A personal loan is a form of credit that can help you with a large purchase or to consolidate debt with a higher interest rate. Taking out a personal loan can make sense when it is cheaper than other forms of credit, and when you can comfortably afford your monthly payments over the life of your loan. Because personal loans generally carry lower interest rates than credit cards, they can be used to consolidate multiple credit card debts into one, lower-cost monthly payment. Interest rates may be lower as well, especially if you have a good credit score, making personal loans a good way to consolidate and pay down credit card debt.
It is usually far lower than average credit card APRs, so many consumers are using loans to refinance their credit card debt. Unsecured loans usually carry higher interest rates and require better credit, since there is no physical object that lenders can seize if you fail to make payments. Personal loans usually have lower interest rates than credit cards for borrowers with good credit, and most personal loans are unsecured, meaning that there is no need to put down collateral.
Borrowers who qualify for a personal loan at a lower interest rate than credit cards can simplify their monthly payments and save money in the process. You should be wary of borrowing with high interest rates, or taking a loan as a simple solution rather than looking at other solutions. A home equity loan may be a good option if you have a high credit score, would rather have a single loan with a fixed interest rate and payments, and would rather not have any modifications made to your first mortgage.
If you need additional money to cover home improvements, fund a wedding, or consolidate high-interest debt, you may consider a personal loan. While taking out a installment loan is not going to raise your score by itself, using a personal loan to pay down your revolved debts will result in the biggest visible increase to your credit score. Even with an unsecured personal loan, of course, failing to pay it back in a timely manner could hurt your credit score and greatly limit your future credit access. As with any other secured loan, you can lose your security deposit if you are unable to keep up the payments.
If you fail to repay your loan, your lender can take possession of your assets in order to recoup any lost money. The drawback is that a house would be used as collateral, so the home could be taken away from the lender should you ever default. A personal loan might help you out in the short-term, giving you a little quick cash, but over the long-term, it can cause you an even bigger problem, since you will need to repay all that you borrowed, as well as a huge chunk of interest. Generally unsecured (not needing collateral, such as a car or a house), personal loans can be used to consolidate debt, for home improvement projects, and for other large expenses one might not want to or be able to cover all at once.
Best Company For Personal Loans
Whether you are looking to consolidate high-interest credit card debt, fund a big home remodel, or cover some other expense, a personal loan can help. Some lenders – like LightStream and SoFi – offer personal loans of up to $100,000, which can be a less-risky option to finance big projects than a home equity loan or a home equity line of credit (HELOC). Personal loans are typically offered to those with better credit scores, but online lender Avant offers personal loan options for borrowers with credit scores as low as 600.
Generally, borrowers with credit scores below 650 can struggle to get approved for loans at banks and online lenders, particularly at rates as low as PenFed offers. A fair to poor credit score does not exclude you from getting a personal loan (some lenders even specialize in loans to applicants with bad credit), but you might find it harder to secure a lower interest rate that is competitive with credit card interest rates. A higher credit score signals to the lender that borrowers can be trusted to handle credit and debt responsibly, so higher credit scores generally merit a higher likelihood of loan approval and lower interest rates.
It is a good idea to consider refinancing your loan if you have improved your credit score and are able to qualify for a better APR, as this allows you to benefit from lower interest rates, which could save you big money down the road.
If your credit score is below 620, OneMain Financial might be a better personal loan company for you, since nearly half its overall loan volume goes to borrowers with credit scores below 620. Company Loan Amount Minimum Credit Score APRs Avant $2,000-$35,000 580 9.5%-35.99% Earnest $5,000-$75,000 680 6.99%-18.24% FreedomPlus $7,500-$40,000 620 5.99%-29.99% Marcus $3,500-$40,000 660 5.99%-28.99% SoFi $5,000-$100,000 N/A (High) 6.95%-35.00% Prosper $6,500-$100,000 N/A 5.49%-22.99% The best personal loan companies. Credit Score Best for Bad Credit Loans 5% – 35% $500 – $10,000 Not specifying a low credit score Upstart 78.6% – 35% $1,000 – $50,000 600 Limited credit history OneMain Financial 18.00% – 35% $1,500 – $20,000 Not specifying a secured loan TD Bank 6.99% – 21.99% $2,000 – $50,000 Not specifying a credit build up Avant 9.95% – 35.00% $2,000 – $35,000 580* Unsecured loan LendingPoint 9.99% – 35.00% $2,000 – $36,500 590 Flexible repayment options Upgrade 5.94% – 34.97% (with autopay) $1,000 – $50,000 Not specifying a fast loan LendingPoint 9.99% – 35% $2,000 – $35,000 580* Unsecured loan LendingPoint 9.99% – 35% $2,000 – $35,000 580* Unsecured loan LendingPoint 9.99% – 35.00% $2,000 – $35,000 580 Flexible repayment options Upgrade 5.94% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% (with autopay) 4.94% – 35.00% (with autopay) 4.94% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% – 35.00% (with autopay option 5.94 – 35.00% (with autopay) – 35.00% – 35.00% -35.99% $2,000 – 35.00% (with autopay) -35.99% $2,000 -35.99% (with autopay) -35.99% $2,000 -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) -35.99% (with autopay) Credit Score Best for Bad Credit Loans 5.99 % -35.99 % $ 500- $ 10,000 Not specified Poor credit scores Upstart 7.86 % -35.99 % $ 1,000- $ 50,000 600 Limited credit history OneMain Financial 18.00 % -35.99 % $ 1,500- $ 20,000 Not specified Secured loans TD Bank 6.99 % -21.99 % $ 2,000- $ 50,000 Not specified Credit building Avant 9.95 % -35.99 % $ 2,000- $ 35,000 580* Unsecured loans LendingPoint 9.99 % -35.99 % $ 2,000- $ 36,500 590 Flexible repayment options Upgrade 5.94 % -35.97 % (with autopay) $ 1,000- $ 50,000 Not specified Fast funding LendingClub 8.05 % -35.89 % $ 1,000- $ 40,000 600 Online experience *Avants minimum credit score is 580 FICO and 550 Vantage. LendingPoint is one of the top options. Credit Score Loans are available. Credit Scores are available. Credit Scores are available. Credit Scores are available. LendingPoint is one of the top options.
