Low-interest personal loans

If you’re contemplating taking a personal loan, you already know how crucial it is to check the lender’s interest rates. Going for low-interest personal loans will save you lots of cost on loan charges.

We’ll tell you what they are, the requirements for approval, and how much you can borrow. As you shop around for the best low-interest personal loans lenders, here are some you could consider;

Representative APR
Max Loan Amount
Credit Score

Best

LightStream

3.49% to 16.79%
$100,000
660

5.98% to 35.89%
$40,000
600

5.99% to 18.64%
$100,000
680

APR range
Fees
Terms
Amounth
Unemployment protection

Best

Bank 1

6.95%–35.89%
Up to 5% transfer fee
3–5 years
$1,000–$40,000
No

6.95%–35.89%
Up to 5% transfer fee
3–5 years
$1,000–$40,000
No

6.95%–35.89%
Up to 5% transfer fee
3–5 years
$1,000–$40,000
No

What is a Low-Interest Rate?

This is a risk-free interest rate set by the bank, trade union, or online lender that is below the average minimum. In rare conditions, these institutions could reach zero, or even more, the negative interest rate.

Lending institutions often consider going the low-interest rate way after a financial crisis.

Here, the borrower typically saves at the expense of the lending institution.

Low-interest rates promote economic growth by encouraging borrowing. Since the same money borrowed is often used to finance businesses or other assets.

These rates also tend to have better loan terms and most of the time don’t require security, hence you don’t have to face the risk of losing your asset.

Hot Tip:

Lending institutions often consider going the low-interest rate way after a financial crisis.

Requirements to qualify

Please note that lenders reserve the right to set their preferred interest rate based on your credit profile. As long as they do it by the law, or better still, the provisions of the central bank.

The lender will, therefore, check your ability to repay your loan by first checking your credit score. Some lenders may not set a specific credit score. However, every lender will be compelled to offer you better loan terms if you have an excellent credit score.

Lenders will also want to see a stable source of income. This way, they can be sure you’ll repay your loan. They’ll be basically checking your debt-to-income ratio.

You’ll want to maintain a debt-to-income ratio of 35% and below. Anything above that is likely to make a lender deny you a loan.

Other basic requirements include being a legal resident in the US and being 18 years and above.

Differences between average and low rates?

Average and low-rate loans are closely related. They have almost similar terms and mostly offered by the same lenders. However, they still have some different aspects. Such include;

Interest rates: low-rate loans have some of the lowest rates in the market. Anything below the average preset market interest rate is considered low-rate.
Requirements for qualification: You’ll need a credit score of above 640 to qualify for low-rates with most lenders. However, a score as low as 500 can still get you an average rate.
APR: Low-rate loans attract a lower APR than average-rate loans. This makes low-rate loans among the cheapest. The lowest low-rate APR of a lender currently stands at 3.49%. Most low-rate lenders also have auto-pay system which could reduce the interest rate by 0.5%
Security: You may not need security or collateral to qualify for low-interest personal loans. Though they may not be a requirement for average rates, they’ll definitely boost your chances of qualifying for the loan. They’ll also attract better loan terms.
Loan terms: Low-rate loans are known to have more generous repayment terms compared to average rates.

Please note that the lender is the one to decide whether you should be granted average or low-rates based on how well you meet their qualifications.

Shop for lenders with more friendly requirements to part with better terms.

Financial Alternatives

In case you miss out on low-interest rates, here are other financing methods you can try out;

Secured loans

These are low-risk loans taken against some form of security or collateral. As you borrow a loan, you put up your house, car, or other assets as security so that when you’re unable to repay, the lender can dispose it and use the proceeds to repay your loan.

Such often attract lower interest rates hence reducing the general cost of borrowing.

Unsecured loans

These are not backed by any security or collateral. Lenders categorize them as high-risk loans. Hence, attracting higher interest rates. And, lenders tend to be stricter in the approval process.

Unsecured loans are best for debt consolidation, such as repaying a credit card debt.

Payday loans

In a fix? Need some quick cash? Payday loans can come in handy. These are high-cost loans best for taking care of emergency bills.

They usually carry high-interest rates and have a short-term repayment term of up to 4 weeks.

Consider these only when you have exhausted other financing options.

Credit card advance

You can borrow a cash advance using your credit card balance. This is a good option for cash purchases, especially for businesses not accepting credit cards.

Credit card advances are known to attract high-interest rates which you’ll start incurring immediately you withdraw the cash.

Contribution/ Loans from Friends and Family

Friends and family can be a good source of financing, even better than banks and other lending institutions.

They are likely to understand your situation better, and will, in most cases, not require interest or other loan charges.

You also won’t risk your credit profile should you delay payment. However, you risk losing your relationship with the lender.

How much can you borrow with Low Rates?

Just like with any personal loan, how much you can borrow depends on your ability to repay. The lender determines that based on your credit score, available security, and income stability.

With an average credit score of 600 and above, you can borrow between $5000 and $100,000 at low-interest rates.

The lenders above offer some of the best rates with higher approval rates and lower fees.

In case you don’t qualify, you can still shop around for lenders with more favorable terms. Or better still, focus on boosting your credit score by repaying your current loans.

Alternatively, if you need other loan amounts outside the low-interest loan cap, be sure to source suitable lenders. While at it, be prompt with repayment. That will boost your credit score.

Getting a co-signer with an excellent credit profile and stable income will also improve your loan limits. Alternatively, you can use your car, house, or other assets as security.

Personal Loans Lowest Interest Rates

As of December 4th, 2020, the market’s best rate was marked at 9.83%. At the time of writing, the best rate on personal loans stands at 10.40%.

LightSream, an online lender, offers the best rates overall, with an APR of 3.49%. They also have generous terms of payment and the auto-pay option so you can reduce your loan costs.

Shop around for lenders with fair interest rates compared to the national average. The five tabled above have some of the best rates.

Either way, every lender has their technique for determining interest rates. That includes checking your credit profile, income stability, and repayment history.

Having a good credit score will give you an upper hand with lenders offering lower rates.

Hot Tip:

Every lender has their technique for determining interest rates. That includes checking your credit profile, income stability, and repayment history.

Pros and Cons of a Low Rate Personal Loan

Following are the pros and cons you can get with a Low-rate Personal Loan.

PROS	CONS
Low-interest rates: low-rate personal loans attract some of the lowest rates in the market. That significantly reduces your loan costs.	Credit score requirement: these loans don’t favor individuals with a credit score below 600.
Reduced costs: Low-rate personal loans have APRs as low as 3.49%. Since APR entails all the loan charges plus interest rates, its low and will save you lots of cash when repaying your loan.	Slow approval process: Most lenders take up to two business days to approve a loan, which is considered fairly slow.
Higher loan limits: You can borrow up to $100,000 on low-interest personal loans. however, that depends on the lender and your credit profile.

Frequently Asked Questions (FAQ)

Where can I find low-interest personal loans?

Online lenders such as SoFi offer low-interest loans. Other lenders, including the ones on the table above, also have some competitive rates.

What is a low interest on a personal loan?

Any rate below the national average is considered a low-interest rate. The lowest rate is currently 10.40%. However, this depends on the lender and your credit profile.

Do personal loans hurt your credit score?

Any loan product can hurt your credit score. However, personal loans won’t hurt your score more than credit cards. You can avoid going down this road by repaying your loan on time.

What do I need to qualify for a low-interest loan?

Different lenders have different requirements. However, having a good credit score and a stable income is crucial.

How do I get low-interest personal loans?

Lenders prioritize borrowers with an excellent credit score (640 and above). Focus on improving your score first. Once that is done, shop around for lenders offering better terms.