How to Get the Best Personal Loan Rates In 2025

 

How to Get the Best Personal Loan Rates

The most competitive personal loan rates are typically reserved for the most creditworthy borrowers. However, there are other factors that can impact rates, and it is possible to get a lower rate without a stellar credit profile. Follow these tips to get the best personal loan rates:

1. Understand your credit report. Before prequalifying or applying for a personal loan, request a copy of your credit report from one of the three main credit bureaus—Equifax, Experian and TransUnion. A credit report includes valuable insight into how your credit scores are calculated and how much risk you pose to lenders. Likewise, check your credit score and use it to prequalify for an APR before submitting to a hard credit inquiry.
2. Calculate the best loan amount and term. Personal loan APRs are generally higher for larger loans and more extended repayment terms. That said, shorter repayment terms mean larger monthly payments. Use a personal loan calculator to determine how much monthly payment you can afford, and then opt for the shortest possible loan term.
3. Apply with a co-signer or co-borrower. If you won’t qualify for a competitive APR based on your personal credit, consider applying with a co-borrower or co-signer who has a higher credit score. This approach can lead to higher approval odds and lower personal loan rates.
4. Choose a secured loan. A secured personal loan is one that is collateralized by a valuable asset, such as real estate. If a borrower defaults on a secured loan, the lender can seize the collateral in order to recoup the outstanding loan balance. Because secured loans are less risky to lenders, they may be a better fit for borrowers who can’t qualify for a personal loan or a competitive APR.
5. Take advantage of rate discounts. Many lenders offer rate discounts to borrowers who sign up for automatic payments during the loan application process. When comparing lenders, choose an option that offers autopay discounts or other savings opportunities.
6. Opt for a fee-free lender. To remain competitive, some lenders moved to a fee-free structure that does not charge origination fees, late payment fees, prepayment penalties or other additional costs. Choosing a fee-free lender can reduce the overall cost of a loan, thereby reducing the APR.

Pros and Cons of Personal Loans

Before taking out a personal loan to consolidate debt or finance your next purchase, it’s a good idea to run through the pros and cons. Below are the advantages and disadvantages of personal loans you should be aware of.

Pros of Personal Loans

• Flexible loan amounts
• Unsecured loans typically require no collateral or down payment
• Fixed installment payments
• Can qualify for low interest rates
• Loan funding may happen in a week or less
• Funds can be used to pay for almost any type of legal personal expense

Cons of Personal Loans

• Loans may have origination fees
• Collateral may be required if you don’t have good credit
• Borrowers with less-than-perfect credit may qualify for higher interest rates
• Loans can damage your credit history if you don’t make on-time payments
• Late payment fees or prepayment penalties may increase the cost of the loan

Where To Get a Personal Loan

Various lenders offer personal loans and some may be better suited for you and your financial needs. Before accepting a loan, consider

1. Banks. Traditional financial institutions, like banks, offer personal loans, but they can come with high interest rates.
2. Credit unions. Credit unions can be a good option for a personal loan if you’re a member or qualify to be a member. These lenders often work with borrowers who have a less-than-perfect credit history and can offer low interest rates.
3. Online lenders. Online lenders can offer competitive interest rates and flexible repayment terms. Some cater to borrowers with bad credit scores.

How To Get a Personal Loan

Although the process can vary by lender, you’ll generally take these steps in order to get a personal loan:

1. Check your credit. Before starting your search for lenders, check your credit score for free through your credit card issuer or another service. This will help you narrow down which lenders will be willing to work with you.
2. Improve your credit. If your credit score is lower than 610, take steps to improve your credit score such as lowering your credit usage or paying off debts. This can help you qualify for a loan and, in some cases, a lower interest rate. 
3. Shop around for lenders. Determine how much money you need to borrow and which lenders whose qualification requirements you meet. Many lenders will let you pre-qualify before submitting a formal application, which allows you to see the rates you could qualify for without impacting your credit score.
4. Submit an application. Once you find the lender that works best for you, submit an application. Depending on the lender, this can take hours or days.

Best Personal Loan Interest Rates of 2024

1. LightStream (7.49% to 25.49%): Best for borrowers who can qualify for low interest rates and want a lender with no  origination, late payment or prepayment fees.
2. SoFi (8.99% to 29.99%): Best for borrowers who are looking to borrow a large personal loan.
3. Wells Fargo (7.49% to 23.24%): Best for borrowers who have an existing relationship with the lender.
4. Discover (7.99% to 24.99%): Best for borrowers who can repay their loan within 30 days.
5. U.S. Bank (8.24% to 24.99%): Best for borrowers who are U.S. Bank customers and can take advantage of the customer discounts.
6. PenFed (8.49% to 17.99%): Best for borrowers looking to get low interest rates at a credit union.
7. Upstart (7.8% to 35.99%): Best for borrowers who are looking to borrow a small amount

 

Previous

Next