The rates on 5-year fixed rate personal loans have decreased. Is A Personal Loan Right For You?
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The average rate on a 5-year fixed rate personal loan fell from 16.51% in the week of August 30 to 15.3% in the week of September 6, according to the latest interest rate data from Credible. However, the average rate on a 3-year fixed rate personal loan rose slightly from 11.72% to 11.97%. However, the interest rate that you personally get on a personal loan depends on factors such as creditworthiness, loan duration, loan size and lender. And some rates start at 2.49%; See the lowest prizes you can qualify for here and below. Note that in order to get the lowest interest rates, you will typically have excellent credit scores, use personal loans for certain things, and get shorter repayment terms. And these loans are not for everyone. Here’s what you should know before taking one out.
What is a personal loan?
Quite simply, it’s a fixed-amount loan that you get from an online lender, bank, or credit union that you typically repay every month over a period of one to seven years. The loan amounts are typically between $ 1,000 and $ 100,000.
Should you take out a personal loan?
If you have excellent credit and are in need of quick cash, getting a personal loan can mean a quick approval process and lower rates than a credit card. However, if your credit is not good, personal loan interest rates can be high.
Make sure that not only are you able to repay the loan (if it doesn’t affect your creditworthiness and your ability to get future loans on good terms), but that you consider fees like the loan application fee as well. Annie Millerbernd, personal loan expert at NerdWallet, says that based on your loan, the fee can be anywhere from 1% to 6% of the loan amount – or it can be a one-time flat rate. Learn more about personal loan origination fees here.
What should – and shouldn’t – use a personal loan for?
“If you can qualify for a lower interest rate than the alternatives, a personal loan can be an attractive way to consolidate credit debt, medical debt, finance your business, or improve your home,” said Ted Rossman, senior industry analyst at Bankrate. “Refinancing private student loans with a personal loan might make sense, but I don’t recommend them for federal student loans because they have more generous forbearance and forgiveness policies,” says Rossman.
Don’t use a personal loan for discretionary purchases like vacation or paying for a wedding, experts say, as interest costs can easily add up. “It’s easy to end up spending too much and paying a lot of money in interest. It would be better to save if possible and pay with your savings, ”says Rossman.