Personal loan rates tend to be higher than mortgage or home equity rates. Such loans pose a greater risk for the lenders since most personal loans are not backed by suitable collateral. The rates on secured personal loans can be comparable to those of other financing options.
In any case, you are at a better position with a personal loan than with a credit card. This is why unsecured personal loans are getting popular as an alternative for credit card debt consolidation.
Factors Affecting the Rates
The interest rates vary depending upon a number of factors.
- For an individual, the credit score remains the most important factor. For example, a borrower with an excellent credit score (720+) can have a rate as low as 4-5% while the one with a poor credit will not find a lender willing to offer less than 25% APR.
- Besides, the purpose of the loan, annual income and whether the loan is backed by collateral or not can also become important for a lender to calculate a personal loan interest rate.
- Moreover, the rates also vary geographically and from one lender to another.
- Finally, the rates of interest are always subject to change depending upon a variety of market indicators.
Finding the Best Rate
Comparison is the key to getting a favorable rate of interest and loan term. Use rate calculators available at many bank websites or independent financial services providers to compare interest rates on different loan products and at different lenders.
Besides, you can also take into account your credit score to calculate the same. While there can be a number of reputable lenders offering low interest rates to people with excellent credit, there won’t be too many loan options for people with bad credit.
Here is a sample of personal loan rates available at some leading lenders in the United States.
|Citibank||8.99% to 20.74%|
|SunTrust||1.99% to 5.99%|
|Bank of America||Not Provided|
|Chase Bank||Not Provided|
|PNC Bank||Not Provided|
|Wells Fargo||Vary depending on Locations|