Need money ASAP? A personal loan may help! Personal loan rates vary between lenders. They also vary based on other factors, all of which are important to understand. It is also crucial to compare personal loan rates before applying for a new loan. This helps keep your credit score high and finance charges low.
Knowing how to understand and compare personal loan rates helps make the most of your money. By finding the loan with the lowest rate, you can save thousands of dollars in interest fees. Read on to learn more information about personal loan rates and which companies offer the best rates available today.
Applying for a personal loan can be quick and easy, but it is important to take time to make sure you get the best loan. Every personal loan carries an interest rate or finance charge. A finance charge is applied as an annual percentage rate (APR), which is the annual cost charged to a borrower for the service of being provided a loan.
APRs can be fixed or variable. Fixed APRs stay the same for the duration of the loan. Variable APRs change with the market, or index rate. Variable rates for personal loans are frequently attached to the fluctuations of the prime rate, which is the interest amount lenders and financial organizations charge each other when lending and borrowing between similar institutions.
The credit reporting agency Experian states personal loans most commonly have fixed APRs, while variable rates are more commonly associated with home mortgages. Personal loans having variable APRs are subject to regulatory caps. This means regardless of how high the prime rate increases, APRs on personal loans can only be raised within specified limitations.
A borrower’s FICO score also largely affects the APR on a personal loan. A FICO score is a rating based on how reliable or unreliable a borrower’s credit history is. The higher the FICO score, the lower the interest rate in many lending scenarios. APRs can also be affected by the purpose of the loan funds, the length of the loan repayment terms, employment history of the borrower and company policies.
Short-term unsecured loans tend to have significantly high APRs, extra fees and occasional hidden costs. Longer-term personal loans secured by viable collateral carry lower APRs. A members-only credit union will most often have better loan rates than online-only or emergency/payday personal loan services. Finally, in short, the less risk taken on by the lender the lower the APR will likely be.