How Your Credit Score Determines Your Personal Loan Interest Rate

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You might have a dashing smile and charming personality, but when it comes to getting a personal loan, lenders are looking at a different kind of profile: your credit score.

If you’re looking to get a personal loan — or you’ve been denied in the past — your credit score may be the reason. Find out how much your credit score matters to personal loan lenders.

What’s a credit score?

Your credit score is the biggest influencer in personal loan approval. It showcases how responsible you are with money and if you’re able to pay a lender back on time without issue. The higher your credit score, the more trustworthy you look to lenders.

A perfect credit score is 850. To lenders, you may be the perfect candidate to receive a loan if you have a credit score that high. With a perfect score, you’ll see low interest rates because lenders trust you to pay back your loan on time and in full. But few people are scored so highly.

Credit scores range from 300 to 850, depending on your past payment history, the amount of debt you owe, and how long you’ve had credit, among other factors.

Why is a credit score important for a loan?

While you can get a personal loan with subprime credit, it isn’t a sure thing. Jeff White, an editor at Fit Small Business, says that your credit score doesn’t affect your approval odds — it affects how much you’ll pay in interest.

“Someone with a 700 credit score might get approved for an auto loan with a 5.00% interest rate, but someone with a 680 credit score might end up getting an 8.50% interest rate,” White says. “That may not seem like much, but ultimately it could be the difference of about $40 per month.”

And depending on how long your loan terms are, that could be hundreds of dollars over the life of the loan. The extra cost adds up.

What’s a good interest rate for a personal loan?

If you’re in the market for a credit card or a personal loan, your score could give you an affordable monthly payment — or keep you from getting one.

Maggie Germano, a personal finance coach for women, says anyone with a credit score less than 600 will most likely not get approved for a personal loan. So you’ll want to stay above that to keep your approval chances higher.

“If you have a credit score between 600 and 700, your personal loan offerings will vary,” she says. “Any interest rate that is lower than your credit card rates is going to be a win. On average, if you’re in this range, you’ll probably get interest rates of 15.00% to 30.00%.”

For some lenders, such as Upgrade, you could get a personal loan with a minimum credit score of 620 and see interest rates between 6.87% and 35.97%. Other lenders may require a higher credit score and offer lower interest rates.

Overall, a good interest rate for a personal loan is in the single digits. If your credit score is on the good to excellent side, your interest rates will be some of the lowest around, according to Germano.

“If you have excellent credit, between 720 and 850, you’ll likely get the best rates out there,” she says. “Some personal loan companies offer interest rates as low as 5.00%, which is an amazing difference from typical credit card interest rates. I would say that any interest rate between 5.00% and 10.00% would be a great deal.”

How to boost your credit score

If you’re stuck with a low or just alright credit score and looking to give it a much-needed boost, here are a few things you can do:

  1. Pay your debt. Whether you have credit cards or student loans, make at least minimum payments every month. Doing so could lower your debt load while also building a healthy payment history.
  2. Get a credit card. If your credit is on the lower side, you might need to get a secured credit card. Once you’ve proven you’re responsible, you can look into applying for a regular credit card.
  3. Become an authorized user. If you know someone that has good credit, ask them if you can become an authorized user on their credit card. This is a quick way to boost your score without getting a credit card or loan yourself.

Your credit score matters when it comes to personal loans

For banks and other lenders, your credit score is one of the only ways to prove your creditworthiness. Make sure you continue to build your credit, even if it’s already in good standing. If it’s not, work on ways to boost it faster so when it does come time to get a loan, your interest rates will be as low as they can be.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.58% APR to 14.87% APR (with AutoPay). Variable rates from 6.275% APR to 12.575% APR (with AutoPay). SoFi rate ranges are current as of July 16, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.275% APR assumes current 1-month LIBOR rate of 2.10% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.73% – 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
6.28% – 14.87%1$5,000 - $100,000
Check rate nowon SLH's secure site
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% – 29.99%$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%2$5,000 - $50,000Visit Citizens
15.49% – 34.49%$2,000 - $25,000Visit LendingPoint
5.99% – 35.89%$1,000 - $40,000Visit LendingClub
5.49% – 18.24%$5,000 - $75,000Visit Earnest
9.95% – 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.