How do I Choose the Best Personal Loan Interest Rates?

Tricia Christensen
Tricia Christensen

There a number of ways to compare personal loan interest rates, and they begin and end with understanding that interest rate is not completely representative of loan costs. Still, looking at percentage of interest charges is a good point of departure. People should have several loan offers to look at in order to make comparison, and will need understanding of likely offers at present credit score to find the most eligible loans. Once loan offers are in place, scrutiny moves from personal loan interest rates to all other aspects of the loan.

A man getting a personal loan.
A man getting a personal loan.

At any given time, credit score is a good way of determining qualification for certain rates. The highest scores, usually above 700, are likely to result in the best offers. Lower scores in the 600s don’t usually put people out of the running for obtaining a loan, but they’ll have a less than optimal rate of interest. Below 600 tends to mean taking on loans with the highest rates, and often having a hard time finding lenders.

After people get some sense of the personal loan interest rates they are likely to get, they can make preliminary applications to several loan companies. This is when details get extremely important, since interest only says so much about what people pay. One of the big differences in loan offers can be length of the loan. No matter what the rate is, the longer people owe interest, the more they will ultimately pay. In fact, sometimes a higher rate means paying less overall because it is attached to a shorter-term loan.

There are useful online calculators for determining not just personal loan interest rates but also how much money will get spent during the loan; verify any figures obtained with these calculators with the lender. Clearly, spending less can be a better choice when possible, and taking low rate shorter-term loans may be to a person’s advantage. Another important comparison is loan origination fees, and any other fees a lender might assess like those for early repayment or late charge fees.

Performing this extra research and not just limiting investigation to personal loan interest rates may be very useful. People can quickly arrive at the exact amount a loan will cost, and how much that amount exceeds borrowed money. These figures are easily compared, helping people understand which loan is truly cheapest.

If people are not to the stage where they are borrowing money, but they would just like to compare personal loan interest rates, similar steps can apply. Based on credit score, identify likely rates, and then assess these with a loan calculator. Try out different term loans to see how monthly payments and total repayment prices rise and fall. Some people prefer to have this information before they start searching for a loan, since if their credit is very strong, they may then be able to demand exactly the terms they would like.

Tricia Christensen
Tricia Christensen

Tricia has a Literature degree from Sonoma State University and has been a frequent wiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.

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