Personal loans are in high demand among credit union members, according to a new report from the Credit Union National Association (CUNA).
During the month of December, unsecured personal loans increased by 2.6% and credit card consolidation loans increased by 2.3%. Other lending products, such as mortgages and auto loans, experienced more modest growth during this period.
BEST PERSONAL LOANS FOR BORROWERS WITH COSIGNER
It’s part of an industry-wide trend that’s being driven by strong consumer demand for personal loans. TransUnion predicts explosive growth in personal loans as borrowers look for ways to pay off growing credit card balances.
Whether you’re considering borrowing a personal loan to pay off high-interest credit card debt, finance a home improvement project, or cover a major purchase, it’s important to seek the lowest interest rate possible. for your financial situation. You can compare personal loan rates on Credible for free without impacting your credit score.
WHAT IS A GOOD ANNUAL RATE (APR) ON A PERSONAL LOAN?
How to get a good personal loan rate
Personal loan interest rates are currently at historic lows, according to the Federal Reserve. However, this does not necessarily guarantee that you will get a good rate on a personal loan. Here’s how you can lock in a low personal loan rate:
Learn more about each strategy in the sections below.
Establish your credit score
Since personal loans are generally unsecured and do not require collateral, lenders determine your eligibility and interest rate based on your creditworthiness. Applicants with a strong credit history and good credit score will see the best possible loan terms, while those with bad credit may see high interest rates – if they qualify.
Recent data from Credible showed that borrowers with higher credit scores who applied for personal loans with shorter terms were able to secure the lowest interest rates offered. On the other hand, borrowers with fair or bad credit saw much higher interest rates, regardless of loan term.
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To qualify for the most competitive rates, personal loan borrowers must have a credit score considered very good or better, defined by the FICO scoring model as 740 or higher. It’s also helpful to have a low debt-to-income ratio (DTI), which is your monthly debt payments divided by your income.
You can request a free copy of your credit report from the three major credit bureaus (Equifax, Experian, and TransUnion) to get a better idea of where you stand. If you need to improve your credit score before applying for a personal loan, you can sign up for free credit monitoring services by visiting Credible.
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Ask your caisse
Credit unions tend to offer their members lower interest rates on borrowing products, including personal loans. The average unsecured loan rate from a credit union was 10.6% in December 2021, according to the CUNA.
Since credit unions offer their products exclusively to their members, you will need to meet the eligibility requirements in order to borrow a loan from the credit union. Credit unions generally offer membership to consumers based on where they live or work, but some have looser eligibility restrictions.
You can visit Credible to see a list of credit unions that offer personal loans.
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Compare rates from multiple lenders
Personal loan rates vary from lender to lender, so it’s important to shop around to find the best deal for your financial situation. Most lenders allow you to prequalify to see your estimated loan terms with a soft credit check, which won’t affect your credit score.
You should also consider term-based rates, such as a 3-year loan versus a 5-year loan. The rate you get will also depend on the maximum loan amount – larger loans tend to have higher rates, while smaller loans may have lower rates.
Personal lenders may also charge a one-time origination fee upon loan approval, or a prepayment penalty for prepaying the loan. Some lenders charge no fees, while others offer an automatic payment discount for setting up direct deposit from your bank account. Be sure to read the entire loan agreement to understand your repayment terms.
You can browse current personal loan rates from online lenders in the table below and visit Credible to see your interest rate with a soft credit check. Then you can use a personal loan calculator to estimate your monthly payment.
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