Low to Average Personal Loan Interest Rate for Bad to Good Credit
While personal loans provide immediate relief in the times of a financial need, the monthly repayment amount can make them a bitter pill to swallow. Hence, most people, while looking for online personal loans search for low or average personal loan interest rates. This helps them cut down on their fixed monthly interest costs while give them an idea of the overall interest payable by the end of the loan term. The interest rates on these loans can vary with every loan provider.
You can apply for a personal loan with a bank, credit union or an online lender. Each of them has their own approval processes, eligibility requirements and terms & conditions. Understanding them can help you approach the right institute for your personal loan requirements.
How Your Credit Score Affects Personal Loan Rates:
Everyone knows that your credit score affects your loan’s interest, but most people don’t understand why. A credit score is like a measure of your financial trustworthiness. You might make a million dollars a year, but if do not pay your bills on time, you are at risk. It is that risk that your credit score is a measure of.
Conversely, you can have a modest salary, but make sure you pay all of your bills on time. You will end up with a great credit score. That will save you money in the long run.
“One bad report card, and you can bump up your GPA next semester.
One bad credit score, and it could ruin your credit history for years.”
How are interest rates determined by lenders for personal loans?
While a good credit score is necessary to get a low or average personal loan interest rate, there are many factors that lenders consider:
- Employment status – whether you are employed or unemployed; permanent or temporary job; under probation or a confirmed employee; etc.
- Current Debts – the kind of loans that you are currently managing.
- Debt to Income Ratio – a measure your ability to manage monthly installments and repay your loans.
- Loan Tenure – lenders usually prefer borrowers with shorter loan tenures as the chances of the borrower repaying as per schedule are higher.
- Credit history (including missed payments, etc.) – to understand your repayment behavior from earlier loans.
- Loan amount – while lenders have a final say in the sanctioned amount, they prefer applicants who look for smaller amounts as compared to the income eligibility.
Apart from these factors, some lenders might have specific eligibility requirements which invariably contribute to the interest rate calculation.
Why do I need to know the average personal loan interest rate?
When you apply for a personal loan, it is advisable to know the average personal loan interest rates offered by the lender for applicants having a certain credit score. This can be a good starting point as it saves a lot of time and effort and applying randomly without knowing what to expect. The credit score is by far the biggest factor contributing to the APR (Annual Percentage Rate) offered by lenders. Higher the credit score – lower the APR and interest rate. Here is a look at some average interest rate on unsecured personal loan according to credit scores in 2017:
As can be seen above, if you have a credit score less than 579, the chances of getting a personal loan are narrow, at best. On the other hand, if you have a credit score upwards of 720, then you might be able to get an online personal loan at 10-11% APR.
Loan Origination Fees:
Loan origination fees are simply a fee deducted from your loan amount. The fee is a one-time facilitation fee. In many cases, this is a flat-fee not based on how much your loan is. Origination fee ranges from 1% to 5%. Average origination fee is 2.5%.
APR – What is it and what does it mean?
Annual percentage rate (APR) refers to the amounts of interest that a loan will cost. There are actually two different rates:
- Simple APR – This is the amount that you will pay per year. This is normally a round 6% 36%.
- Effective APR – This is the amount that you will actually pay. It is simply the APR and the amount of the compound interest that you pay. Here’s where this all gets tricky.
It’s important to note that APR is annual, but interest is usually calculated monthly. When the interest rate is low, the difference can be small, but when your interest rate is high, for example 20% or more, the difference can be significant.
How can I get lowest to average personal loan interest rate for fair to good credit?
A lot gets written and spoken about borrowers with bad credit rating and with excellent credits. However, there are many people with a fair to good credit score who have to pay anything between 15 to 20% APR on personal loans. Such borrowers tend to look for ways by which they can get low to average personal loan interest rate. Let’s look at some parameters that can help you get lower APRs in online personal loans:
Lenders prefer borrowers with a permanent or stable employment record:
Before applying for a personal loan, look at your employment record – especially the current employment. If you have just changed your job or have changed multiple jobs in the recent past, then it might be prudent to apply in your spouse’s / relative’s name.
Accuracy of the information provided:
Although it sounds elementary, but many applicants receive higher APRs due to the inaccuracy of information provided. A fair or a good credit score can appear better to a lender if accurate details are provided.
Regular taxpaying history:
Lenders always look at regular tax payers with trust. Ensure that you tax papers are in order.
Too many credit applications:
If you thought that applying for a personal loan and credit card across many institutions goes unnoticed – you were wrong. Lenders look at how many times you have applied for credit in the past to understand your credit-behavior. Everybody needs a little financial push once in a while, but overdoing it might increase your interest rates.
Debts and Liabilities:
This can be correlated with the importance pegged by most lenders on Debt-to-Income Ratio (DTI). A prospective borrower with a fair to good credit score and low debts can expect a low to average personal loan interest rate.
Past loan repayments:
While your credit score speaks about the overall credibility of your profile, lenders usually take it a step ahead and look at your past loan repayments. If you have missed a monthly payment or overused your credit limit in the past, then the interest rate offered might be on the higher side.
Guarantor of a defaulted loan:
If you have signed as a guarantor for a loan in the past which eventually defaulted, then the lender might not look at it with a kind eye. This might adversely affect your interest rate too.
If you had filed for bankruptcy in the past, then the lender probably will increase the interest rate. This is a red flag and you would be better off applying through a spouse or a relative.
Remember, lenders want their money back – with interest – on time; not before time. A borrower, who has taken a loan and paid all the installments on time, displays a responsible individual and lenders usually associate such borrowers with people having the capability to handle debt. Foreclosure of a loan, on the other hand, is not looked upon favourably by the lenders. While they get their money back before time, they also lose out on interest income and have to find borrowers for the foreclosed funds.
These parameters may seem small but they can go a long way in ensuring that you get a lowest to average personal loan interest rate for a fair to good credit score.
What credit score is considered good by online lenders? Also, what is a good APR?
A credit score of around 600 is usually considered good by online lenders along with a post-tax monthly income of at least $2,000. If you can couple this with a low debt to income ratio, then you can get a low to average personal loan interest rate.
Annual Percentage Rate (APR) is calculated by taking interest rate, origination fees and all other charges into consideration. It is the net interest paid by you on your loan. While some online lenders might extend a low personal loan interest rate to borrowers with a good credit score, others might reduce the origination and/or other charges. Understanding the APR will help you identify these benefits and choose a loan accordingly.
Getting low origination fees and other charges in addition to interest rate can considered as a good APR rate.
Average Personal Loan Interest Rates for Bad to Excellent Credit :
Below an example of bad to excellent credit score for personal loan $10,000 for the term 4 year.
These are estimated APR and loan origination fees. Not exact, but can almost come close to it. These are examples for low interest personal loans by credit score.
Applicants with poor or bad credit may be able to get unsecured personal loan based on permanent source of income and low debt levels. Borrowers with excellent credit and low debt to income may get low interest rates similar to secured loan.
If you have a bad credit score, you can still get a loan. There are providers that can help you get a person-to-person (P2P) loan almost without regard to your credit score. It is called bad credit loans.
P2P loans are a much better option than so-called “payday loans”. In the case of those loans, if you miss the payment, which most people do, your effective interest rate can climb to well over 30%.
Low interest personal loans to pay off debt:
When you need debt consolidation loan to pay off credit card debts, bills, and other high interest loans. Consolidation loans with low interest rate can solve your debt problem with one loan.
While the average credit card rate is above 17% to 18%, personal loan rates have come down to a new lowest average interest rate of 11%. Personal loans are now a cheaper alternative to credit cards for home repairs, vacations, debt consolidation and for other reasons.
This type of interest is ideal for debt consolidation. You can pay off debt with high interest using low interest personal loans in one go. Start making monthly payments for a single loan instead of multiple loans and multiple interest rates. Thus, you can save money and time with this personal loan.
Make time for a family vacations or cruises along the coast. Say goodbye to high interest loans or collateral loans and avail our low interest personal loans.
You have the freedom to select the best rates. It’s a good decision, not good luck that gets you the best of everything. Go ahead and apply now. Find out how much you are qualified for a loan based on your credit score and monthly income. One thing for sure, you will get low rates compare to other competitor’s offers.
There are many factors that make you get best rate personal loans at low interest. But a good credit score and stable monthly income is a mandatory.
- Min Credit Score 580 +
- Source of income: Must be Employed or Self-Employed.
- APR starts at 6% to 36%
- Loan amount: $1000 to $35,000
- Loan term: 3 Months to 60 Months
P2P loan interest rates:
These loans are facilitated by loan originators, usually through a website. A private individual will make money available to loan out. A credit rating of 580 will be required. In many circumstances, these loans have less rigid credit requirements simply because there isn’t a huge bureaucracy to deal with. These loans often have lower interest rates a well, since there is less of an infrastructure to pay for. According to Forbes, people with great credit, these loans can have interest rates as low as 6-10%, with very bad credit being as high as 30% to 36%.
Payday or cash advance loan interest rates:
These loans are outlawed in some places because the effective interest rates are so high that they end up being extraordinarily expensive. It’s not necessarily the interest rate, which is comparable to an introductory credit card, but it’s the fact that often people don’t pay the debt on the next payday and the fees can be huge. Many payday loan stores don’t check credit at all. They need to know that you have a long-term job and a checking account.
Where to find personal loan with average interest rate:
Personal loans can seems like something that only good to excellent credit people can get, but, in reality, with a bit of searching, you can find some great loans at great rates. These loans are typically unsecured and based on your credit score. That score is simply your history of taking your debts seriously and paying on time.
Apply for a personal loan at P2P lending and see how easy you can get a loan at average interest rates. The P2P revolution has helped average people get the loans that they need and investors to make some extra money, all without the need for banks and bureaucracies.
If you are looking for low interest rate personal loans for good credit or personal loans for fair credit score, then you must realize that understanding the lender’s approach of assessing borrowers can help you project your profile better. This would invariably lead to a lower APR offer by the lender. Get to work and prepare your application well to get low to average personal loan interest rates.