May 17, 2022, 6:45 a.m. EDT

The latest personal loan rates — plus how to get one.

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By Alisa Wolfson

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Personal loan rates have risen slightly: For those with excellent credit, the average interest rates on personal loans with 60-month terms hit 15.50% and for 36-month terms 14.05%. But if your credit score isn’t in the upper echelon, expect to pay more. For personal loans with 36-month terms, average interest rates were 22.61%, while personal loans with 60-month, or 5-year terms, were 23.69%, according to the latest data from Bankrate for the week ending May 15. You can see the lowest personal loan rates you can qualify for here. 

The basics of personal loans

Personal loans — which you borrow from either a bank, credit union or online lender — give a borrower a lump sum of money. These loans tend to fun quickly. You’ll typically have a repayment period of 1 – 7 years, meaning both interest and principal need to be paid back during that time frame, starting as soon as the loan funds. Most personal loans range between $1,000 and $100,000 and they can be used for a variety of needs including large purchases, home remodels or repairs, unexpected expenses and even to help fund a business. Though most personal loans are unsecured and therefore don’t require the borrower to put up any collateral, they can be secured by collateral for borrowers with considerable assets.

Is a personal loan right for you?

If you’re in need of a large sum of cash and you need it quickly, a personal loan can help. Some personal loans fund in as little as one business day, so if time is of the essence, you’ll want to explore how quickly the lender you’re applying with generally makes money available. Keep in mind though, because personal loans are frequently unsecured, they tend to have higher interest rates than other types of loans — but if you don’t have assets to use as collateral and you need money quickly, paying a higher interest rate might be worth your while.

You can see the lowest personal loan rates you can qualify for here. 

It’s also important not to get carried away when applying for a personal loan. Experts recommend only taking out as much money as you actually need. Though it can be enticing to withdraw more funds to play with, remember that you’ll have to pay back all the money you borrow — and a bigger loan means more interest and principal that will have to be repaid. Plus, if you fail to pay back your balance, you can expect your credit score to suffer along with the ability of taking out future loans. 

Prior to taking out a personal loan, learn about the lender’s loan structure and the fees associated with the loan. It’s common for personal loans to have origination fees attached to them, and they often range from 1% to 8% of the total amount of the loan, so you’ll want o make sure you apply for enough money to cover the cost of the fees upfront. If you need a $100,000 loan but your origination fee is 5%, you’ll actually want to apply for a $105,000 loan to cover the fees, ensuring you don’t come up short when the loan funds. 

How to get the best rate on a personal loan

The higher your credit score, the lower your interest rate will be, which is why it’s a good idea to prequalify for a loan using a soft credit check. This way you can get an idea of what rate you’ll pay, without dinging your credit score. This MarketWatch Picks guide can also help you navigate the personal loan application process.

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