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Best Personal Loans of 2022: Top 10 Online Loan Companies for Low Rates

personal loan

* We may earn a referral fee for partners featured in this article. This is not a financial advice article. Please contact a financial advisor if you need financial assistance.

(Ad) Getting a personal loan online is one of the fastest and most convenient ways to borrow money. The best personal loans can offer lower interest rates than banks and credit unions, while also offering an easier application process and faster access to your personal loan funds.

Online personal loans can be used for a variety of purposes including debt consolidation, home improvement projects, large purchases, vacations, and unexpected expenses. 

But with so many different personal loan companies to choose from, finding the right lender for your needs can feel overwhelming. To help you decide, we've reviewed the best places to get a personal loan online.  Each personal loan lender was evaluated on a variety of factors including interest rates, term lengths, origination fees, and credit score requirements.

Here are our top picks for the best personal loan companies of 2022.

The 10 Best Personal Loans of 2022

Honorable Mentions: Marcus by Goldman Sachs, Avant, Discover Personal Loans, LendingPoint, Universal Credit, Prosper, and PenFed.

#1. SoFi: Best Personal Loans Overall

sofi

SoFi is our top pick for the best personal loan company of 2022. SoFi is an online lending platform that offers fixed rate personal loans, flexible repayment terms, low interest rates, and high loan amounts. 

SoFi Personal Loans is one of the better-known online lending platforms and has established its reputation as a leader thanks to its reliability, flexibility, and high maximum loan amounts.

Since its founding in 2011, SoFi has extended over $50 billion in personal and debt consolidation loans. The company has the necessary experience to make your loan application smooth and straightforward.

SoFi offers unsecured personal loans ranging from $5,000 to $100,000, though amounts are limited in certain states. Borrowers can get a wide range of repayment terms, from two to seven years, with relatively favorable APRs, from 4.99% to 18.13%.

One drawback of SoFi is its stringent application requirements. Potential borrowers must have a minimum credit score of 680 and have an annual income of at least $45,000 to qualify for a personal loan.

However, SoFi also has the benefit of not charging origination fees, late fees, or prepayment penalties, making it one of the most transparent online lenders. Most lenders will charge origination fees at a minimum, which can make SoFi one of the best personal loan providers for qualifying borrowers.

Many people use SoFi for debt consolidation. However, while SoFi does have debt consolidation loans, it transfers the money directly into the borrower’s account instead of to the borrower’s creditors. If you get a SoFi debt consolidation loan, you’ll need to use the borrowed money to pay off your other loans.

SoFi is dedicated to having its customers succeed in making their monthly payments. The platform has an extensive knowledge base and offers perks such as financial planning advice and unemployment protection. Borrowers can also change their payment due date once per year to adapt to any changing circumstances.

Overall, SoFi is one of the best personal loan companies for borrowers with a good credit score. SoFi has a higher maximum loan amount than most lenders ($100k), also making it a great option for people looking for a larger loan amount.

Pros

  • Easy prequalification with soft credit check
  • High loan amounts available
  • Fast funding in as little as two days
  • No origination fees
  • No prepayment penalties
  • 0.25% autopay discount
  • Option to add co-borrower

Cons

  • Doesn’t offer small loans under $5,000
  • No option for secured loans

Click Here to Check Rates or Apply Online

#2. Credible: Best Online Loan Marketplace

credible

Credible is the best personal loan marketplace for comparing multiple lenders at once. 

Credible is a free-to-use online marketplace where you can shop for the best loan offers from a variety of lenders. You can expect to find personal loan amounts from $600 to $100,000, with an APR from 2.49% to 35.99%. Credible shows you a wide range of offers, making it one of the best personal loan companies for finding the best rates possible. 

Since Credible is not the lender, credit score requirements depend on the lender you choose. Generally, the minimum score will be over 600. Credible can use a soft credit inquiry to help you learn your score, which won’t make it go up or down. When you start an application with a lender, they will ask to use a hard credit inquiry during the process, which may affect your score by a few points.

Life is full of twists and turns, and there are so many reasons you might find yourself looking for a personal loan. Credible will show you offers for loans that you can use for: 

  • Consolidating debt
  • Starting a business
  • Wedding expenses
  • Car financing
  • Home improvement
  • Vacation
  • Medical bills 

Some lenders provide personal loans for specific purposes, so you’ll have to let them know what you plan to use the loan for when applying. 

To help you out, Credible has a personal loan calculator to give you an idea of what your payment amount would be each month. You can compare offers to find the terms that work best for you.

Again, Credible is not a lender, but it partners with some of the biggest names like Upstart, Discover, SoFi, and Avant. Each of them has its own requirements to qualify for a loan. Typically, you need to be 18 or older, a U.S. citizen or a permanent resident with a valid Social Security number, and have a good credit history. 

To start looking for personal loans, you just need to spend a couple of minutes providing some basic information to personalize your search. After that, you will see various offers from Credible’s lending partners with the best rates they can offer you. 

Credible is confident it can find you the best rate possible for a personal loan, and it backs that claim up with its Best Rate Guarantee. If you can find and close on a loan with a better rate than one of the offers it showed you, it will pay you $200.

Pros

  • Compare quotes from multiple lenders at the same time
  • Low minimum loan amount of $600
  • Competitive rates from most lenders in their network
  • See your pre-qualified annual percentage rate without affecting your credit
  • Trusted online loan marketplace since 2012
  • Great for debt consolidation loans

Cons

  • Not a direct lender

Click Here to Check Rates or Apply Online

#3. Upgrade: Best Lender for Debt Consolidation

upgrade

Upgrade is the best online lender for debt consolidation loans. With low fixed rates, fast funding, and high approval rate, Upgrade is a great choice for borrowers with good or fair credit.

Upgrade offers a quick and easy approval process. You can apply online in just minutes and see your loan rate with no obligation or impact to your credit score. Upgrade will then provide you with multiple loan options so that you can decide which offer is best for your needs. Once you accept your loan offer, you'll receive money into your bank account within a day after being approved.

One of the best features of Upgrade is its flexible loan options. You can select your monthly payment to ensure that it fits within your budget. You can also choose your term-length, ranging from 36 months to 60 months. Whether you prefer to pay your loan off faster with a 36-month term or want a lower monthly payment with a term of 60 months, Upgrade has you covered.

Unlike other companies that offer secured personal loans, Upgrade doesn't charge a prepayment penalty. So if you're ready to pay off your loan before the end of your term, there is no penalty for doing so.

Upgrade offers loan amounts ranging from $1,000 to $50,000. You can use your personal loan funds for a variety of different purposes including debt consolidation, home improvement, unexpected expenses, or for a large purchase. Upgrade even allows you to use these funds for business purposes, which isn't something that most lenders offer.

Fees and Terms: Upgrade has APR ranges that vary between 5.94% and 35.97%. This lender charges an origination fee between 2.9% and 8%. The term lengths offered vary between 24-84 months.

Eligibility Requirements: To qualify for a personal loan from Upgrade, you'll need a minimum credit score of 580. There is no minimum income requirement. Ideally, borrowers should have a debt-to-income ratio below 45%, excluding their mortgage. Upgrade does allow co-applicants, increasing loan accessibility to borrowers with no credit history.

Pros

  • Allows secured and joint loans
  • Wide range of repayment terms
  • 0.5% discount rate for setting up autopay
  • Rate discounts for checking account holders
  • Low minimum credit score requirement
  • Direct lender payoff for debt consolidation loans
  • Can use loan proceeds to cover business expenses
  • Good option for fair credit scores

Cons

  • Charges an origination fee
  • Higher APR range than some of the best personal loan companies
  • Penalties for late payment and insufficient funds

Click Here to Check Rates or Apply Online

#4. Upstart: Best for Fair Credit

upstart

Upstart is an online lender that takes a unique approach to loan approvals. The site uses a combination of artificial intelligence and machine learning to approve more applications than its competitors. The company reports approving 27% more personal loans than traditional lending models simply by taking factors other than credit score and income into account.

Upstart’s evaluation process considers the applicant’s education, job history, debt-to-income ratio, number of credit checks, and even current residence. While the site advises that applicants have a minimum credit score of 600, the algorithm can also approve people who have yet to establish their credit history.

Borrowers can get a personal loan between $1,000 and $50,000, with APR rates of 5.31% to 35.99%. The lender has two loan terms—three and five years—making it less flexible than other lenders.

Personal loans from Upstart can be used for a variety of purposes including debt consolidation, auto refinancing, paying off credit cards, and large purchases. Unsecured personal loans from Upstart can even be used to cover educational expenses, except in states where this is explicitly disallowed, such as California, Connecticut, Illinois, Washington, and the District of Columbia.

Overall, Upstart is a good lender to consider if you have a fair credit score and need a personal loan with a rapid approval turnaround. The high maximum APR and high origination fee may give some people pause, but because the company does a soft credit check, you can get an estimate of your monthly payment before committing to the loan. The company also doesn’t have a prepayment penalty, allowing you to pay off your loan sooner than the initial loan agreement.

Pros

  • Accepts borrowers with lack of credit history
  • Quick funding with loan proceeds available within one business day
  • Offers direct payment to creditors with debt consolidation loans
  • Online prequalification with a soft credit check
  • Ability to choose your own payment date
  • Reasonable personal loan rates

Cons

  • Co-signers and co-applicants not permitted
  • Higher origination fee than most of the best online loan companies
  • Loans only available for three or five year terms

Click Here to Check Rates or Apply Online

#5. BadCreditLoans: Best for Bad Credit Score

bad credit loans

BadCreditLoans is a highly rated personal loan company that specializes in bad credit loans. BadCreditLoans has flexible repayment terms, competitive interest rates, and a fast online application process.

BadCreditLoans.com specializes in connecting borrowers with poor credit to online lenders that are willing to offer unsecured personal loans to individuals with a bad credit history.

Loan amounts vary between $500 and $10,000, which may not be enough to fund a kitchen renovation but could be enough to deal with an unexpected financial difficulty. The minimum APR is 5.99%, with a maximum of 35.99%. Payment terms depend on the lender, as do the loan term, fees, and penalties associated with the personal loan.

The only criteria needed to apply for a loan are:

  • US residency or citizenship
  • 18+ years of age
  • Valid bank account
  • Steady income source

The application process for BadCreditLoans.com is relatively simple and requires filling in details on an online form. These include personal and banking details as well as the loan purpose and your employment information. The site then connects you with lenders that meet your criteria. These lenders can reach out with an offer that matches what you need.

The main appeal of loan aggregator sites is that they make comparison shopping for the best personal loan much easier. Instead of having to repeat the same process multiple times, BadCreditLoans.com brings the offers to you.

If you need to borrow money urgently and have bad credit, it’s a great place to start looking for an unsecured personal loan. We strongly recommend reading each offer’s terms and conditions carefully because they can differ in terms of origination fees, late fees, and prepayment penalties.

Pros

  • Compare multiple lenders with one place
  • Low minimum loan amount of $500
  • Great alternative to payday loans
  • Easier application process than credit unions
  • Get a personal loan in as little as 24 hours

Cons

  • Not the best personal loan option for borrowers with excellent credit
  • Not a direct lender

Click Here to Check Rates or Apply Online

#6. LightStream: Best for Low Interest Rates

lightstream

LightStream is the best personal loan lender for low interest rates and high loan amounts.

LightStream is the online consumer lending division of Truist. The company formed after the merger of SunTrust Bank and BB&T and has used its extensive experience in the private loan business to offer some of the best personal loans on the market.

LightStream personal loans are available throughout all 50 US states as well as in Washington, DC, and Puerto Rico. Loan amounts range from $5,000 to $100,000 depending on the loan’s purpose. The APR range is from 2.49% to 19.99%, and customers who opt for the auto-pay option receive a 0.50% rate deduction.

LightStream’s personal loans offer appealing repayment terms ranging from two to seven years, allowing people to decide whether they want lower monthly payments or a lower total amount paid back.

Unlike many lenders, LightStream doesn’t have hidden costs such as origination fees, prepayment penalties, or late-payment fees. The company also has a rate-beat program, in which it will beat a competitor’s interest rate by 0.1% for certain applicants.

LightStream’s application process is extremely simple, with fast approval times and quick access to funds. However, the company doesn’t make a soft credit inquiry to ascertain your eligibility for the loan. Instead, it conducts a hard check from the beginning, and an unsuccessful application can affect your credit score.

Like other companies that offer personal loans online, LightStream has a customer service platform where users can manage their loans. Borrowers get access to customer support Monday through Saturday and qualify for COVID-19 hardship assistance and a comprehensive online knowledge base.

Overall, LightStream is an appealing lender to people who need large loan amounts. However, the lack of a pre-approval process and relatively high minimum credit score mean it’s a better option for individuals with high credit scores, long credit history, and a stable income who can cover the monthly payments.

Pros

  • No origination fee
  • No prepayment or late fees
  • Fast loan approval
  • Some of the best personal loan interest rates online
  • 0.5% point rate discount for setting up autopay
  • Satisfaction guarantee

Cons

  • No flexibility with payment due dates
  • Limitations on use of loan proceeds
  • No option to pre-qualify on its website
  • Does not offer direct payment to creditors for debt consolidation loans
  • Not suitable for borrowers with bad credit

Click Here to Check Rates or Apply Online

#7. LendYou: Best for Small Loans Under $2,500

lendyou

LendYou is one of the top online lenders for small personal loans under $2,500.

LendYou is an online loan marketplace that offers short-term loans between $100 and $2,500. It matches applicants with lenders and helps them find the best offers within just a few minutes of applying.

Its fast and secure application process gives applicants a quick and easy turnaround response on their application, enabling them to receive their loans as early as the next business day.

LendYou is the perfect credit loan company for people looking for a small payday loan. Despite the nature of the borrower’s monetary needs, LendYou pairs applicants with the correct loan terms for each specific need.

LendYou supports and works with borrowers of all credit histories.

Important to note: LendYou is not a lender and doesn’t make decisions on short-term loans or credits, but the company serves as the bridge between a wide network of lenders and interested borrowers.

LendYou Background

LendYou is not a direct lender, and the company doesn’t make any loan decisions. Still, it serves as the bridge or point of contact for the initial interaction between a borrower and a lender. The platform allows borrowers to search, fill out, and submit loan applications but leaves the line of communication after a direct lender makes a real-time offer with the terms and conditions of the loan.

Getting Started With LendYou

  • Provide proof of consistent income to qualify for a payday loan.
  • You do not need to show collateral to qualify for a payday loan.
  • The application process is quick and usually only takes a few minutes.
  • If approved, you can get your loan deposited into your bank account as early as the following business day.

While each lender working with LendYou has its own set of requirements for loan application and approval, here are some standard requirements:

  • Minimum age: 18-years-old
  • A minimum regular annual income of at least $1,000 per month
  • The borrower must hold a valid checking or savings account with access to direct deposit. 

Pros

  • Best online lender for small personal loans
  • Fast and easy online application process
  • Fast funding with as soon as the next business day
  • All credit scores are welcome
  • Compare multiple online lenders from one interface

Cons

  • Not the best personal loans for refinancing debt
  • Low maximum loan amount
  • Some lenders may charge an origination fee
  • Not the best personal loans for excellent credit

Click Here to Check Rates or Apply Online

#8. Best Egg: Best for Home Improvement Loans

best egg

Best Egg is the best personal loan company if you’re looking for home improvement loans.

Established in 2014, Best Egg has made a name for itself by offering extremely competitive interest rates, multiple loans, and a streamlined approval process.

Borrowers can take out between $2,000 and $35,000 for a loan term of between three and five years. The APR range starts at 5.99% for candidates with excellent creditworthiness and tops out at 35.99% for higher-risk individuals. Best Egg also allows existing loan holders to take another loan for a maximum combined amount of $50,000.

Loan proceeds can go to any purpose, including consolidating debt, home improvement, credit card refinancing, medical bills, or making a large personal purchase.

Best Egg offers a pre-approval process that performs a soft credit check. It’s an excellent way to get an estimate of your APR and monthly payments without having to worry about lowering your credit score.

According to Best Egg, applicants must have an excellent credit score, 700 or above, and an annual income of $100,000 to qualify for the best APR rate. The company also charges an origination fee of up to 5.99% of the total loan amount and a $15 late fee.

Overall, Best Egg offers flexible loan options with generous loan amounts for individuals with good credit. The loan terms allow borrowers to decide whether they want higher monthly payments with a lower total loan amount or spread their repayments over a longer period to reduce the monthly payments.

Best Egg also has a comprehensive knowledge base and excellent customer support. With good debt consolidation loan rates, flexible loan amounts, and no prepayment penalty, Best Egg is a great option for individuals with good credit and income.

Pros

  • Check your annual percentage rate in just minutes
  • Low fixed APRs
  • Check your rate without affecting your credit score
  • A+ Better Business Bureau Rating
  • Great for refinancing high-interest debt

Cons

  • Does charge a small origination fee on loans

Click Here to Check Rates or Apply Online

#9 OneMain Financial: Reputable Lender with Low Credit Score Requirements

onemain financial

OneMain Financial is one of the best personal loan lenders for borrowers with fair credit or less than stellar credit.

OneMain Financial is unique because it doesn’t have a minimum credit score for borrowers. Instead, it looks at your ability to fulfill your financial obligations, like rent or car payments, while paying off your loan. The lack of credit score requirements makes it one of the best personal loan companies for those who don’t have the best credit history.

OneMain Financial offers personal loans for common uses such as:

  • Debt consolidation
  • Medical bills
  • Wedding expenses
  • Auto repair
  • Home improvement
  • Vacation

OneMain offers loans of $1,500 to $20,000. You won’t be able to get as much as other lenders offer, but you do have the relatively uncommon option to get a small loan amount. OneMain’s APR ranges from 18.00% to 35.99%, a very high interest rate compared to other companies. You can get 24, 36, 48, or 60 months for longer-term lengths.

To apply for a OneMain Financial loan, you just need to fill out an online application with your personal information and your loan requirements. A loan specialist will verify your information and approve your loan.

Pros

OneMain has the option of a secured loan. You can potentially improve the terms of your personal loan by using collateral, such as your vehicle, to secure your loan. Doing so will make it much easier to get approved, but if you can’t make your loan payments, you can lose your car.

Each of the 44 states in which OneMain offers loans has branch locations. If you would rather speak to a loan specialist in person, you can walk into one of these locations and work out your loan with them.

You can receive your loan from OneMain within 1 to 3 days of completing your application. Depending on how long it takes to verify your information, OneMain boasts that it can have the money in your account the same day you inquire about the loan.

If you change your mind about a loan, OneMain allows you to cancel the application within seven days. Few lenders are as lenient about cancellation.

Cons

OneMain personal loans have origination fees. Depending on your state, the fee can be $25 to $100, or 1% to 10% of the loan.

The interest rates for a OneMain loan are much higher than you’ll find elsewhere. If you have a low credit score, getting approved will be much easier, but you might pay a lot in interest.

Click Here to Check Rates or Apply Online

#10. Payoff: Best for Flexible Repayment Terms

payoff

If you’re looking to consolidate credit card debt with a private loan, Payoff is one of the top personal loan companies to consider.

Payoff is an online lender specializing in consolidating debt. It doesn’t offer general-purpose personal loans, but it’s the best for debt refinancing, especially for individuals with fair to good credit.

Loan amounts range from $5,000 to $40,000, and borrowers can choose from lending terms spanning two to five years. While its bottom APR is competitive, it’s the top end that can make Payoff so appealing. The highest possible APR on a Payoff debt consolidation loan is 24.99%, which is significantly lower than that of other loans for bad credit.

While the company does charge an origination fee, it has a transparent pricing structure with no hidden costs. You won’t have to worry about late fees, administration costs, or prepayment fees.

Payoff recommends a minimum credit score of 640 to qualify for loan approval. The lender also looks at minimum annual income, debt-to-income ratios, and existing lines of credit. These factors can influence the interest payments and monthly repayment terms.

Prospective borrowers can use the pre-approval process to check their estimated APR range and monthly payment options. Because the pre-approval process uses a soft credit check, you can play around with loan amounts and loan terms before committing to a formal loan agreement.

If you’re looking to borrow funds for credit card consolidation, Payoff is an appealing option. While the loan purpose isn’t as flexible as with some other lenders, Payoff has many benefits for people looking for credit card consolidation as a way to lower credit scores and get out of credit card debt.

The service is especially useful for individuals with fair to good credit who may otherwise get unfavorable personal loan rates and loan terms from other providers.

Pros

  • Best for refinancing existing debt
  • No late payment fees
  • Low minimum credit score
  • Competitive personal loan interest rates
  • See your rate without affecting your credit score
  • Fast online application
  • Designed to help boost your FICO score

Cons

  • Can be charged up to 5% origination fee

Click Here to Check Rates or Apply Online

How We Evaluated the Top Personal Loan Lenders

We reviewed dozens of lenders to identify the best personal loans for a variety of needs. Our methodology included assessing these lending companies on several data points that are the most useful to people looking to borrow money.

We tend to look favorably on the top personal loan lenders that offer consumer-friendly features, such as transparency, low origination fees, reasonable annual percentage rates, customer service, and soft credit checks.

Loan Costs

Loan costs include everything above the principal loan amount. This factor takes into account the APR range, potential fees, and loan terms. The higher the final total loan cost, the less favorable our impression of the lender.

Speed

Speed contains two main criteria: how fast you get your approval status and how fast the money appears in your bank account.

Most of the top personal loan lenders have a pre-approval check that gives you an indication of whether you’ll succeed in your application without affecting your credit rating. Once you pass this check, the approval process can take a few hours or a couple of days.

Installment loan clearance times depend on state requirements, completeness of the application, and the online lender’s payment system. Typically, lenders will aim to pay the loan within one business day of a successful application, but some may take several days to clear.

Eligibility Requirements

Some loans have stringent eligibility requirements that may make securing them difficult. Lenders will often give a minimum credit score requirement and minimum annual income, while others will also consider the applicant’s debt-to-income ratio, loan purpose, and even employment history for credit approval.

Unfortunately, some lenders don’t make these criteria clear and may not reveal their income minimums or other eligibility requirements.

Application Process

Web-based lenders have spent a lot of time making their application processes smooth and simple to understand. We also evaluated the site’s clarity and helpfulness, as well as what information the lender requested.

Repayment Terms

Flexible repayment terms allow customers to find a repayment solution that can make the most financial sense to them. While some borrowers may prefer shorter terms with higher monthly payments, others benefit from longer terms and lower payments, even if it means a larger total repayment amount. However, keep in mind that missed payments may show up on your credit report and can lower your credit score.

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What Is a Personal Loan?

A personal loan is a lump-sum loan assigned for personal, individual use. It’s typically an unsecured loan, though some lenders do offer a personal secured loan option at a lower interest rate. Most personal loans have a fixed interest rate, which can make budgeting for monthly repayments more predictable.

Borrowers use online personal loans to cover a wide variety of personal expenses, but lenders still have some discretion in how to allocate the loan funds. For instance, if your stated purpose is to remodel your kitchen, you can’t use the funds to pay for educational costs instead.

While some people use personal loans to consolidate debt, it may be a better idea to seek out a dedicated debt consolidation loan to cover student loans or credit card debt.

Personal loans typically have medium repayment terms of two to eight years and low interest rates for individuals with excellent credit. Unfortunately, the interest rate tends to become increasingly severe for individuals with lower credit scores.

What Are the Requirements for Getting A Personal Loan Online?

Every lender has a different set of requirements that they consider when issuing a personal loan. In general, the best personal loan companies want to mitigate their risk and approve loans only if they think the borrower can pay off the debt. That’s why aspects like credit score, income, and overall credit history are common requirements for a personal loan.

While the specifics may differ, it’s still a good idea to familiarize yourself with common loan requirements. Knowing the criteria you have to meet will allow you to get all the relevant documentation ready while also helping you narrow down your applications for personal loans that you qualify for.

Credit Score

Lenders view your credit score as a good estimate of your risk profile. The three main credit rating agencies all use a FICO scoring system that looks at five main factors when calculating your credit score:

Payment history: Do you always pay your monthly payments by the due date, or do you have a history of frequently missing payments?

Amounts owed: Ideally, you want to have as little debt as possible while still showing evidence of credit usage. A major factor in this calculation is the credit utilization ratio, which looks at your current debt vs. your overall credit limit. The lower this ratio, the better.

Length of credit history: Older credit accounts tend to contribute to a good credit score, and active old accounts are even better.

New credit: Hard credit checks that pull up your credit history and new credit accounts can hurt your credit score. It implies that you need credit and may be in financial trouble.

Credit mix: Having a diverse credit portfolio, such as retail accounts, mortgage loans, credit cards, and short-term loans, can provide a small bump to your credit score.

Credit scores range between 300 and 850, with higher numbers being better. Most personal loans require a minimum credit score of about 600 to qualify. Some lenders may offer loans to people with bad credit scores, under 600, but these loans tend to have high interest rates to mitigate the risk of not having a minimum credit score.

Having a good credit history can make a huge difference in the quality of your personal loan, from the amount you can borrow to your repayment terms and interest rate.

Income

Lenders want to know that you can pay your personal loan back and will often have minimum income requirements. These vary dramatically from lender to lender. For instance, SoFi has a minimum income threshold of $45,000 per year, while Avant needs a household income of only $20,000.

Overall, loans that have a steep income threshold tend to have better interest rates because the lender doesn’t have to mitigate as much risk. Individuals with higher incomes are more likely to pay off their loans than those with lower incomes and don’t represent as much of a default threat.

Even when lenders don’t disclose their minimum income threshold, you will have to provide evidence of your income. Examples of proof of income include:

  • Tax returns
  • Pay stubs
  • Monthly bank statements

Debt-to-Income Ratio

The DTI ratio is an indicator of how much of the applicant’s gross monthly income goes to paying off debt. People with higher DTIs may struggle to take on and pay off additional debt, making them a risky venture to lenders.

Ideally, the best personal loans look for a DTI of 36% or less. However, some lenders are willing to offer personal loans to individuals with up to 50%, provided they have an excellent credit history and provable income.

Collateral

Collateral is any valuable asset that lenders use to secure a loan against the threat of default. If you can’t make your repayments, the lender may seize your asset to clear the debt.

Most personal loans are unsecured, which means they don’t require collateral. Most lenders will use high interest rates to offset the risk of not having collateral for unsecured loans.

Some of the best online loan providers will offer a secured loan for personal use. Collateral can include:

  • Cash or investment accounts
  • Real estate property
  • Collectibles

The interest rate on secured personal loans is often much better than those of unsecured loans, but you face the risk of losing your assets if you can’t pay off your debt.

Common Uses for a Personal Loan

The best online personal loans offer a great deal of flexibility in terms of what you can do with the funds. While some lenders may offer personal loans for specific uses, most will let you use the proceeds however you want.

Paying Off High-Interest Credit Cards

Credit cards often come with extremely high APRs, which can make them difficult to pay off. Personal loan rates are often much lower, which means that you’ll be paying a much lower total sum while still paying off the same amount of debt.

Credit consolidation can reduce your monthly payment, help you pay off your debt faster, and free up your income for expenses so that you don’t have to take on more debt.

Medical Bills

It’s always good practice to have an emergency fund to cover unexpected medical expenses; saving enough money can take a lot of time and is not something that everyone can afford to do.

Meanwhile, taking out an online personal loan can help cover medical bills and other emergency expenses without having to resort to high-interest credit cards or predatory payday loans.

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Debt Consolidation

Most people who have student debt often have multiple loans with several providers, all with different repayment terms and interest rates. Taking out a single debt consolidation loan can make the repayment process significantly simpler and can also save money on interest. If you want to consolidate debt, try to look for the best personal loan with average interest rates lower than those of your current debt.

While the best personal loans can work for tackling student debt, many lenders offer dedicated consolidation loans that work best for debt consolidation. Online loan companies offering these dedicated loans will handle the administrative concerns of paying off various student loan providers while allowing for higher loan amounts and competitive interest rates.

Auto Financing

Most car loans are secured loans that use the vehicle you want to buy as collateral. If you can’t make your payment schedule, then the lender can take the vehicle to pay off the debt.

It’s possible to use personal loan proceeds as an informal, unsecured car loan. The main advantage of doing this is that you don’t have to put up the vehicle as collateral, but you will have to consider the higher APR range of personal loans vs. secured car loans.

Home Improvement

There are two main reasons to take out a personal loan to work on your home: emergency repairs or making it more appealing to buyers.

Emergencies like burst pipes, a broken HVAC system, or electrical concerns can cost a lot of money to repair. By their very nature, it’s vital to fix these problems as soon as possible to avoid costly repairs in the future, which means that saving up isn’t the best way to go. Instead, taking out a personal loan lets you address the issue and worry about the finances later.

Some home renovations can dramatically increase a house’s value. If you’re looking to sell, investing a bit of money into a new roof or appealing kitchen may entice buyers and help you get a better selling price. While it’s possible to save up for these projects, personal loans can provide a quick, reliable influx of cash to complete the renovation and put your home on the market sooner.

Pros and Cons of Personal Loans

Before you start hunting for the best personal loans for bad credit, it may be a good idea to consider whether a personal loan is the right option for your financial situation. Just like other lines of credit, there are advantages and weaknesses to taking out a personal loan. It’s up to you to decide whether you can live with the drawbacks and whether the advantages of a personal loan are the ideal fit for your needs.

Pros:

A fixed interest rate means that you have a predictable monthly payment for the entire lifespan of the loan.

Lower qualification requirements than for other loan types. While you do need a minimum credit score for most personal loans, they are much more accessible than many other financing options.

You have a lot of leeway with what you can use loan funds for, making them suitable for many applications.

The online nature of personal loans means that they’re a quick way to access additional funds. The best personal loan providers will often approve and pay out a personal loan within 48 hours of application.

Unsecured loans aren’t tied to any of your assets, which can make them safer for borrowers. However, it does mean a higher interest rate to compensate.

Cons:

You have to repay the full loan amount, and interest on the full amount, even if you don’t end up using all of the loan funds. You can avoid this pitfall by making sure that you’re requesting only the loan amount that you need.

Most of the best lenders charge an origination fee that can be between 1% and 8% of the full loan amount. These origination fees may be built into the APR or taken out from the loan amount before it enters your bank account. It’s vital to determine how the lender handles the origination fee because it may affect the loan amount you need to request.

The best lending companies are often unsecured, which means that they have a higher interest rate than secured loans or other financing alternatives. People with poor to fair credit may end up paying higher interest rates on their personal loans than on their credit cards, especially for loans that don’t have a minimum credit score.

Personal loans are a long-term financial commitment. People with stable incomes may find it easy to make the same monthly payment and budget it into their expenses, but individuals with fluctuating incomes may find the long-term commitment challenging to meet.

Understanding Loan Interest Rates and Fees

The interest rate is either an additional payment on a loan or a reward on an investment. The amount paid or rewarded is a percentage of the principal, or the initial loan amount or investment.

When it comes to the best online lenders, the amount of interest you pay depends on the total unpaid portion of the personal loan. If you miss a payment, the interest will get added to the sum you owe, and the new interest rate will factor in that extra sum during the next repayment. This is one of the many reasons it’s vital to make your monthly payment on any loan.

A high interest rate will make the total cost of the loan higher because you’re paying back a higher amount each month. Lower interest rates are always better when it comes to looking for the best personal loan, assuming all other conditions are equal.

While some people use interest rates and APR interchangeably, they’re not wholly the same thing. The APR is the total cost of the loan, which includes the interest rate as well as other costs, such as the origination fee and other administrative add-ons.

However, it’s important to note that some lenders do not include the origination fee in their APR and instead deduct it from the loan before paying it out to the borrower. Make sure to confirm with the lender how it handles its origination fee because it can affect the total loan cost, as well as the loan amount you need to borrow.

Frequently Asked Questions

What’s the Difference Between a Secured and Unsecured Loan?

A secured loan requires some form of asset as collateral. If the borrower fails to pay off the loan in time, the lender can recoup its losses by taking the asset. Common assets used as collateral include bank accounts, investment accounts, retail holdings, and valuable collectibles.

Unsecured loans don’t need collateral, which means that even if you default, your assets are secure. However, these loans tend to have higher interest rates to alleviate the increased lender risk.

Do Personal Loans Affect Your Credit Score?

Yes. Personal loans are a form of credit that can affect an individual’s credit score in various ways.

In terms of positive contributions, they can:

  • Contribute to your credit mix by adding another line of credit. It’s especially useful if you predominantly have credit card debt because it shows a more stable borrowing portfolio.
  • Help build up a payment history as long as you pay each installment on time.
  • Reduce your credit usage ratio if you use the loan to consolidate credit card debt. Your credit card limit will remain the same, but your balance will be lower. Personal loans don’t factor into the credit utilization ratio because they’re not a form of revolving debt.

However, if you have poor to fair credit, you need to know that personal loans can also hurt your credit score. A hard credit inquiry lowers the credit score for a few months, regardless of whether you get the loan. Missed payments can dramatically lower your credit score, so you need to be sure that you can afford the loan, plus interest and origination fee, before signing off on it.

What’s the Difference Between Fixed and Variable Interest?

A fixed interest rate remains the same for the lifetime of the loan. A variable interest rate fluctuates based on changes in the economy and market. Each type has its strengths and weaknesses, so it’s worth considering which one works best for you.

In general, personal loans use fixed interest rates, resulting in predictable payments for the loan’s lifetime. A variable rate will often be lower than a fixed rate because of the inherently higher risk to the consumer, as the rate can rise dramatically over the lifespan of the loan.

How Much Money Can You Borrow with a Personal Loan?

It depends on the lender. Most tend to have a range of between $2,000 and $50,000, though some will go as high as $100,000. Banks and web-based lenders will offer higher caps than loans from a credit union.

Can I Get a Personal Loan with Bad Credit?

While many banks and lenders have a minimum credit score for personal loans, some lenders specialize in providing loans to individuals with bad to fair credit.

You can find out whether you meet the minimum credit score requirement through pre-qualification. Most web-based lenders will have a pre-qualification process that performs a soft credit check and lets you know whether you qualify for the loan. It also gives you useful details about the loan, such as the cost of the origination fee, loan terms, and estimated APR.

If you’re struggling to secure a loan with a minimum credit score, consider going with a co-signed or secured loan instead. Secured loans often have a lower minimum credit score requirement because the lender has a fallback if you fail to make your payments on time. Co-signers will add their credit score to yours, which is often enough to clear the minimum threshold.

Can I Refinance a Personal Loan?

If you don’t have the best personal loan, you can consider refinancing it with another personal loan with better terms and interest rates.

Some lenders will allow you to refinance a loan from another lender, but not their own loans. Others will let you use your personal loan for any purpose, including refinancing another of their loans.

It’s a good idea to consider refinancing a loan if you’ve improved your credit score and can secure a better APR because it lets you take advantage of a lower interest rate that can save you a lot of money in the future.

If you’re looking for a loan that’s best for debt consolidation, consider specialized offerings as well as personal loans. Some lenders have dedicated credit card consolidation loans with better rates than even the best personal loans.

Is It Possible to Get a Low-Interest Personal Loan?

When looking for the best personal loans, a major factor is your interest rate. Lenders look at many factors when deciding on your APR, such as:

  • Loan amount
  • Your credit score, income, and DTI
  • Current market trends

However, if you barely meet the min credit score, you may find that you receive a much higher rate than the minimum APR advertised.

Luckily, you can still employ some strategies to lower your interest rate and save you money. These include:

  • Getting a secured loan instead of an unsecured one
  • Signing up for the auto-pay discount that many web-based lenders offer
  • Avoiding integrating the origination fee into the APR and offering to pay it as a portion of the loan instead
  • Shop around for lenders with a lower origination fee and different qualification requirements
  • Choose a shorter loan term
  • Get a co-signer, if allowed by the lender

*This article is provided by an advertiser and not necessarily written by a financial advisor. Investors should do their own research on products and services and contact a  financial advisor before opening accounts or moving money. Individual results will vary. Foreign companies and investment opportunities may not provide the same safeguards as U.S. companies. Before engaging with a company, research the laws and the regulations around that service, and make certain the company is in compliance. For comprehensive guidance on U.S. investments and financial regulations, visit the Securities and Exchange Commission (SEC)’s Investor.gov.