Best Personal Loans of March 2024

Table of Contents

What Is a Personal Loan?

The average personal loan rate is 11.94% as of Feb. 7, according to a Bankrate survey. Personal loan interest rates are trending higher in 2024 so far, up nearly a full percentage point from July 2023:

Personal loan rates vary widely based on creditworthiness. Borrowers with very good or excellent credit scores will see much lower interest rates than those with fair or poor credit. Often, borrowers with bad credit will apply for a secured personal loan that uses an asset as collateral in order to achieve lower rates:

What Is a Personal Loan?

A personal loan is a type of lump-sum loan that you repay in fixed monthly payments over a set period of months or years, unlike a credit card or revolving line of credit.

Personal loans are typically unsecured, which means they are supported by your creditworthiness rather than collateral. Collateral is an asset, such as a car or house, a lender may use to recoup its losses if you default on a secured loan. However, some lenders offer secured personal loans that are backed by collateral like a savings account or certificate of deposit.

You can get a personal loan from different types of lenders, including traditional brick-and-mortar banks, credit unions and online lenders. They serve borrowers with varying credit scores, income levels and other requirements.

Pros and Cons of Personal Loans

Pros

  • Depending on the lender, borrowers can potentially receive funds for personal loans in as little as one business day.
  • Personal loans can help borrowers consolidate high-interest credit card debt and pay it off faster at a lower interest rate.
  • Personal loans are delivered as a lump sum that can be used as you see fit.
  • Personal loans are typically unsecured, so the borrower doesn’t have to use collateral.

Cons

  • Depending on the lender, borrowers may have to pay origination fees, or even prepayment penalties.
  • A personal loan may have a higher APR than other options, such as a 0% credit card or a home equity loan, depending on creditworthiness and other factors.
  • Personal loans may be difficult for consumers with fair credit or below to obtain.

Who Can Get a Personal Loan?

Lenders often set minimum requirements and will likely look at your credit score, payment history, income and debt-to-income ratio.

If you’re furloughed or unemployed, the lender may ask you for documentation that indicates when you’ll return to work, such as your furlough letter or a job offer.

Age eligibility requirements can vary by lender or by state and territory laws. Generally, consumers must be 18 to apply, but some states may require borrowers to be 19 or 21.

If you’re applying for a secured loan, the lender will also consider your collateral.

How to Choose the Best Personal Loan Lender for You

You’ll want to consider a number of factors when choosing the best personal loan lender.

  • What interest rate can I qualify for? The lower your personal loan rate, the less you’ll pay in financing charges over time. You’ll want to shop around to find the lowest possible APR for your financial situation.
  • What loan amounts does the lender offer? Many lenders offer minimum and maximum loan amounts, so it’s worth noting before applying for a personal loan. After all, if a lender’s maximum amount is $40,000, you don’t want to waste your time if you need to borrow more.
  • What terms can I expect? Not only will you want to secure the best interest rate, but you’ll also need to make sure to get the loan repayment length you need. Use these factors to calculate your monthly payment to make certain you can afford it.
  • What fees does the lender charge? Many lenders charge an origination fee that can vary from 1% to 10% of the loan amount. Because this can greatly affect the payout you actually receive, be sure to note this and any other fees the lender may charge.
  • How is the lender’s customer service? Check online reviews, such as the Better Business Bureau, Trustpilot or the Consumer Financial Protection Bureau. If the lender is a financial institution, you might reach out to family and friends about their experience.

How to Apply for a Personal Loan

Follow these steps to apply for a personal loan:

1. Get prequalified. Most – but not all – personal loan companies let you see your estimated interest rate with a soft credit inquiry, which won’t impact your credit score. When you request a rate quote, you’ll provide your personal information, such as your address, income and Social Security number, on the lender’s secure website. You’ll indicate the amount you want to borrow, the reason for borrowing and the repayment term length you prefer.

Once you give these details, you’ll be informed of rates and how to formally apply for a loan. However, prequalification doesn’t necessarily guarantee your loan application will be approved.

2. Compare offers. Research different lenders to find the best personal loan interest rate. You should also consider factors like loan origination fees, the monthly payment, repayment terms and customer service.

3. Formally apply through the lender of your choice. You’ll complete your loan application, which will trigger a hard credit inquiry on your credit report. Keep in mind that even with good credit, you won’t be guaranteed approval or a particular interest rate.

What Are the Alternatives to Getting a Personal Loan?

There may be other ways to get the funds you need, so consider these alternatives before you commit to a personal loan.

  • Make a payment arrangement. Costs such as unpaid medical expenses can significantly impact your credit score, but always attempt a payment arrangement with the medical provider before taking out a personal loan. The same goes for utility providers like electricity or water companies.
  • Look at other types of loans. A home equity loan or line of credit could be your option for home repairs, and an auto loan for a new or used car purchase. Compare other types of loans and their terms to see if they offer a better rate.
  • Consider using a low-interest credit card. If your expense or purchase can be paid with a credit card that has a zero-interest promotional period, consider that first. But be sure that you can repay the balance on a reasonable time frame to avoid accruing high-interest, revolving debt.
  • Borrow from a family member. Asking for help may be difficult, but if someone is in a position to loan you money, then it may be better than a personal loan. It’s up to you to weigh the pros and cons of borrowing from friends or family.

Leave a Comment