Best Personal Loans Of 2022
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Many personal loans can be used for general family expenses such as home improvement projects, wedding expenses, vacations, and in some cases even buying land. Borrowers also turn to personal loans for debt consolidation, as interest rates for personal loans are often lower than for credit cards—especially for applicants with good to excellent credit.
These loans are available from traditional banks, credit unions and online lending platforms that make it easy to apply online without visiting a bank branch. What’s more, many personal loans can be funded within a few business days so you don’t have to wait to get the money you need. The best personal loans offer low interest rates, flexible loan amounts and repayment terms, and limited fees for well-qualified borrowers.
Above personal loan rates and details are accurate till September 30, 2022. While we update this information regularly, annual percentage rates (APRs) and loan details may have changed since the page was last updated. Keep in mind, some lenders make specific rates and terms available only for specific loan purposes. Be sure to confirm the available APR range and loan details based on your desired loan purpose with your lender before applying.
What is a personal loan?
A personal loan is a type of lump-sum financing that borrowers can get from a traditional bank, credit union, or online lender, which they can use for a variety of expenses. Common uses include medical bills, auto repairs, home improvement projects, and debt consolidation. Personal loans typically have repayment terms of between two and seven years and offer interest rates as low as 3% for highly-qualified borrowers.
Tips for comparing personal loans
Consider these tips when comparing personal loans:
Where possible, prequalify.
Many personal loan providers offer potential borrowers the ability to pre-qualify for loans. This means that the applicant can submit details about their credit requirements, income, housing status and other relevant information to know what kind of loan amount, rates and repayment terms they are eligible for. Even better, this process usually only requires a soft credit inquiry so you can make the purchase without damaging your credit score.
Consider the purpose of your loan.
While personal loans can be used for a very wide range of purposes, they are limited to things like consumer debt consolidation, home improvement, vacations, weddings, funerals, major purchases, and other personal expenses.For this reason, lenders often restrict the use of personal loans for postsecondary education expenses, business purposes, and illegal activities at least. When considering a lender, make sure your intended use of the loan is permitted under its borrower agreement.
Watch out for additional fees.
Some lenders offer fee-free personal loans that don’t require borrowers to pay origination fees, late payment fees, prepayment penalties or any other common loan costs. However, this is more the exception than the rule, so it’s important to ask about fees when shopping for the best loan terms. And, if a lender charges an origination fee, find out if it’s built into the APR or deducted from the loan amount before funding, as this can affect the loan amount you need to request.
Evaluate the lender’s customer support options.
If you have found a lender who is willing to offer you the money you need on acceptable terms, there is one more thing to consider before signing the loan agreement. Customer support may not seem like a big deal in the honeymoon phase of your loan, but it can make a huge difference if you face payment issues or financial hardship during your repayment period. Review the lender’s customer service resources and read reviews from past and current borrowers to ensure they are a good fit.
How does a personal loan work?
Personal loans are usually available from banks, credit unions and online lenders. Prospective borrowers apply for a loan online or in person and then wait for a decision—approval or denial. If approved, borrowers receive their funds as a lump sum payment in their bank account and interest starts accruing in the first month. Personal loans require fixed monthly payments for the entire loan term, usually between one and seven years.
Average personal loan interest rates by credit score
Here are the average estimated interest rates for personal loans based on VantageScore risk levels, according to Experian. Please note that interest rates are determined and set by the lenders. Rates provided are approximate.
Average personal loan interest rates by credit score
Vantage V4 Credit Score Average Interest Rate
Deep Subprime (300-499)
Near Prime (601-660)
Super Prime (781-850)
While lenders determine and set rates, as an applicant, you can increase your chances of receiving favorable terms.
“Consumers with high credit scores typically qualify for lower interest rates,” says Rod Griffin, senior director of consumer education and advocacy at Experian. To boost your credit scores, make sure you make your payments on time and try to keep your balances low. Missed payments and high [credit] utilization rates, or balance-to-limit ratios on your credit cards, are the two most heavily weighted factors in determining your credit scores. If possible, I recommend checking your credit report and score three to six months before you apply for a personal loan. This will give you time to take steps to improve your credit standing if needed.
Reasons for getting a personal loan
You can use a personal loan for almost any kind of personal expenses. In general, however, personal loans are good for:
Emergency expenses. If you need money immediately for medical bills, funeral expenses, car repairs or unexpected expenses that require immediate attention, you can use a personal loan.
Debt Consolidation. A personal loan is a great way to consolidate high-interest debt to help you save money on interest and streamline your payments.
Home improvement and repair. If you have an upcoming home improvement project, you can take out a personal loan to finance the cost. You can also use a personal loan for unexpected home repair or maintenance expenses.
Auto financing. While auto loans are the most common way to finance a vehicle, personal loans can also help you get the job done. Personal loans have fewer restrictions on the type of car you can buy, but they usually charge higher interest rates than traditional auto loans.
Moving expenses. The cost of moving can add up quickly. If you don’t have cash on hand, a personal loan can help you finance the expenses.
Best place to get personal loan
You can get a personal loan from three types of institutions:
Online Lenders. These are mostly technology-based non-bank companies that offer a small range of credit products, including personal loans. Online lenders typically offer low interest rates, loans that are available nationally and can provide funding within 24 to 48 hours.
banks. Many local and national banks offer personal loans in addition to other financial products, such as checking and savings accounts. If you have an existing relationship with a bank, you can consider opening your personal loan through that bank.
Credit unions. These are local to your community and offer applications both online and in person. Credit unions require membership, so be sure to check to see if you qualify.
The best place to get a personal loan is where you can avail the most favorable terms and loan limits to suit your needs.
How to get a personal loan
Although the process varies by lender, follow these general steps to apply for a personal loan:
Check your credit score. Start by checking your credit score for free through your credit card issuer or another website that offers free scores. This will give you an idea of your creditworthiness and your chances of qualifying. Aim for a score of at least 610; However, a score of at least 720 will give the most favorable terms.
If necessary, take steps to improve your credit score. If your score falls below 610 or you want to raise your score to get the best terms possible, take the time to improve your score before applying, such as reducing your credit utilization or paying off unpaid debt.
Determine how much you need to borrow. Once you check your credit score, calculate how much money you want to borrow. Remember, though, that you’ll receive your money in one lump sum, and you’ll have to pay interest on the entire amount—so only borrow what you need.
Shop around for the best terms and interest rates. Many lenders will let you prequalify before submitting your application, which lets you see what terms you’ll receive with just a soft credit inquiry. Prequalifying lets you shop around for the best rates without hurting your credit score.
Submit a formal application and wait for a loan decision. After you find the lender that offers the best terms for your situation, submit your application online or in person. Depending on the lender, this process can take anywhere from a few hours to a few days.
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Survey: Borrowing money has improved financial situation
Borrowing money does not always have a negative impact on your finances. In fact, 69% of Americans say that borrowing money has made their finances better. You, too, can experience the benefits of borrowing money by following responsible practices. To avoid financial difficulties when borrowing money, we recommend you:
- Pay your bills on time or early to avoid damaging your credit score
- Borrow below your means and within your budget
- Take the time to find the lowest rates and fees to reduce overall borrowing costs
- Improve your credit score or apply with a co-signer to increase your chances of getting the most favorable terms
- Don’t overspend if you’re using a credit card or line of credit
- Set up automatic payments to never miss a payment
- Monitor your monthly statements
- Consolidate high-interest debt into one streamlined payment
We reviewed 29 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and application process. We have selected the 10 best lenders based on the weightage assigned to each category:
- Loan Details: 20%
- Loan Cost: 35%
- Eligibility and Accessibility: 20%
- Customer Experience: 15%
- Application Process: 10%
Within each major category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications, and the lender’s geographic availability. Finally, we evaluated each provider’s customer support tools, borrower benefits and features that make the borrowing process easier—such as pre-qualification options and mobile apps.
Where appropriate, we awarded partial points based on how well the lender met each criterion.