Cheapest Personal Loans
Simply put, Cheap personal loans are multipurpose credit advances availed to an individual at highly attractive interest rates. And, they are referred to as multipurpose loans because they can be used to address virtually any cash need. But, who has the best rates for personal loans in the US in 2020? We will highlight a few in the table below, and explain everything you need to know about cheap personal loans in this guide.
- APR range
- Amount
- Credit Score
- Repayment Period
Lightstream
- 3.99% - 16.99%
- $5,000 - $100,000
- 660
- 2 – 7 Years
SoFi
- 5.99% – 18.28%
- $5,000 - $100,000
- 680
- 2 – 7 Years
Best Egg
- 5.99% – 29.99%
- $2,000 - $35,000
- 700
- 3 – 5 Years
- APR range
- Amount
- Credit Score
- Repayment Period
Wells Fargo
- 5.49 – 24.99%
- $3,000 – $100,000
- 600
- 1 – 4 Years
American Express
- 6.91 – 19.97%
- $3,500 – $40,000
- None
- 1 – 7 Years
TD Bank
- 6.99 – 18.99%
- $2,000 – $50,000
- 700
- 1 – 5 Years
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
What are cheaper personal loans?
Cheaper personal loans are unsecured loans that are availed to individuals at relatively low interest rates and highly attractive loan terms. Keep in mind that you often have to look beyond the interest rates when evaluating different personal loan offers. Most importantly, consider the loan APR – the annual percentage rate of a loan – indicating the total loan cost.
The difference between the interest rate and loan APR is, while the interest rate tells you the premium charged on the loan amount, the APR addresses the loan’s total cost. It takes into account the upfront and recurring loan fees, including the interest rates, the origination fees, the loan processing fees, and closing fees.
Therefore, the cheapest personal loans don’t necessarily refer to credit advances with low-interest rates. Rather, they refer to a credit advance with attractively low APR.
Requirements to qualify
The qualification requirements for personal loans vary from one lender to another. There are, nevertheless, two basic requirements that every lender must take into account:
- You must be a US resident
- You must be above 18 years
After satisfying these basics, the lenders will demand that you fulfill such other requirements as having a stellar borrowing history if you are to qualify for the cheapest personal loans. Other requirements include:
- A stellar credit score
- Stable source of income
- Personal account with the lender or bank statements in case of online lending platforms
- Low debt-to-income ratio
A combination of all these factors plays a key role in determining how low a lender can go when it comes to loan interest rates. Note also that different borrowers place greater significance on different requirements. For instance, while some consider a good credit score as the most important factor in determining the interest rate, others consider the stability of your income source. You, therefore, don’t have to worry about getting cheaper personal loans when you don’t have any borrowing history.
You must be a US Resident and have at least 18 years to borrow a cheaper personal loan.
Pros and Cons of Cheapest Personal Loans
Pros
- More attractive interest rates: The interest rates for personal loans, unlike most other types of loans like credit card or payday loans, are attractively low.
- Highly versatile: A car loan can only be used to fund the purchase of a vehicle, just as the mortgage will only be used to fund a home. On the other hand, personal loans can be used to fulfill any need for cash, from loan debt consolidation to paying for vacation or wedding, for medical emergencies, or home improvement.
- Readily available: A huge number of lenders – both high street traditional banks and purely online lending platforms – currently offer cheap personal loans with quick disbursement.
- They don’t have to be collateralized: Personal loans, unlike car loans or mortgages, don’t need to be collateralized. You only need a good credit score and a stable income source to qualify for cheaper personal loans.
- Flexible repayment terms: Unlike Payday loans or credit card loans that charge exorbitant loan costs with very short repayment periods, personal loans are often cheaper and come with extended loan repayment periods of between 12 months and 7 years. You also don’t have to pay back the loan as a lump sum, instead, it’s broken down into small manageable monthly repayments.
Cons
- Affects your credit score: By taking a cheap personal loan, you increase your debt to income ratio. This makes it hard to qualify for other loans.
- May trap you into a debt cycle: A personal loan, no matter how cheap, isn’t always the best solution to your financial problems – especially if you are using it for debt consolidation. It doesn’t cure the problem but only extends the repayment period. Its misuse may also trap you in a debt cycle.
- Most carry high overhead fees: Most lenders seek to recover the cost of the cheap personal loans in the numerous overhead fees. They will often charge you origination and processing fees, fines for late/missed payments, and penalize early loan payoffs.
- Attract fixed monthly repayments: Unlike credit cards or lines of credit that only require you to pay a small portion of the amount owed at the end of the month, personal loans impose fixed monthly repayments amounts and fines for missed or late payments.
What’s The Best Rate on a Personal Loan?
The national average rate for an unsecured personal loan in the US today stands at 10.3% and 28.5% for individuals with ‘perfect’ and ‘poor/average’ credit scores respectively. The best rate for a personal loan should, therefore, be any offer below this rate.
Note that the best rate in this context refers to the total loan cost, including any upfront payments or deductions from the loan like origination and closing fees.
The best rate on a personal loan today should also be void of exorbitant fines in case of missed or late payments and the unreasonable penalties for early payoffs.
The national average rate for an unsecured personal loan in the US today stands at 10.3% and 28.5% for individuals with ‘perfect’ and ‘poor/average’ credit scores respectively.
How To Get a Low-Interest Rate
- Shop around: Ask for loan offers from multiple lenders. Be careful, though, to only ask for such offers from lenders that either doesn’t pull your credit score or others that will only conduct a soft inquiry. Hard inquiries from multiple lenders often hurt your score.
- Improve your credit score or get a co-applicant: Clean and improve your credit score by requesting the credit report and checking for errors and misrepresentations. If none of it can be corrected within a short period, get a co-applicant with a higher credit score than yours.
- Apply for a secured loan: You can also push the cost of the personal loan drastically if you opt to add collateral for the loan. This could be your car, home, or another property in your name.
- Agree to the auto-repayment: Did you know that most lenders would consider lowering the rate of your personal loan if you agree to auto-repayments for the loan? Float this idea with your lender.
- Pay off current debts: Most lenders consider individuals with higher debt to income ratios high-risk borrowers. If they don’t deny you the personal loan outrightly, they will charge you considerably higher interest rates.
How to Choose The Cheapest Personal Loans Provider
- Compare their fees: Seek several loan offers from different personal loan service providers. Compare their terms and only go for the loan provider with the most affordable rates.
- Check the loan associated costs: In addition to the cheap personal loan interest rates, you also have to consider the associated borrowing costs imposed by the lender. Check their origination fees, processing fees, and all other associated borrowing costs.
- Look beyond the interest rate: You also need to vet the cheap personal loan provider’s reputation. Check the different online user reviews about the company and inquire about the lender’s level of customer service from acquaintances who have had prior engagements with the company.
- The flexibility of the loan repayment: What is the lender’s view towards loan repayments? Do they penalize late and missed repayments? What if you decided to pay off the loan early? Ask if you would have to pay for the foregone interest.
Frequently Asked Questions (FAQ)
The minimum average interest for personal loans currently stands at 10.3% for persons with credit scores above 720, 13.5% for borrowers with a credit score of 690, 17.8% for individuals with credit scores of 630, and 28.5% for anyone with a poor credit score – below 629.
Most traditional banks take between 2 to 10 days to approve and disburse a loan, while most online banks will process and disburse the loan on the same day or the next.
Most lenders allow you to borrow from as little as $1,000 to as much as $100,000.
The loan repayment terms vary from one lender to another but often range from 12 months to 12 years.
The answer is yes. It is entirely up to you to decide what to do with the sum of money you borrowed. Still, you have to remember that lenders ask what your loan’s purpose is in your application as it is one of their criteria for determining their risk in lending you money.
