And naturally, one of the most crucial factors to consider whentaking out a personal loanis the interest rate.
Currently, the average personal loan interest ratehoversaround12% to 13%.
How personal loans work
Personal loans are typicallyunsecured loans, meaning they don’t require collateral.
The interest rate on the loan determines how much you’ll pay in addition to the principal amount borrowed.
“These borrowers have demonstrated past behaviors that indicate they are low-risk,” Tayne explains.
Theseborrowers have had issueswith missed payments in the past and even collections or bankruptcies.
The most common sources for unsecured personal loans include banks, credit unions, and online lenders.
Many allow you to begin the process by submitting an software online or over the phone.
Tips for getting the best loan rate
1.
Check and improve your credit score:Your credit scoreis one of the primary factors lenders consider.
Pay bills on time, reduce credit card balances, and correct any errors on your credit report.
Shop around: Don’t settle for the first offer.
Compare rates from multiple lenders, including banks, credit unions, and online lenders.
Get a co-signer: Aco-signerwith excellent credit could help you qualify for a lower rate.
Improve your debt-to-income ratio:Pay down existing debtsand avoid taking on new ones before applying for a loan.
Demonstrate stable income: Lenders favor borrowers with steady, reliable income sources.
Look for rate discounts: Some lenders offer discounts to hold onto existing customers.
Understanding personal loan interest rates and how they impact your borrowing costs is crucial for making informed financial decisions.
