Average interest rates by credit score
Consumers with higher credit scores will typically qualify for a lower rate. If you don't need a personal loan urgently, it may pay off to wait a month or two if you believe your credit score will increase. The best way to increase your credit score is by making on-time payments and keeping your balances low.
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Reasons to opt for a personal loan
You can use personal loans for just about any type of personal expense. Most commonly though, personal loans are good for:
- Emergency expenses. If you need money right away for unexpected expenses like medical bills, funeral costs, car repairs, or something else that needs immediate attention, you can use a personal loan.
- Debt consolidation. Personal loans are a great way to consolidate high-interest debt to help save money on interest and streamline your payments.
- Home improvements and repairs. If you have an upcoming home improvement project, you can take out a personal loan to help finance the costs. You can also use personal loans for unexpected home repairs or maintenance expenses.
- Auto financing. While auto loans are the most common way to finance a vehicle, personal loans also can help you get the job done. Personal loans have fewer restrictions on the types of cars you can purchase, but they typically charge higher interest rates than traditional auto loans.
- Moving costs. The cost of moving can add up quickly. If you don’t have cash on hand, personal loans can help you finance the costs.
What if I have bad credit?
Many lenders can provide loans even if you have bad credit, though you will face tougher interest rates and less leeway with the loan amount and repayment terms.
Typically anything under 630 is considered a bad credit rating, and even when people in this range do get loans, they tend to have a 28.5% - 32.0% APR on average. If you have collateral to put up, this can help you secure a loan despite a low credit rating.
If you feel that a secured or co-borrower loan is a good fit, we highly recommend OneMain Financial as they specialize in such loans.
In addition, many lenders allow cosigned loans. These are loans where someone with better credit co-signs the loan with you. While this is a way for you to get a loan that you’d be shut out from otherwise, there are some caveats. Mainly, the person who cosigned for the loan is on the hook too so if you default on the payment, it could wreck their credit as well as your own.
What affects interest rates?
- Variable vs fixed rate loan - With a variable rate loan, the interest rate can fluctuate as the market changes, and typically has lower interest rates than a fixed loan, which stays at the same rate throughout the repayment of the loan.
- The length of the repayment - The longer the repayment term the more interest you will pay over the lifetime of the loan. If you can keep up with a higher monthly payment over a shorter period of time, then you can find loan terms that will save you money on interest. It's crucial though that you first look at your monthly budget and determine how big of a loan you can stay ahead of, so you don’t slip further into debt paying off the new loan.
- Your credit score - A better credit score may help you get a lower interest rate, though some lenders don’t use credit scores when considering you for a loan. Lenders will also look at your past financial history to look for any delinquent loans, foreclosures, bankruptcies, and other red flags that could make you a high-risk borrower before they determine the interest to assign you. Your income - or lack thereof - will always be a central factor in determining your interest rate.
Not sure where to start?
We have compared dozens of top-rated lending programs. Our top choice overall is Sofi due to their top-notch service, wide range of options, and acceptance of credit scores of all ranges.
Best of all, you can compare options and rates without affecting your credit score.
We recommend 600+
$1,000 to $50,000
- See a potential rate in 5 minutes or less
- There are no prepayment penalties
- Looks beyond your credit score to make a decision
- Terms max out at 5 years
- Upstart may charge an origination fee up to 8%