Best Personal Loans of 2022
Personal loans allow you to borrow money for almost any purpose. This type of loan usually offers flexibility, but borrowing costs can vary depending on your credit history and the lender you choose. Most personal loans do not require any form of security or deposit. However, late and missed payments appear on your credit report and can lower your credit score.
The best personal loans offer simple and straightforward application processes. It also features low interest rates and low fees for qualified borrowers. Plus, they usually don't charge any prepayment penalties if you want to pay off your balance early.
Best Personal Loans of 2022
Best Place to Get a Personal Loan If you’re looking for a personal loan, some of the best places to get one are banks, credit unions, and online lenders. If you need funds quickly, choose a lender that offers a simple online application and fast funding. Many banks and credit unions allow you to apply online and get funding quickly, but you’ll generally need to have good credit to get approved. If you don’t have good credit, an online lender is usually a better option.
Should You Apply for a Personal Loan?
If you need funds to cover a large expense or want to consolidate existing debt, then you might consider applying for a personal loan. Personal loans are commonly used by people who need funding for a big expenditure, like paying for a wedding, covering emergency expenses, or making home improvements or repairs. Loan funds can also be used to consolidate higher-rate debt into a lower-cost fixed-rate loan.
Personal loans can be a good option for those who need immediate funding and can afford the monthly payments. However, you’ll pay interest on the loan, so it’s more costly to use loan funds than to cover the same expenses using cash. Even so, the APRs on personal loans are usually lower than the rates you’ll pay on credit card debt. So, if you need to choose between using credit cards or personal loans, the latter is often the better choice.
One of the other benefits of an unsecured personal loan is that you don’t have to pledge any collateral, like your home or car, to get the loan. This can save you money because you don’t have to pay for costs associated with the collateral, such as appraisal fees. Plus, you may be able to get the funds more quickly because there’s no collateral involved. So, if you need funds to make home improvements, like repairing your roof, building a new office, or adding solar, a personal loan can be the way to go.
Comparing Personal Loan Lenders
The most important things to consider when selecting a personal loan lender include the costs and terms of the loan, what it takes to apply, and how quickly you can get approved and funded. As you’re comparing personal loan lenders, pay close attention to these factors:
- APR and Fees: Personal loan rates and fees are the primary factors to consider before choosing a lender. Rates and fees are factored into the loan’s APR, which measures the annual cost of the loan. The better your credit, the lower the rate you’ll get.
- Repayment Terms: Shorter repayment terms result in higher payments and usually carry lower interest rates. This means you may reduce your overall borrowing costs by choosing the shortest possible repayment term. However, just make sure you can afford the monthly payments before applying.
- Application Process: It’s also important to consider the lender’s application process. You might want to get a loan at your local bank or credit union, which can be a great option. However, keep in mind that certain small lenders may not offer automated systems or online applications, making the application process more time-consuming. If you’d prefer to avoid applying in person, choose a lender that offers an online application.
- Approval and Funding Speed: The loan’s funding speed is often closely linked to the application process. Lenders that have online applications and automated processes are often able to get you funded more quickly. However, many of these lenders only approve borrowers with good credit.
- If you have blemishes on your credit, choose a lender with less stringent credit score requirements, like an online lender or a local bank or credit union that can make individual decisions based on your unique circumstances.
How to Get a Personal Loan
Frequently Asked Questions
How Do Personal Loans Work?
How Much Do Personal Loans Cost?
- Personal loans usually have lower APRs than credit cards.
- Your personal loan will be fully repaid over a short period, versus credit cards, which might never be repaid if you just make the minimum monthly payments.
- Interest rates are fixed on personal loans, meaning your rate will never change.
- Unsecured personal loans don’t require collateral, making them quicker and easier to get than secured loans such as home equity loans.
- You’ll have to pay interest and fees with a loan, costs you wouldn’t incur if you used cash.
- Short repayment terms translate into higher monthly payments, so it’s essential to ensure you can afford the monthly payment before getting the loan.
- If loan interest rates decrease in the future, you’ll be stuck with a higher interest rate until you pay off the loan or refinance it.
- Since unsecured personal loans don’t require collateral, they may have higher APRs than secured loans, loan amounts can be smaller, and you’ll likely need better credit to qualify.