Personal Loans of July 2024 in The United States

Personal Loans
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Updated:
24.06.2024
10:01
Finanso
Personal Loans
Rating by Finanso®
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The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
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300
650
1000
2000.00 – 100000.00 $
Rate
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Interest rate

6.34 – 35.89 %
Term
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Loan term for the financial product

2 months – 72 months
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Personal Loans of July 2024

A personal loan is a form of financing that allows individuals to borrow a lump sum of money from a lender, such as a bank, credit union, or online lending platform. These loans are versatile and can be utilized for various personal expenses, ranging from consolidating debt to covering unexpected medical bills or home renovations. Unlike specific-purpose loans like mortgages or auto loans, personal loans provide borrowers with flexibility in how they allocate the funds. Personal loans typically are unsecured, meaning no collateral is required, personal loans are repaid in fixed monthly installments over a predetermined period, which can range from two to seven years depending on the lender and the borrower's preferences.

Interest rates for personal loans can vary significantly, influenced by factors such as the borrower's credit score, income, and existing debt. Generally, personal loans feature fixed interest rates, meaning the rate remains constant throughout the loan term, facilitating easier budgeting for borrowers.

Features

  1. Versatility. Personal loans can be used for a wide range of purposes, including debt consolidation, home improvements, medical expenses, and more.

  2. Fixed Loan Amounts. Lenders offer fixed amounts of money, typically ranging from $1,000 to $100,000, depending on the borrower's creditworthiness and other factors.

  3. Fixed Interest Rates. Personal loans often feature fixed interest rates, meaning the interest rate remains constant throughout the loan term, simplifying budgeting.

  4. Online Application and Management. Many lenders offer online application processes, making it convenient for borrowers to apply for and manage their loans from anywhere.

  5. Origination Fees. Some lenders charge origination fees, typically ranging from 1% to 8% of the loan amount, which are deducted from the loan proceeds.

  6. Regulatory Compliance. Lenders offering personal loans must adhere to regulations set forth by governing bodies, ensuring consumer protection and fair lending practices.

Pros and Cons

Pros

No Collateral Requirement. Most personal loans are unsecured, meaning borrowers don't need to provide collateral such as a house or car to secure the loan.

Fixed Monthly Payments. Borrowers repay personal loans through fixed monthly installments over the loan term, making budgeting easier.

Fast Funding. Many lenders offer quick approval and funding processes, with funds typically disbursed within a few business days after approval.

Cons

Minimum Credit Requirements. While personal loans may have fewer qualification requirements compared to other forms of financing, borrowers typically need a minimum credit score to qualify, and those with lower credit scores may face higher interest rates.

Potential for Debt Accumulation. Without proper financial discipline, taking out a personal loan could lead to further debt accumulation if the borrowed funds are not used wisely or if borrowers take on more debt than they can comfortably repay.

Risk of Default. Failing to repay a personal loan as agreed can result in negative consequences, including damage to credit scores, collection efforts by lenders, and potential legal action.

How to Get a Personal Loan

Apply for a Loan

  1. Check Your Credit Score. Start by checking your credit score through your credit card issuer or other websites that offer free scores. Aim for a score of at least 610, though a score of 720 or higher will yield more favorable terms.

  2. Improve Your Credit Score (if necessary). If your credit score is below the desired range or you want better loan terms, take steps to improve it. This may include paying down debt, lowering credit usage, and disputing any errors on your credit report.

  3. Determine Loan Amount Needed. Calculate how much money you need to borrow. Remember, you'll receive the funds as a lump sum and will need to pay interest on the entire amount, so borrow only what you need.

  4. Shop Around for Lenders. Research various lenders, including banks, credit unions, and online lenders, to find the best terms and interest rates for your situation. Many lenders offer prequalification, which allows you to see potential terms with just a soft credit inquiry, helping you shop around without impacting your credit score.

  5. Gather Necessary Documents. Prepare documents commonly required for loan applications, such as proof of income (pay stubs or tax returns), identification (driver's license or passport), and bank statements.

  6. Submit a Formal Application. Once you've chosen a lender, submit a formal application either online or in person. Be prepared to provide personal and financial information, including your income, employment history, and existing debt obligations.

  7. Wait for the Lending Decision. After submitting your application, wait for the lender to review and make a decision. This process can take anywhere from a few hours to a few days, depending on the lender's procedures.

  8. Review Loan Terms. If approved, carefully review the loan terms offered, including the interest rate, repayment term, and any fees. Ensure you understand all terms and conditions before accepting the loan offer.

  9. Sign Loan Agreement. If you agree to the terms, sign the loan agreement provided by the lender. This document outlines the terms of the loan, including the repayment schedule and any other important details.

  10. Receive Personal Loan Funds. After signing the loan agreement, the lender will disburse the loan funds to you. Depending on the lender, funds may be deposited directly into your bank account or provided via check.

Requirements

  1. Minimum Credit Score. Lenders typically require a minimum credit score for borrowers to qualify for a personal loan. While specific requirements vary between lenders, borrowers with higher credit scores generally have better chances of approval and may qualify for lower interest rates.

  2. Income Verification. Borrowers are usually required to provide proof of income to demonstrate their ability to repay the loan. This may include recent pay stubs, tax returns, or bank statements.

  3. Employment History. Lenders may consider borrowers' employment history as part of the loan application process. Stable employment and a consistent income stream can strengthen a borrower's application.

  4. Debt-to-Income Ratio. Lenders assess borrowers' debt-to-income ratio, which compares their monthly debt payments to their gross monthly income. A lower debt-to-income ratio indicates a borrower's ability to manage additional debt responsibly.

  5. Identification. Borrowers must provide valid identification, such as a driver's license or passport, to verify their identity and prevent fraud.

  6. Age Requirement. Borrowers must be at least 18 years old to apply for a personal loan. Some lenders may have higher age requirements.

  7. Residency. Borrowers must be legal residents or citizens of the country where they are applying for a personal loan.

Conditions

  1. Interest Rate. Lenders offer personal loans with varying interest rates, which may be fixed or variable. The interest rate assigned to a borrower depends on factors such as their credit score, income, and loan term.

  2. Loan Amount. Lenders specify the maximum and minimum loan amount options available to borrowers. Loan amounts typically range from $1,000 to $100,000, but some lenders may offer higher or lower amounts based on individual circumstances.

  3. Repayment Term. Lenders provide borrowers with a range of repayment terms, usually between two to seven years. Longer loan terms result in lower monthly payments but may incur more interest over the life of the loan.

  4. Origination Fees. Some lenders charge origination fees, which are deducted from the loan amount or added to the loan balance upon disbursement. Origination fees typically range from 1% to 8% of the loan amount.

  5. Prepayment Penalties. Borrowers should review the loan terms for any prepayment penalties imposed by the lender. Prepayment penalties may apply if the borrower pays off the loan before the scheduled term ends.

  6. Late Payment Fees. Lenders may assess late payment fees if borrowers fail to make their monthly payments on time. Late payment fees vary between lenders and are typically outlined in the loan agreement.

  7. Additional Conditions. Lenders may impose additional conditions or requirements based on their internal policies and risk assessment. Borrowers should carefully review all loan terms and conditions before accepting an offer.

Ways to Get the Money

  1. Direct Deposit. Many lenders offer the option for borrowers to have the loan funds deposited directly into their bank account. This method is convenient and allows borrowers quick access to the funds once the loan is approved.

  2. Check. Some lenders may provide borrowers with a physical check for the loan amount. Borrowers can then deposit the check into their bank account or cash it at their financial institution.

  3. Wire Transfer. In some cases, lenders may offer wire transfers as a method of disbursing loan funds. Borrowers provide their bank account information, and the lender transfers the funds electronically.

  4. Payment to Creditors. For debt consolidation loans, lenders may offer to directly pay off the borrower's existing creditors or accounts. This streamlines the debt consolidation process and ensures that the loan funds are used for their intended purpose.

  5. Payment to Service Providers. In cases where the personal loan is used for specific expenses, such as home renovations or medical bills, lenders may offer to directly pay the service providers or vendors on behalf of the borrower. This eliminates the need for the borrower to handle the funds themselves.

Best Places to Get a Personal Loan

  1. SoFi stands out as a top choice for borrowers with strong credit profiles, offering competitive rates, no fees, and flexible repayment options. Their joint loan feature allows applicants to combine finances for added convenience, and they provide multiple rate discounts to further enhance affordability. Additionally, SoFi extends support to borrowers facing financial hardship through their dedicated program. While their mobile app facilitates convenient loan management, some drawbacks include the absence of an option to select the initial payment date and a relatively high minimum loan requirement. To qualify, applicants must meet basic eligibility criteria such as legal adulthood, U.S. residency, and stable employment or income prospects. Loan terms range from 2 to 7 years, with origination fees varying from 0% to 7%.

  2. Upgrade offers a comprehensive solution for personal loans and credit-building tools, catering to individuals with robust cash flow. Their secured and joint loan options provide added flexibility, while multiple rate discounts enhance affordability. The convenience of managing loan payments via their mobile app and the option for direct creditor payments streamline the borrowing process. However, applicants should note the origination fee and the absence of the ability to choose payment dates. To qualify, individuals need a minimum credit score of 560, a two-year credit history with at least one account, and a debt-to-income ratio not exceeding 75%. While there's no minimum income requirement, Upgrade accepts various income sources, including alimony and retirement funds. Loan terms range from 3 to 7 years, with origination fees ranging from 1.85% to 9.99%.

  3. Discover Personal Loans presents a competitive option for borrowers with good to excellent credit scores, boasting attractive rates and no origination fees. While the absence of a co-sign or joint loan option may limit flexibility, the pre-qualification option with a soft credit check streamlines the application process. Discover's quick funding and user-friendly mobile app contribute to a seamless borrowing experience. However, borrowers should be aware of potential late fees for Discover personal loan options. To qualify, applicants need a minimum credit score of 660, an annual income of at least $25,000, and a valid U.S. Social Security number. Discover offers loan terms ranging from 3 to 7 years, with no origination fees and late fees capped at $39.

  4. Upstart caters to individuals with limited credit history and promising financial futures, providing fast funding and flexible repayment options. The ability to change payment dates and pre-qualify with a soft credit check adds convenience to the application process. However, Upstart may charge an origination fee, and their loan options lack joint, co-signed, or secured alternatives. While there's no specific credit score requirement, applicants must meet other eligibility criteria, including U.S. citizenship, a valid Social Security number, and a minimum annual income of $12,000. Loan terms range from 3 to 5 years, with origination fees ranging from 0% to 12% and late fees calculated at 5% of the past due amount or $15, whichever is greater.

Things to Pay Attention to

  1. Loan Amount. Determine how much money you need to borrow and ensure the loan amount offered by the lender meets your needs. Avoid borrowing more than necessary to prevent overextending your finances.

  2. Credit Score Requirements. Understand the minimum credit score requirements of the lender and ensure your credit score meets or exceeds this threshold. Higher credit scores typically result in better loan terms and lower interest rates.

  3. Prepayment Options. Check if the lender allows early repayment of the loan without penalties. Having the flexibility to make extra payments or pay off the loan ahead of schedule can save you money on interest charges.

  4. Customer Service. Evaluate the lender's customer service reputation and responsiveness. Choose a lender that provides excellent customer support and is readily available to address any questions or concerns.

  5. Loan Purpose Restrictions. Some lenders may impose restrictions on how you can use the loan funds. Ensure the loan can be used for your intended purpose, whether it's to consolidate debt or make some home improvements.

  6. Financial Stability of the Lender. Research the financial stability and reputation of the lender before committing to a loan agreement. Choose a reputable lender with a track record of reliability and transparency.

  7. Read the Fine Print. Carefully read the loan agreement and all associated documents before signing. Pay attention to the terms and conditions, including any clauses or provisions that may impact your rights and obligations as a borrower.

How to Repay a Personal Loan

  1. Review Loan Agreement. Carefully review the loan agreement provided by the lender. Pay attention to the repayment terms, including the monthly payment amount, due date, interest rate, and any fees or penalties.

  2. Set Up Automatic Payments (if available). Many lenders offer the option to set up automatic payments from your bank account. This ensures that your payments are made on time each month, reducing the risk of late fees and helping you stay on track with repayment.

  3. Make Monthly Payments. On or before the due date each month, make your loan payment as specified in the loan agreement. You can typically make payments online, through the lender's website or mobile app, by mail, or by phone.

  4. Consider Making Extra Payments. If possible, consider making extra payments towards your loan principal to pay off the loan faster and save on interest charges. Check with your lender to ensure there are no prepayment penalties.

  5. Monitor Your Account. Regularly monitor your bank account to ensure that your loan payments are processed correctly and that there are no issues with insufficient funds or other payment issues.

  6. Contact Lender for Assistance (if needed). If you encounter financial difficulties or anticipate missing a payment, contact your lender as soon as possible to discuss options. Some lenders offer hardship programs or may be willing to work out a modified payment plan.

  7. Keep Records. Keep records of all loan-related documents, including the loan agreement, payment receipts, and correspondence with the lender. This documentation can be helpful for reference and dispute resolution if needed.

Reasons for Getting Rejected for a Personal Loan

  1. Low Credit Score. One of the primary factors lenders consider when assessing loan applications is the applicant's credit score. A low credit score, typically below 600, may indicate a history of missed payments, high credit utilization, or other negative credit behaviors, making the applicant a higher risk for default.

  2. Insufficient Income. Lenders want to ensure that borrowers have sufficient income to repay the loan. If the applicant's income is too low or unstable, the lender may deem them unable to afford the loan payments.

  3. High Debt-to-Income Ratio. Lenders also evaluate the borrower's debt-to-income ratio, which compares their monthly debt payments to their gross monthly income. A high debt-to-income ratio suggests that the borrower may struggle to manage additional debt responsibly.

  4. Unstable Employment History. Lenders may view applicants with a history of frequent job changes or unemployment as higher risk, as it may indicate instability or difficulty maintaining a steady income.

  5. Errors on Credit Report. Inaccuracies or errors on a credit report, such as incorrect personal information or accounts that don't belong to the applicant, can negatively impact credit scores and lead to a loan application being rejected.

  6. Incomplete or Inaccurate Application. Providing incomplete or inaccurate information on the loan application can raise red flags for lenders and result in the application being denied.

Alternatives

  1. Credit cards. Credit cards offer revolving credit lines that can be used for various expenses. They often come with introductory 0% APR periods on purchases or balance transfers, which can be advantageous for short-term borrowing.

  2. Home Equity Loans or Lines of Credit. Homeowners can tap into their home equity through a home equity loan or line of credit (HELOC). These secured loans typically offer lower interest rates than unsecured personal loans, as they are backed by the borrower's home.

  3. Peer-to-peer lending. P2P lending platforms connect borrowers with individual investors who fund loans. These loans may offer competitive interest rates and flexible terms, but eligibility requirements and loan terms vary by platform.

  4. Credit union loans. Credit unions often offer personal loans with favorable terms and lower interest rates compared to traditional banks. Membership requirements may apply, but credit unions prioritize serving their members' financial needs.

Editorial Opinion

Personal loans serve as a versatile financial tool that can provide individuals with access to funds for various purposes, from consolidating high-interest debt to covering unexpected expenses. While personal loans offer convenience and flexibility, it's essential for borrowers to carefully evaluate their financial situation and consider the associated costs, including interest rates and fees. Additionally, responsible borrowing practices, such as borrowing only what is needed and repaying the loan on time, are paramount to avoid financial strain. Ultimately, personal loans can be a valuable resource for individuals seeking financial assistance, provided they are used wisely and within the borrower's means.

Important

Keeping your Debt-to-Income (DTI) ratio below 30-40% of your monthly income is crucial. This will help you avoid potential financial problems in the future. Additionally, always assess the necessity and feasibility of taking a loan, ensuring you can comfortably manage its repayment.

How to Choose a Lender

  1. Make sure to confirm whether the lender is licensed to operate in your state. You can verify this information with your state regulator or attorney general.

  2. Check if the lender is a member of a reputable association, such as the Community Financial Services Association of America. Membership in such organizations may provide an extra level of reliability.

  3. Carefully review all the terms and conditions of your payday loan contract.

  4. Thoroughly examine the interest rates on payday loans and ensure that your contract includes a detailed breakdown of the total cost of the loan.

  5. Take advantage of your right of rescission. Usually, you can rescind the loan within three days after signing the agreement. Alternatively, there is typically a "cooling-off" period, which allows you several days to thoroughly review the contract before making an informed decision to enter into a consumer loan agreement based on the terms specified by the lender.

  6. Choosing a payday lender is a significant decision that demands careful consideration and a good understanding of how such organizations operate.

Other Personal Loans

Sources

FAQ

Can I get a loan if my credit score is 500?

Whether you can obtain a loan with a credit score of 500 largely depends on the lender's requirements and your overall financial situation. While a credit score of 500 is considered poor and may limit your options, some lenders specialize in providing loans to individuals with lower credit scores.

However, these loans often come with higher interest rates and stricter terms. It's advisable to explore alternative lending options, such as credit unions or online lenders, and consider improving your credit score before applying for a loan to increase your chances of approval and secure more favorable terms.

How much would a $5000 personal loan cost a month?

The monthly cost of a $5000 personal loan depends on several factors, including the interest rate, loan term, and any additional fees. Using an online loan calculator can help estimate your monthly payments based on these factors.

For example, with a 10% interest rate and a 3-year loan term, the monthly payment for a $5000 loan would be approximately $161. However, it's essential to shop around and compare loan offers from multiple lenders to find the most affordable option that fits your budget and financial goals.

What type of personal loan is easiest to get approved for?

The type of personal loan that is easiest to get approved for varies depending on individual circumstances and lender requirements. Generally, secured personal loans, where the borrower offers collateral such as a vehicle or savings account, may be easier to get approved for than unsecured loans, as they pose less risk to the lender.

Additionally, loans from credit unions or online lenders often have more flexible eligibility criteria and may be more accessible to individuals with lower credit scores. However, it's essential to carefully review the terms and conditions of any loan offer and ensure that it aligns with your financial needs and ability to repay.