Credello: Personal loan rates are falling. What does it mean if you have a low credit score?
NEW YORK – May 16, 2022 – (Newswire.com)
If you have great credit, you’re in luck. Personal loan rates for 60-month terms for people with credit scores of 761 and above are down to 14.95%; The 36-month durations are down to 13.71%. Personal loans are a viable option if you are looking for the best debt consolidation loans. However, you can expect to pay more if your credit score isn’t the best of the best.
Personal loans can range from $1,000 to $100,000 to cover expenses such as home renovations, weddings, honeymoons, unexpected medical expenses, etc. They generally cannot be used for education expenses or business expenses, as there are specific loan types for these categories with different requirements. You typically repay the loan monthly for one to seven years. Most loans are unsecured, which means you don’t have to post collateral and have a better chance of being approved.
Personal loans are a great way to consolidate multiple debts into one monthly payment. Debt consolidation allows you to develop a concrete plan on how to pay off your debts in a timely manner. The APR on credit cards can be high, so consolidating through a personal loan can save you money. Make sure you only remove what you need and be prepared for setup fees. These fees can range from 1% to 8%, so be sure to include this in the loan amount you request so that all your bases are covered. By borrowing only what you need, you avoid paying unnecessary interest.
Getting the best interest rate on a personal loan really depends on your credit score. Your credit score tells the lender how reliable the borrower is and how likely they are to repay the debt. Lower credit scores tend to be riskier, so the lender charges more interest.
Although interest rates on personal loans for borrowers with high credit scores are falling, they remain high for those with low credit scores. Rates are rising further across the credit profile, with average interest rates for 60-month personal loans reaching 24.1%. Personal loans have higher rates than some other types of loans because they’re unsecured, but they’re a great option if you don’t have anything to put up as collateral.
What to do
If you have a low credit score, there are a few steps you can take to try to raise it before getting a personal loan to potentially lower your rate. Always pay your payments on time and try to pay more than the minimum due. Regularly monitor your credit report and dispute any account or problem that you do not recognize. Try to keep your debt-to-equity ratio as low as possible and don’t use more than 30% of your available credit.
If you adopt sound financial habits, you can increase your credit score while simultaneously improving your chances of being approved for a personal loan and reducing the interest rate you’ll pay on it.
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