When it comes to personal loan rates, they tend to be all over the place. Some are high and some are quite reasonable. A lot of what determines your loan rates depends on your personal situation as well as who your lender is.
What You Need to Know About Personal Loan Rates
A quick reminder, a personal loan is typically an unsecured loan that you are approved for based on your credit history and your employment status instead of a piece of collateral such as a car or home.
If you start doing a little research, you’ll soon discover that loan rates for personal loans tend to range from 5 percent and up to around 40 percent. This varies from lender to lender and your credit history.
Things that Determine Your Loan Rates
1.) The loan term – There are several things that go into determining your personal loan rates. The first is the length of time you want to borrow the money for. In general, the shorter the loan term, the lower the interest rates will be.
With a shorter loan term, the lender knows that they will get their money back faster, so they can offer a little lower rate.
2.) Your credit score – One of the big determiners when it comes to the loan rates you will be offered on a personal loan is your credit score. It goes without saying that the higher your credit score is, the lower your interest rate will be.
The same is true the other way around. There are personal loans available for those with less than perfect credit, but you’ll have to accept a little higher interest rate. Depending on your situation, that may not matter to you. Just be sure to check out all of the terms and read the fine print.
3.) Your employment – This is another aspect loan companies look at when deciding on your interest rates. If you have been employed with the same employer for at least two years, the lender will see you as less of a credit risk and offer you lower rates.
The thinking is, if you have a stable work history then you should continue to have one going forward which means you should be able to make your monthly loan payments.
4.) Your outstanding debts – When applying for a personal loan, one aspect of your financial history that will be considered is how much debt you currently have. While it’s true that a personal loan is a great way to pay off credit card debt, you still need to make sure you aren’t overextended to the point that you can’t get a loan.
This is something you will want to talk to your lender about. Let them know you will be wiping out your credit card debt with the loan if that is what you plan to do .
5.) Your overall financial situation – While the above items are parts of your financial situation, a lender will take a look at the whole picture to determine your personal loan rates.
That can be a good thing. If you have one area in your financial status that could be improved but you have other areas that are in good shape, your overall status may even out.
Finally, when you decide to shop personal loan rates, be sure you work with a company that has an A+ rating with the Better Business Bureau like BetterLoanChoice.com.
Don’t work with payday lenders as many are predatory in nature. Instead, stick with personal loan lenders with reasonable interest rates and terms. You’ll be glad you did when it’s time to pay back the loan.
This information was brought to you by BetterLoanChoice
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