Personal Loan Interest Rates
Whether you are a homemaker with a family or a struggling student, there are times in your life where you need a little extra money for emergencies or bills. You may also be looking to consolidate a few debts and want to research your loan options. One great option to consider is an online loan. There are many loan options to consider applying for such as a personal loan or an installment loan. No matter what you choose, it is important to be fully aware of the terms and conditions before you accept them.
Personal Loans Vs. Installment Loans - Is There A Difference?
By definition, an online personal loan is a broad term that constitutes a variety of loan types. Each of the personal loan types will come with its own set of fees, finance charges, repayment terms and other set terms made by the lender you choose to apply with. Under the umbrella of personal loans is an installment loan. It is a type of personal loan that often attracts people in need of money for emergency expenses. They are typical loans with short-term loan conditions.
Personal loans are often approved to borrowers in need of money for a variety of needs. It can be used for car repairs, bill consolidation, medical bills or a last-minute vacation. You are able to use the funds for any purpose you deem fit. An installment loan is similar to a payday loan. There are key differences, however. A payday loan will need to be repaid in a lump sum on the next payday of the borrower. When an installment loan is taken out, it is received in a lump sum as well.
However, repaying an installment loan can be paid back over time in installment payments. As with any type of installment loan or personal loan, you may repay your lender earlier than the original due date without being subjected to any prepayment fees or charges.
Average Interest Rates Of A Personal Loan Online
When it comes to finding out the average interest rates, you may obtain a personal loan estimate online from the comfort of home. This year, the average annual percentage rate for a personal loan online is between 10-percent and 28-percent. The actual APR a borrower will be eligible for will depend on a variety of factors including the loan type, how good your credit is, the amount you are looking to borrow, the lender you choose to work with and the length of the loan.
What Is Considered A Good Interest Rate For An Online Personal Loan?
When it comes to determining if a personal loan interest rate is good for your specific situation, you will need to take a few things into consideration. A few things to consider are what you are using the loan for, the balance of the loan and the loan terms and conditions. If you are desperate for emergency funds, agreeing to a loan with a higher APR will make sense in that situation.
If you are not in a hurry to receive your funds, consider applying to various lenders. Each loan estimate may be compared against each other to find the best loan for your funding needs. Applying to multiple lenders will also allow you to see what kind of rates you are eligible for based on your creditworthiness, your income and other determining factors. If you are not happy with the rates you get, consider taking some time to work on your credit before applying again.
Additional Factors Used To Determine Online Personal Loan Interest Rates
Personal loan lenders look at a multitude of factors when determining the interest rate to offer a borrower. The most important is your credit history and FICO score. Next in the line of importance is your debt-to-income ratio and your current employment status. Many lenders have strict guidelines and eligibility requirements that greatly revolve around those factors in particular.
How Lenders Set Their Interest Rates
Lenders will often use a risk-based method of determining the interest rates and terms they will offer borrowers. This method works to figure out how risky offering a loan to a borrower will be based on credit scores and other factors. If your credit history is long and in good standing, a lender will offer you their best rates because they deem you a lower credit risk.
Benefits Of Considering A Personal Loan
Even though many people will say debt is the root of evil, there is plenty of good that can come from obtaining a personal loan. Financially responsible people from all walks of life use personal loans, credit cards and other ways of financing purchases each day. Loans make it possible for the average person to buy new vehicles and purchase a home. Items that most could only dream of buying in cash are made possible because of loans.
Even with judicious borrowers, unsecured and secured personal loans are gaining an increase in popularity. The average borrower's affinity to personal loans over other loan options available isn't too surprising. They can offer a lot of benefits compared to payday loans, title loans and high-interest credit cards used for paying expenses.
Some of the benefits of using a personal loan over other options includes a higher borrowing limit, lower interest rates and fees, no need for collateral and a predictable payment schedule. Most payment terms for personal loans are between two and five years. This is much longer and easier to budget for compared to paying back a payday loan, title loan or other fast cash loan option.
Personal loans are popular as an option to refinance other debts with higher interest rates. Debt consolidation makes perfect sense if you are able to obtain a personal loan with a low APR. Managing one single payment instead of multiple credit cards and other loans is much easier. The payments can be easier to budget for because they are more predictable. In most cases, monthly payments will be significantly lower.