Last week saw a significant drop in personal loan rates, presenting an excellent opportunity for qualified borrowers to secure favorable financing. For those with a credit score of 720 or higher, the average fixed interest rate on a three-year personal loan was 15.38%, and rates on five-year loans fell to 18.93%. These rates, as reported by Credible.com, indicate a competitive market for personal loans. The rate you receive will depend on various factors, including your creditworthiness and the lender's terms.
To ensure you snag the best rate, prequalify with multiple lenders. Prequalification involves a soft credit check, which won’t impact your credit score. This process gives you an idea of the terms you might qualify for, enabling you to compare offers from different lenders. However, formal applications will involve a hard credit check, which can slightly affect your credit score.
Whether you choose a bank, an online lender, or a credit union, your credit score plays a pivotal role. Experts recommend checking your credit report and scores three to six months before applying to address any issues. A credit score of 720 or higher generally unlocks the best terms. If your score is lower, take steps to improve it by reducing debt, correcting report errors, and ensuring timely bill payments.
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