart has been able to approve 27% more loans since late 2017. Typical rates on Upstart personal loans are between 7.98% and 35.99%. Qualified applicants can borrow as much as $50,000.

Other important information:

  1. Minimum/maximum amount you can borrow: $1,000 to $50,000
  2. Typical APR range: Interest rates range from 7.98% to 35.99%, based on credit, income, and other information considered in your loan application. Your education, area of study, and job history might help you qualify for a better rate.
  3. Fees: Origination fees can cost up to 8% of your loan amount. Late fees are either $15 or 5% of the past due amount—whichever is greater. Returned check fees (or ACH return fees) are $15. You’ll also be charged $10 if you switch from paperless monthly statements to mailed copies.
  4. Minimum recommended credit score: 600
  5. Other qualification requirements: You can’t qualify with a bankruptcy, public record, or currently past-due account on your credit report.
  6. Repayment terms: Three- and five-year payment terms offered.
  7. Time to receive funds: You could access funds as soon as the next day, once you accept the terms of your loan, two days if you accept after 5pm EST.
  8. Restrictions: Residents of Iowa and West Virginia are not eligible for Upstart personal loans.

Avant: Best for Bad Credit

A personal loan from Avant may be a solution to consider if you need to borrow money but you have challenged credit. Qualified borrowers may receive up to $35,000 in funding and interest rates start as low as 9.95%. While that might not be the lowest rate you can find on a personal loan, it’s considerably lower than the starting point for many alternative personal loans for bad credit.6

Other important information:

  1. Minimum/maximum amount you can borrow: $2,000 to $35,000
  2. APR range: 9.95%–35.99%
  3. Fees: Avant may charge an administration fee of up to 4.75%, deducted directly from your loan amount. Late fees may be charged as well, if your payment becomes past due.
  4. Minimum recommended credit score: 600–700 is the average credit score range of most approved applicants.
  5. Other qualification requirements: In addition to your credit score, Avant will also review your income to see if you qualify and for what loan amount.
  6. Repayment terms: Loan repayment terms can range between 24 to 60 months (two to five years).
  7. Time to receive funds: Loan funds are usually deposited in your account by the next business day.

Best Egg: Best Runner Up

Best Egg is known for their highly-rated customer service and competitive rates. This online lender has some of the best rates out there even with the origination fee. Applicants can get personal loans with rates as low as 5.99% and terms starting at 36 months.

Other important information:

  1. Maximum/minimum amount you can borrow: $2,000 to $35,000
  2. APR range: 5.99%–29.99%
  3. Fees: 0.99% to 6.99% origination fee; $15 late fee
  4. Minimum recommended credit score: 640
  5. Other qualification requirements: Applicants need to have an income of at least $100,000 to qualify for the lowest rates and a minimum credit score of 700
  6. Repayment terms: 36 to 60 months
  7. Time to receive funds: One to three business days
  8. Restrictions: Combined loans cannot be more than $50,000

Wells Fargo: Best Bank

Wells Fargo is one of the nation’s biggest banks. If you don’t want to visit one of their 5,400 branches across the U.S., you can access info on their website — existing customers can apply online or over the phone. Wells Fargo offers competitive rates, a big range of loans, and less stringent credit requirements than others.

Other important information:

  1. Maximum/minimum amount you can borrow: $3,000 to $100,000
  2. APR range: 5.74%–24.49% (includes relationship discount)
  3. Minimum recommended credit score: 670
  4. Fees: None
  5. Other qualification requirements: Applicants need to sign up for autopay from a qualifying Wells Fargo bank account to qualify for rate discount
  6. Repayment terms: 12 to 84 months
  7. Time to receive funds: As soon as the next business day
  8. Restrictions: New customers cannot apply online

First Tech Credit Union: Best Credit Union

First Tech Credit Union offers those with low to fair credit access to better rates and minimal fees. Plus, membership requirements aren’t as strict—to qualify you need to sign up to be a member of the Financial Fitness Association or the Computer History Museum and open a savings account with $5. The credit union offers one of the most competitive rates for unsecured personal loans, starting at 7.70%.

Other important information:

  1. Maximum/minimum amount you can borrow: $500 to $50,000
  2. APR range: 7.70%–18%
  3. Fees: None
  4. Minimum recommended credit score: 580
  5. Other qualification requirements: Applicants need to be the age of majority in their state, and the credit union will also consider their income and debts
  6. Repayment terms: 24 to 84 months
  7. Time to receive funds: As soon as the next business day
  8. Restrictions: Borrowers need to become a member of the credit union

Requirements for a Personal Loan?

Qualification requirements for a personal loan vary based on the loan amount, who is lending the money, and the type of loan. Typical personal loan qualification requirements are:

  1. Minimum FICO score of usually 660
  2. Income requirements
  3. Debt-to-income ratio
  4. Address history for the past two years
  5. 18+ years old
  6. Valid social security number
  7. Bank statements showing proof of income and positive banking history

How Much Do Personal Loans Cost?

Some of the fees associated with personal loans are origination fees, prepayment penalties, late fees, and administrative fees. However, not all lenders charge the same fees. It’s important to check with the lender before getting a personal loan. Despite what fees the lender charges, the largest cost is going to be what you’re paying in interest. The average interest rate for a personal loan is 9.82%.

How to Compare Personal Loans?

Try to compare loan rates from at least two personal lenders before you apply for a loan. Consider interest rates, credit requirements, loan amounts, repayment terms and other factors to choose the best personal loan for your financial situation. Take a look at this example comparing these two personal loan companies:

Discover

Personal loan interest rate: 6.99% to 24.99%

Minimum FICO score: 660

Loan amounts: $2,500 to $35,000

Term length: 36 to 84 months

Best feature: charges minimal fees

Sofi

Personal loan interest rate: 5.99% to 18.64%

Minimum FICO score: 680

Loan amounts: $5,000 to $100,000

Term length: 24 to 84 months

Best feature: accepts co-borrowers

When you’re comparing personal loan options, think about what works best for your needs. For example, if you need a large personal loan and have good credit, SoFi could offer a lower rate and larger loan amount than Discover. But if you need a smaller loan and have fair credit, Discover may be a better choice.

Of course, you shouldn’t choose a personal loan company based on interest rate alone. You’ll need to get rate quotes to estimate your personal loan rate because it depends on your credit and other factors.

Do Personal Loans Hurt your Credit?

The process of applying for a personal loan may initially hurt your credit score. However, a personal loan can actually help improve your credit score over time.

When you apply for a personal loan, lenders will assess your credit score and history to determine your credit risk, or your creditworthiness. To do this, they’ll run a hard credit check. When they run this check, they’re looking for indicators of financial health, like low credit balances and a good debt-to-income ratio. Whether or not you’re in good financial standing, you’ll likely see a few points knocked off your credit score as a result of the hard check.

If you’re applying for a personal loan, you likely won’t be able to avoid a hard credit check. However, the long-term investment of a personal loan can be worth it in comparison to the few points you may lose.

If you are approved for a personal loan, the new loan can drop the average age of your credit history. Although the length of your credit history accounts for only 15% of your FICO credit score, it is still an important factor for lenders and can affect your chances of getting a loan.

Payment history is the most important factor in your FICO score at 35%, which means that you must pay your personal loan on time. If you stop making payments on a personal loan, you risk defaulting on the loan and damaging your credit.

“If you’re taking out an unsecured personal loan, you don’t have to risk losing your home or your car, but that doesn’t mean they’re risk-free,” Kaplan says. “Failing to pay the loan back, also known as defaulting, could do some pretty serious damage to your FICO score. That will make it harder and more expensive to borrow money in the future.”

Making sure that your monthly payment fits in your budget will help you pay on time. Get an idea of how much you can afford before you look at loans.

“A loan with a longer repayment term might cost a little more overall, but that longer term will also lower the monthly payment amount,” Kaplan points out. “And if those payments are a much better fit for a person’s budget, then that loan is probably the best one for them.”

A 36-month personal loan, for instance, will allow you to pay off your loan faster and with less interest than a 48-month loan. But the latter could give you more wiggle room in your monthly budget.

What Is the Interest Rate on a Personal Loan?

Personal loan APR ((Annual Percentage Rate)) ranges are typically from about 6% to 36%, depending on creditworthiness and other factors. Generally, the higher your credit score, the better your personal loan interest rate.

Also, the higher your credit score, the greater choice of personal loans you’ll have with favorable terms. Companies want to work with people who have good or excellent credit scores and are more likely to offer personal loans with better terms to these consumers.

“Frankly, you probably need a credit score of 680 to 700 or higher” to qualify for a personal loan, says Joseph A. Carbone Jr., certified financial planner and founder of financial planning firm Focus Planning Group. “If you are in a range of 620 to 680, you might need a co-signer to secure the line.”

But your credit score is not the only factor that determines either approval for a personal loan or where interest rates start. Companies will request information about your job, your minimum annual income, how stable your income is, your savings and more. Your answers can determine your eligibility.

How to Apply for a Personal Loan?

There are several ways you can apply for a personal loan.

1. Get preapproved rates. Make sure the lenders you’re requesting rates from will obtain them using a soft credit inquiry. When you request a rate quote, you’ll provide your personal information, such as address, income and Social Security number, on the lender’s secure website.  

You’ll indicate the amount you want to borrow, the reason for borrowing and the repayment term length you prefer.  Once you give these details, you’ll be informed of rates and how to formally apply for the loan.

2. Compare offers from different lenders to find the best personal loan interest rate. Choose your top one or two lenders and then apply formally. Make sure you’ve carefully read the loan’s terms and conditions, and then hit submit.

The agreement certifies that all the information you’ve submitted on the application is correct. It also authorizes the lender to take steps to verify your information, such as contacting your employer and pulling your credit reports.

Conclusion

Before applying for a loan, make sure you understand what you are spending your money on and how much you really need. Try not to borrow more than you can repay, and make sure you can handle monthly payments along with your other obligations.

Remember to compare lenders to find the best personal loan for you. Look at several lenders and compare interest rates, origination fees, and other terms. Take a close look at the situation so you can choose the loan that will work best for you.

Do you have any queries on finding the Best Personal Loans? Please feel free to let us know so we can assist you with any information you will need.

We hope you will find this information useful. Please, do not hesitate to share it with friends, colleagues and relatives whom you know may be in need of this kind of information. Thanks for caring and do have a nice one ahead!

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