The higher your credit score was, a lot more likely you’re in order to qualify for a personal bank loan having a minimal rate. ( Shutterstock )
When you need to borrow money, a personal loan can come in handy. If you’re able to land a lower interest rate, it can save you a lot of money over the life of your loan. Interest rates vary based on how much you want to borrow, the length of your loan, your credit score, and other factors. The higher your score, the less interest you’ll likely pay.
Borrowing money comes at a cost. When you take out a loan, lenders will charge you an interest rate on top of the loan amount you borrow, which is expressed as a percentage. If the interest rate is fixed, you’ll pay the same amount over the life of the loan. If the interest rate is variable or floating, the amount you’ll pay can change over time with market fluctuations.
If you have a lowered interest, you’ll spend smaller in order to borrow funds along side lifetime of the brand new loan. Their interest rate is roofed on the apr, otherwise Apr, hence means the whole cost of credit money having a year. APRs additionally include one charge or costs associated with the loan, so it’s a more right representation off how much cash you can pay than just your interest by yourself.
Personal loans often come with lower interest rates than credit cards. The average interest rate for a 24-month personal loan was 9.09% as of , while the average credit card interest rate was %, according to Government Set-aside research.
While more lending products on the market are designed for consumers with a good credit score ratings, having a lower credit score doesn’t make borrowing money impossible.
Qualifying for a low-interest personal loan is generally easier when you have a strong credit history. To qualify for the best possible interest rates, you’ll need a good to excellent credit score (a FICO Score of 740 and above). If you have a poor credit score, you may find it hard to qualify for the lowest-interest personal bank loan. Many lenders work with borrowers who have lower credit scores, but you can expect to pay higher interest rates and fees.
When you are unsure what interest rates you can qualify for, it could be helpful to prequalify for an unsecured loan. A number of lenders give unsecured loan prequalification, and therefore merely involves a softer credit inquiry, so you would not hurt your credit by applying. After you’ve several prequalification also provides, you will see and this lender is most likely to offer you an informed cost and loan conditions (in the event prequalification offers are not a guarantee from financing acceptance).