Banking

As interest rates rise, is it still possible to get a good rate on a personal loan? – News Opener

Interest rates are on the rise as the Federal Reserve tries to wrangle record-high inflation. The central bank does this so that lending becomes more expensive and it can try to slow down the economy, hopefully without sending it into a recession.

However, rising interest rates mean that loans are now becoming more expensive and not as desirable, compared to the record-high demand since the onset of the pandemic.

But can you still get a reasonable interest rate on a personal loan?

Select investigates how you can get the best rate possible on any loans in the new future, and how to improve rates on your current outstanding loans.

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How to get a low interest rate on a personal loan

The average rate for a 24-month personal loan is 8.73%, according to the most recent Federal Reserve data. However, this average rate has been sliding since 2018, when it was 10.32%. It’s also important to remember that these are just average rates. There are personal loans currently available with APRs under 4%.

Here are the three main components to getting the best interest rate possible.

1. A good credit score

Getting the best rate on a personal loan is no secret — the higher your credit score, the more likely you are to get a better interest rate. You typically must have a very good or excellent credit score (740 and above) to qualify for the lowest rates. Plus, a higher score may land you other benefits like a longer repayment period and a bigger loan.

However, don’t let a less-than-perfect credit score be a deterrent from applying. Even if you don’t have a stellar credit score, there still are ways to get a personal loan with a favorable interest rate. There are other factors taken into consideration with lenders to determine what you can qualify for, such as your work experience and education history. In fact, there are personal loans specifically for those with bad credit scores, including:

Upstart Personal Loans

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation, credit card refinancing, wedding, moving or medical

  • Loan amounts

  • Terms

  • Credit needed

    FICO or Vantage score of 600 (but will accept applicants whose credit history is so insufficient they don’t have a credit score)

  • Origination fee

    0% to 8% of the target amount

  • Early payoff penalty

  • Late fee

    The greater of 5% of monthly past due amount or $15

OneMain Financial Personal Loans

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation, major expenses, emergency costs

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

    Flat fee starting at $25 to $onem00 or percentage ranging from 1% to 10% (depends on your state)

  • Early payoff penalty

  • Late fee

    Up to $30 per late payment or up to 15% (depends on your state)

If you’re unsure what your credit score is, you may consider signing up for a credit monitoring service like Chase Credit Journey or CreditWise® from Capital One.

2. Your employment history

The second part is employment history. The lender will likely ask for a history of employment to demonstrate you have the means to pay back the debt. To prove this, you will likely have to get a letter from either your manager or HR department. Although more challenging, it is still possible to get approved for a personal loan if you’re unemployed.

3. Verifiable income

Lastly, you will need some type of verifiable income. Similar to employment history, the lender will want to see your current income to ensure you can make the monthly payments of the loan. This is particularly useful if you’re still working on improving your credit score. Again, it might be slightly more challenging, but you can still get approved for a personal loan if you’re self-employed and have inconsistent income.

Compare offers to find the best interest rate

Like anything else, you need to shop around to get the best deal and loan terms. So if you’re in the market for a personal loan to help pay off credit card debt, start a home renovation or simply need some breathing room — it’s best to start shopping around based on your needs.

Even if you don’t need the money for several months, it’s advantageous to know what rates look like and what your monthly payment will be to repay the debt.

If a personal loan is in your future, consider our top picks of lenders:

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    3.99% to 19.99%* when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, wedding and others

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Marcus by Goldman Sachs Personal Loans

  • Annual Percentage Rate (APR)

    6.99% to 24.99% APR when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, wedding, moving and relocation or vacation

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

SoFi Personal Loans

  • Annual Percentage Rate (APR)

    7.99% to 23.43% when you sign up for autopay

  • Loan purpose

    Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Select also has a comparison tool and loan marketplace that allows you to easily review different loan offers. You’ll need to answer a handful of questions and Even Financial will determine the top offers for you. The service is free, secure and does not affect your credit score.

This tool is provided and powered by Even Financial, a search and comparison engine that matches you with third-party lenders. Any information you provide is given directly to Even Financial and it may use this information in accordance with its own privacy policies and terms of service. By submitting your information, you agree to receive emails from Even. Select does not control and is not responsible for third party policies or practices, nor does Select have access to any data you provide. Select may receive an affiliate commission from partner offers in the Even Financial tool. The commission does not influence the selection in order of offers.

Bottom line

Personal loans are a solid option for consumers to help pay off lingering debt or even help get by during an unexpected job loss.

However, before you apply, be sure to know the terms of the loan well, including the interest rate, if it’s fixed or variable APR and how long you have to pay the loan off in full.

Catch up on Select’s in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.



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