Do you want to have all the comprehensive information about personal loans? At Responsible Economy, we have put together a complete guide covering everything you need to know about personal loans: what they are exactly, the best options available, requirements, and how to obtain them. Welcome!
What are personal loans?
Personal loans are financial agreements in which a lending institution provides a specific amount of money to an individual, based on their credit history and ability to repay. These loans do not require collateral, making them accessible for a variety of personal needs such as medical expenses, debt consolidation, home improvements, or unforeseen costs. Loan terms vary by lender and may include fixed or variable interest rates, repayment periods, and maximum amounts. Applicants undergo a credit evaluation to determine eligibility and establish loan terms. Personal loans in the United States offer a convenient and flexible way to secure funding for individual objectives, but it’s important to compare offers and understand terms before committing.
Interest rate of personal loans
Personal loan interest rates vary based on your credit score, showcasing a significant impact on the cost of borrowing. The average personal loan interest rate stands at 14% APR. Your credit score dictates the interest rate you’re offered, reflecting your credit health. Higher credit scores result in lower rates, while lower scores lead to higher rates due to perceived risk.
For individuals with excellent credit (720-850), personal loans can yield average interest rates ranging from 10.73% APR to 12.50% APR. Those in the good credit bracket (690-719) may secure rates between 13.50% APR and 15.50% APR. In the case of average credit (630-689), rates hover around 17.80% APR to 19.90% APR. For borrowers with lower scores (300-629), bad credit loans present interest rates from 28.50% APR to 32.00% APR.
Valid reasons to apply for personal loans.
There are several key reasons to consider applying for a personal loan:
- Debt Consolidation: Streamline multiple debts into one manageable payment.
- Home Improvements: Fund renovations or repairs to enhance your living space.
- Emergency Expenses: Cover unexpected medical bills or car repairs.
- Major Purchases: Finance significant purchases like appliances or electronics.
- Education Costs: Pay for tuition, textbooks, or educational pursuits.
- Travel Adventures: Fund your dream vacation or explore new horizons.
- Special Occasions: Celebrate weddings, birthdays, or other life milestones.
- Business Ventures: Start or expand a small business or side project.
- Moving Costs: Relocate smoothly by financing moving expenses.
- Credit Building: Establish or improve your credit score with responsible borrowing.
We have created a personal loan calculator so you can see how much you pay in interest.
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Updated the day 1 September, 2023 by Alfredo Barandiarán