At a Glance
Personal loans can be used for just about anything, such as home improvements, car repairs, medical bills, funding a vacation, paying for a wedding, adoption, emergency or unexpected expenses, and more. With loan amounts ranging from $1,000 to $100,000, fixed interest rates, and other benefits, personal loans can be a great option if you’re looking for funding.
They especially should be considered if you have good credit since the higher your credit score, the lower the interest rate you’ll qualify for, and you may also get better terms. Even if your score isn’t excellent (720+), you can still qualify for an affordable, good credit personal loan.
Read on to learn more about:
What is a good credit personal loan?
A good credit personal loan is like it sounds – a personal loan for borrowers with good to excellent credit. When you apply for a loan, the lender will consider several factors such as your credit score, credit history, income, debt-to-income ratio, and others to decide whether to approve your application.
However, your credit score is one of the most important. The better your score,
- The more likely you are to get approved for a loan.
- The more favorable the terms you’ll be offered.
- The lower the interest rate you’ll qualify for.
For better rates and terms, lenders prefer borrowers to have a credit score of at least 690 or higher.
When you have a good credit score, you have a history of managing your debt well. This lowers the risk lenders are taking by letting you have a loan, which is why good credit helps you qualify for lower rates and better loan terms.
Related: What is a good credit score?
Average interest rates on personal loans based on credit
Interest rates can vary based on the factors listed above, as well as the lender itself. The average interest for borrowers with good credit range from around 13.5% to 15.5%, though interest for borrowers with poor credit can get up to 36%.
|Average Personal Loan Interest Rate
|720 – 850
|10.73% – 12.5%
|690 – 719
|13.5% – 15.5%
|630 – 689
|17.8% – 19.9%
|300 – 629
|28.5% – 36%
Remember, your interest rate will affect your total monthly payment as well as how much your loan costs you over time. You’ll want to take steps to ensure as low of an interest rate as possible.
How to choose the right personal loan?
A personal loan is a type of debt, so whether to apply for one or not should be seriously considered. However, if you decide that a personal loan fits your needs and budget, there are a few factors to keep in mind to help ensure you choose the right loan for you:
1. Check your credit score. Your credit score plays such a large role in qualifying for a loan, and the better your score, the better the interest rate and terms you’ll qualify for. Checking your credit score first can help you estimate what you’d qualify for, and give you time to take steps to improve it if necessary.
2. Determine your loan purpose and amount. Personal loans can be used for just about anything, which offers significant flexibility with funds. However, depending on what you need the loan for and the total amount, you may find an alternative to a loan may be a better option.
Additionally, the amount of money you could receive can range from $1,000 to $100,000, so you’ll want to know ahead of time how much you’ll need and make sure the lender offers that amount.
3. Consider the loan term. Most personal loan terms range from 12 to 84 months, but keep in mind that the longer your term, the lower your monthly payments but the more you’ll pay in interest over the life of the loan, and the shorter the term the larger your payments but you’ll pay less in interest.
4. Compare lenders carefully. Shop around to get the best rates and terms you can. Most online lenders allow you to pre-qualify without affecting your credit score, and this gives you a better estimate of the loan you can qualify for. This helps you compare lenders more accurately. Additional factors to compare include customer service ratings and reviews, fees, and other loan features such as a mobile app, flexible payment schedules, or debt consolidation assistance.
Once you find the best lender for you, you can apply either in-person or online (depending on the lender).
Compare: Best Personal Loans
Best personal loans for good credit
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Other loans you can get with good credit
If you have good credit, there are options other than a personal loan that may make sense for your situation:
1. Home equity loans
A home equity loan is a type of secured loan that uses your house as collateral. Equity is the amount of your home that’s been paid off, and the amount you’re able to take out with a home equity loan depends on several factors including your home’s current equity. The loan is then repaid in fixed monthly payments with fixed interest rates. However, if you fall behind on payments, you could lose your house.
Learn more: How does a home equity loan work?
2. Home equity line of credit
A home equity line of credit also requires you to own your home and have some home equity. However, unlike a loan, HELOCs are more like a credit card – you can borrow as much as you need up to your credit limit, and then spend the money you take out on whatever you want. You only pay interest on the money you borrow, though the rates are variable and can change with the market. Additionally, you could lose your home if you default.
Learn more: All about HELOCs
3. Personal line of credit
A personal line of credit is like a credit card. A borrower will be approved for a defined amount of funds, and they can withdraw funds up to the limit at any time. You only pay interest on the funds you borrow, and they must be repaid. Once you pay back what you borrow, the total amount available resets to its full amount. The better your credit score, the lower the interest rate you’ll qualify for.
Learn more: Personal line of credit
Tips to improve your credit score
Even if you have good credit, it doesn’t hurt to put in some work to improve your score. In fact, it could get you better interest rates and help you save money on your loan. A few ways to do this include:
- Check your credit report and make sure there are no errors. If there are or you have any questions, you can take steps to dispute or correct them.
- Make all payments on time. Late or missed payments can significantly decrease your score, but on-time payments can help build good history.
- Pay down debts as much as possible before applying for the loan, including credit card debt. In fact, try not to carry a balance on your credit card from month-to-month.
- Don’t open a new account as each time you do, a hard credit inquiry is run which can decrease your score.
- Keep old accounts open to lengthen the age of your existing accounts.
- Improve your credit utilization rate by keeping credit card balances low and paying off credit card and other debt.
A good credit score for a personal loan is at least 680 or higher. Remember, the better your score, the lower the interest rate you’ll qualify for, so you want to have as high of a score as possible when applying for the loan.
There are several ways to check your credit score for free and without impacting your score. First, you’re entitled to a free credit report every 12 months from the credit bureaus. Check your credit card, financial institution, or loan statement for your score or access it online by logging into your account. You can also use a credit score service or free credit scoring site.
Applying for a personal loan will trigger a hard credit inquiry, which will decrease your score by a few points. Additionally, making late payments or missing payments completely can have a significant negative impact on your score. On the other hand, making payments on time and paying down the loan will improve your score.
This depends on the lender, but personal loan amounts can range from $1,000 to $100,000. Check the lender’s minimum and maximum loan amounts before applying.
Learn more: How much personal loan can I get?
The cost of a loan depends on factors like the interest rate and fees associated with the loan. It also depends on the term, because the shorter the term the less you’ll pay in interest while the longer the term, the more you’ll pay over the life of the loan.