We all need a little help getting ahead from time to time. Whether you need to pay off bills, purchase a new car, or take care of some other expense, you may find personal loans to be a more affordable option than a credit card or payday loan. The trick is to find a stable lender willing to give you what you need without overburdening you with extra fees or high interest rates. (See also: 5 Times Personal Loans May Be Better Than Credit Cards)
Traditional banks, credit unions, and even online lending institutions tend to offer loans with better repayment terms and lower interest rates than credit cards. Depending on your credit score, personal loans average anywhere from a fixed 6% to 30% interest rate with repayment terms of a 24 to 60 month period.
In general, personal loans are great for:
While the cost of taking out a personal loan is often less than using a credit card or another form of financing, you might encounter other hidden costs. Keep the following in mind:
These are just some of the fees you may encounter with a personal loan. The Truth in Lending Act requires financial institutions to list all of the fees they may charge, so review this list of each lender carefully so you are not taken by surprise.
The average credit card interest rate is currently around 17.73% and can quickly increase if you have a low credit score or miss payments. The variable nature of credit card interest rates can cause quite a bit of damage to your bottom line. The only real argument for using a credit card instead of a personal loan is if you are able to find a promotional offer that allows you to transfer all of your balances into one place or one that gives you zero interest for a period to quickly pay off your debts.
It’s usually more affordable to use a personal loan to consolidate your high-interest credit card balances. Not only is the interest rate lower, but you also might get a larger line of credit, which will help to protect your credit to debt ratio.
No luck with the bigger lenders? Peer-to-peer lending programs are another great option. Peer-to-peer loan sites still gather your personal information in order to get an idea of your creditworthiness, but you can then tell your story and ask for individuals to fund your loan. You may receive funding from one person, or from several. Sometimes our peers are more willing than big institutions to take a chance on someone in need.
Top Peer-to-Peer Lenders:
Don’t rush through the loan application process. Take some time to narrow down your options before you start filling out applications and paying for credit inquiries that may ding your credit score. With a bit of due diligence, you may find getting a personal loan from the perfect lender is a breeze.
No are no shortage of companies offering personal loans. Some lenders work with any credit score while others only entertain near perfect credit. The differences in interest rates, repayment terms, and extra fees can be astounding. Here are some commonly used lenders you may want to look into first:
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Floored you didn't mention credit unions. So many offer online lending. Naturally details vary but often the cheapest personal loan is a low intro rate on a credit card.