It’s always a good idea to compare personal loan rates, because even a few percentage points in interest can mean hundreds or thousands of dollars in extra costs over the life of a loan. But there’s more to consider than just the advertised annual percentage rate APR — like other fees, repayment terms and how a lender treats credit score fluctuations.
The best personal loan rates are usually reserved for borrowers with excellent credit scores 720 or higher on the FICO scale and high incomes. They may be able to find loans with lower rates than people with less-than-fantastic credit scores who have poor debt-to-income ratios and long histories of missed loan or credit card payments. However, the average quoted personal loan rate varies considerably from lender to lender, and it can also depend on the type of loan you’re seeking.
Aside from your credit history and income, lenders also factor in things like the economy, unemployment and other macroeconomic factors when setting personal loan rates. They use these indicators to determine the likelihood that a borrower will be able to repay their loan and manage their debt, which helps them predict the financial risk of lending to those individuals.
Lenders also set personal loan rates based on how much money they can reasonably expect to receive from the loans they lend to consumers. This is why many borrowers opt to take out secured personal loans that are secured by collateral that the lender can use to recoup some or all of their loss in the event the borrower fails to make repayments. Borrowers can also seek out unsecured personal loans, which are typically offered by credit unions, banks and online lenders, to obtain competitive rates on loans with different purposes.
When choosing a personal loan, you’ll want to consider a variety of factors beyond the advertised annual percentage rate and other fees, including repayment terms and protections for borrowers who may experience credit score fluctuations or other financial issues while repaying their loans. You’ll also want to check out the lender’s reputation for customer service and whether or not they offer unique perks or features that could help you save on fees.
To help you find the best personal loan rates, Investopedia aggregates advertised APR ranges from some of the nation’s largest online lenders each week. This data includes the APRs of banks, credit unions and other NBFCs.
This data is updated weekly, so it may be a few days before you see new rates and other information. This data is used for comparison only and is not indicative of the actual personal loan rates you may be able to get from any given lender. The actual personal loan rate you receive will be based on your credit history, income, outstanding debt and other factors. To learn more about comparing personal loan rates and other important details, read the full article. If you are interested in a specific lender, be sure to visit that lender’s website for additional information and to apply.