Do you have urgent home improvement needs? Are you starting over in life but don’t have the credit to move forward?
From life emergencies to weddings, there are many reasons to get a personal loan.
Your credit score isn’t an obstacle either. Unlike bank loans, there are personal loans for every credit range. Some lenders provide loans in a matter of days (or even hours!)
However, similar to bank loans, personal loans do have interest rates and fees. The good news is that you could be eligible for low personal loan rates, 0% interest, and other perks.
Are you ready to learn more about your options?
Discover different personal loan types, rates, and tips for getting the best deals on rates.
The Ins and Outs of Personal Loans
Before you do anything, it’s important to know how personal loans work. Otherwise, you may find yourself with higher fees and frustrating repayment terms.
A personal loan is money that you borrow from a lender. These financial institutions are not banks. Since banks have much stricter eligibility requirements, lenders can finance customers with credit scores below the “excellent” and “good” credit score thresholds.
There are more personal loan options than bank loan options as well. Since they service all credit scores, lenders offer several financial products. Furthermore, there are fewer hoops to jump through to secure funding.
Personal loans are also a viable financing solution for home-based entrepreneurs. It’s just enough money to purchase office supplies, website services, PPC marketing, social media ads, and more business essentials.
Am I Eligible For a Personal Loan?
Every lending business sells its own financial products. So, you’re going to find a range of rates, fees, and offers. However, you may not be eligible for all of the products advertised.
Personal loan eligibility varies among lenders. For example, some lenders don’t check your credit history at all, clearing the way toward fast financing. Other lenders do check credit histories, as well as income to debt ratios, annual income, and collateral assets.
Many financial institutions allow cosigners on personal loan applications. Cosigners vouch for your ability to pay since they’re declaring themselves financially responsible if you can’t repay. Since cosigners lower the risk for the lender, you’re eligible for more financial products and lower rates.
Personal Loan Repayments vary among lenders too. Repayment terms are central to personal loans. For example, your low rate may depend on paying within a certain time frame.
Age ago affects eligibility. Children under the age of 18 cannot apply for personal loans. Adults must be at least 18 years old to apply.
Assess Your Life before Applying
The research process starts with assessing your own financial situation. Be realistic about your repayment abilities. Start saving money right away for multiple payments if you can.
If you’re worried about your credit history, you always have your annual income. Lenders want to know if you can repay your loan. Make sure you have all your financial documents ready before applying.
Next, think about the scope of your financing. How much money do you need, and what purpose does it serve?
If you need a large sum of money like $10,000 to $50,000, you’ll need to increase your credit score for approval. Customers with high credit scores are eligible for higher loan amounts. However, a cosigner may help you qualify.
If you only need $5,000 dollars, you may qualify with a lower credit score, depending on the lender.
Once you pinpoint your loan amount, start comparing personal loan rates.
APR Rates For Personal Loans
The most important personal loan rate to know is your annual percentage rate.
APR rates are commonly known as interest rates. Consumer lenders regularly advertise low APR rates, even 0% interest, but there’s a catch.
Only customers with high credit scores are eligible for low APR rate perks. The higher your credit score, the lower your interest rate.
While customers with good credit may reap most of the rewards, there are perks for customers with lower credit scores. For example, many lenders forego credit checks for these customers, expanding access for all consumers.
However, one thing is common among consumer lenders. Customers with bad credit pay much higher interest rates. These APR rates quickly mount up, which can be financially devastating.
How Much Is My APR Rate?
Consumer lenders advertise APR rates, but that doesn’t mean you’ll qualify for those exact rates. The only way to find out your exact APR rate is to apply. Of course, you can always estimate your rates beforehand.
Many lenders provide APR calculators on their websites. Otherwise, you can look at APR ranges and see where you fall.
For example, suppose a lender offers APR rates between 5.95% and 35.95%. Since high credit scores receive the lowest rates, you can presume that 5.95% APR is for excellent credit histories. If you have a fair credit score, you’ll fall in the middle, while low scores would qualify for high APR rates.
You can also use online loan calculators to estimate total monthly payments. These calculators are helpful since many personal loans have fixed rates.
Fixed rates don’t change over time. So, you pay the same amount per month until the loan’s term is over. This perk is a huge draw for borrowers.
However, you must pay your monthly fixed rate throughout the duration of the loan term. These terms are also known as fixed terms.
Many personal loans have fixed terms between two and five years. Some lenders offer longer fixed terms for large personal loans.
Variable-Rate Personal Loans
Most personal loans have fixed rates. However, you may run into personal loans with variable rates. As the name suggests, these rates vary, which means your monthly repayment amount would fluctuate.
These personal loan rates are more common with bank loans. However, these loans typically have lower interest rates for borrows.
Since rates fluctuate, variable-rate loans are better for short-term financing.
Are There Other Personal Loan Rates to Know?
Lenders apply interest (APR) rates, fixed rates, and fixed terms. However, they may not always advertise their origination fees.
Lenders charge customers an origination fee after approval. Origination refers to the actual creation of the loan. This fee is a one-time charge.
Lenders charge a percentage of the loan for the origination fee. This percentage can range anywhere from 1% to 10% of your personal loan, possibly more.
However, just like APR rates, the fee amount depends on your credit history. Thus, high credit scores enjoy low origination fees, while poor credit histories qualify for maximum fees.
A lender may also apply penalties for late payments or failing to pay within the loan’s term window.
Beyond origination fees and penalties, lenders shouldn’t charge any other fees. Hidden charges are a red flag of a sketchy lender.
How Can I Lower My Rate?
Are you expecting a high APR rate? No worries! There are several ways to qualify for better personal loan rates.
Rule number one is to improve your credit score.
The only way to improve your credit score is to lower your debt. Start with high-interest debt first, like credit cards.
First, be willing to work extra hours to pay off your debt. If you can’t pick up extra hours at your job, get a second job to pay off your debt.
Online work is another viable option. Freelancing websites let you pick up extra work and gigs on the side. Within a few months, you can pay off thousands of dollars worth of debt.
If you’re drowning in debt, consider a debt consolidation program. You can apply for debt consolidation personal loans if you need funds right away.
There are more debt relief services available too. You may qualify for debt forgiveness, relieving a portion of your debt.
Apply for a Grant
This next option is a secret weapon for business owners.
If you want to avoid mounting interest rates, you could apply for a business grant. The federal government also awards grants to artists, students, writers, and project managers.
Do you need a loan for a creative project? Your project may qualify for a grant. It never hurts to find out.
Budget, Budget, Budget!
You can avoid personal loan disasters with simple budgeting.
Budgeting and extra work hours will increase your credit score quickly. However, budgeting alone may yield enough funds to pay for your project.
Instead of taking out a large loan, you could take out a microloan and pay for the rest on your own. This option is great for borrowers who don’t qualify for large loans.
Budgeting is easy. Simple things like bringing a lunch to work, canceling cable, and staycations can make a huge difference.
Find the Best Personal Loan Rate Today
Your next step is to score the best APR rate possible. Don’t settle for high personal loan rates when you qualify low a APR.
Remember this guide as you compare personal loans. Plus, there’s still time to improve your credit score and enjoy lower interest rates.
Make sure you have the latest tips and tricks handy. Follow the blog to learn more!