Need to borrow some cash but want to do it in the cheapest way possible? Personal loans might be your best bet.
Personal loan rates are usually lower than rates on other unsecured debt, such as credit cards. Currently, the average personal loan rate is 9.76%, well below the 14.89% average on interest-charging credit card accounts, according to the most recent consumer credit report from the Federal Reserve Bank.
But it’s not enough to beat credit card rates; you also want to find the best personal loan rates. Fortunately, the process can be simple and painless. Here’s how you can get started.
10 tips for finding the best personal loan rates
With a bit of time and effort, you can follow these tips to get the best personal loan interest rates.
1. Improve your credit
If you want access to the best personal loan rates, you need to maintain a positive credit history and high credit score.
But if your credit isn’t as great as you’d like it to be, you can improve your credit in a matter of months by:
- Getting added as an authorized user on an existing credit card account
- Opening a secured credit card and using it responsibly
- Checking your credit reports for errors and fixing any mistakes
You also should practice ongoing healthy credit habits, including:
- Making on-time payments
- Keeping credit card balances low to give your credit score boosts
These financial habits will help you improve your credit score in no time. Remember: The higher your credit score is, the lower your personal loan rates likely will be.
2. Look for top personal loan providers
Different kinds of lenders will be able to meet different needs, and you’ll want to find one that provides what you’re looking for.
From a specific feature to low fees and rates, you can find what you want by checking different types of personal loan providers:
- Personal loans from traditional banks
- Online personal loans
- Personal loans from credit unions
- Peer-to-peer personal loans
- Personal loans from family members or friends
The only way to know you’re getting the best possible personal loan rates is to check the terms and options different lenders offer.
Our roundup of the best low-interest personal loans is a good place to start your search.
3. Get multiple offers for personal loan rates
Not every lender has the same criteria for approving borrowers. Because each lender has its own formula for setting your personal loan rates, it’s smart to put each one to the test.
First, get rate offers from different lenders. Look for lenders that offer personalized rates generated with soft credit checks, which won’t ding your credit. Lenders can generate accurate rate offers with a few details from you, allowing you to compare personal loans and find the best one for you.
4. Compare personal loan APRs — not just base rates
Interest is a significant loan cost. But loan origination fees, applications fees, and other charges also can add up.
Start by comparing the annual percentage rate (APR) for each personal loan offer. A personal loan APR is calculated to include all fees and interest and to reflect your true loan costs. Make sure you’re not paying more than you bargained for with a low personal loan rate thanks to fees and other charges.
5. Choose a shorter personal loan term
The faster the lender gets its money back, the less risk the loan carries. That’s why lenders often reserve their best personal loan rates for short-term loans repaid in three to five years or less.
If you want to get low personal loan rates, try to choose the shortest personal loan term. Go for the shortest offer that allows you to both borrow the amount you need and keep monthly payments manageable.
6. Pay attention to total loan costs and payments
As you’re working to get the best personal loan interest rates, it’s important to keep an eye on how different terms will affect your monthly payments and total costs.
Use our personal loan payment calculator to see how different terms will affect the following factors:
- Total costs: These are all the charges you’ll pay over the life of the loan. Total costs will be higher with long-term personal loans since they carry higher rates and are repaid more slowly.
- Monthly payments: These also should be affordable. While a short-term personal loan will come with lower interest rates, it also will increase monthly payments. You’ll need to choose a loan length that results in affordable payments so you won’t fall behind.
7. Opt for variable rates on your personal loan
Next, consider fixed or variable personal loan rates.
A fixed rate usually starts a little higher but doesn’t change over the life of the loan. A variable rate, on the other hand, is initially lower but will adjust with current interest rates, often rising as the months pass.
Still, choosing a variable rate can help you secure a lower personal loan interest rate. It will make the most sense for short-term personal loans, which you’re likely to pay off before your rate gets too high.
8. Add a personal loan cosigner
If you have poor or fair credit (a FICO score of 580 to 680 or so), lenders might approve you for a loan. However, you’ll likely face higher personal loan rates.
One way to avoid this is to “borrow” the good credit of someone you trust by asking them to cosign your personal loan. When you add a cosigner to your personal loan application, the lender considers the credit histories of you and your cosigner as well as other financial information.
Because your cosigner’s better credit is taken into consideration, a cosigner can help you access the best personal loan rates, even if you couldn’t qualify on your own.
9. Consider a secured personal loan
The term “personal loan” often refers to an unsecured personal loan that doesn’t require collateral.
A secured loan, on the other hand, is guaranteed by collateral — a valuable asset the borrower owns. Secured personal loans can be borrowed using assets such as home equity, auto equity, or even savings or investments.
An asset also acts as a guarantee of the personal loan, lowering the lender’s risk and making it more likely to approve bad-credit personal loans. Also, many lenders will offer lower personal loan rates when the account is secured by an asset.
10. Sign up for personal loan rate discounts
Lastly, check to see if your lender offers personal loan rate discounts. For example, many lenders offer a small rate discount, usually 0.25%, to borrowers who enroll in automatic debit payments.
Lenders often include this discount in their advertised rates, so make sure you take it into consideration as you compare rates. And once you have the loan, enroll in autopay to make your best personal loan rate even better.
As you shop for a personal loan, weigh each option against your own situation and needs to make the right choice. By knowing and comparing your options, you can get the best personal loan interest rates out there.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||Rates (APR)||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
|7.73% – 29.99%||$1,000 - $50,000|
|6.15% – 15.37%1||$5,000 - $100,000|
|5.96% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%||$5,000 - $35,000|
|4.99% – 29.99%||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%2||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%||$2,000 - $25,000||Visit LendingPoint|
|5.99% – 35.89%||$1,000 - $40,000||Visit LendingClub|
|5.49% – 18.24%||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%||$2,000 - $35,000||Visit Avant|