Top 10 Best Personal Loans

With hundreds of loan providers to choose from, how will you know who’s the right fit for you?
Consult our chart of the best personal loans providers to find your perfect lender match.

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Personal Loans at a Glance

Personal loans are one of the most versatile financial products in the industry. Traditional lenders such as banks and large financial institutions issue loans of varied amounts, peer-to-peer lending and micro loan sites finance very small day-to-day operations and the online personal loan industry is a booming arena. Suffice to say, there are many different types of personal loans out there, each with its own nuances. If you’re thinking about taking out a personal loan, take the time to understand what’s available to ensure you make the best decisions for your specific financial needs.

Personal Loan Uses

Personal loans do not necessarily have a defined use. Lenders will issue loans for large one-time expenses such as:

  • weddings
  • engagement rings
  • home renovations
  • moving
  • or even medical expenses

It’s important that borrowers do not overextend themselves, since these are not revenue generating borrowing purposes. These loans should only be taken out if a challenging set circumstances presents itself.

Some possible revenue generating reasons for applying for a person loan include: auto purchase, home purchase, debt consolidation or starting a business. To make a successful loan decision, the benefits to the borrower must outweigh the cost of taking on debt.

Understanding Personal Loan Rates

Understanding interest rates is critical for borrowers to fully realize the impact of a loan and how much it will cost them in the end. Put simply, the interest rate is the rate a lender charges a borrower for lending.

The interest rate that you are charged will depend in part on your credit rating, so do not go in assuming you will be offered the bank’s advertised rate. Some personal loans have variable interest rates, meaning they are not fixed and can go up or down with the market. Interest rates are important in two ways.

First, they incentivize lenders to issue loans, which is necessary for stimulating economic growth. Secondly, loan issuers take on the default risk of not getting the money they lent back, and need to be compensated for that risk. The next figure that a borrower needs to fully understand is the APR, or annual percentage rate. This is the amount that the loan is actually going to cost you - interest charges along with additional fees. While some lenders may issue a loan at a lower interest rate than another, the actual APR may be higher if they charge more fees, so paying attention to the bottom line is in borrowers’ best interests.

Rates for personal loans are generally calculated using the borrowing amount and the borrower’s personal credit rating, but each issuer has their own unique credit rating formula. Most personal loan issuers give fixed rates between 5.99% APR – 39.99% APR, but shop around because all lenders are different.

Secured and Unsecured Lending

Lenders will issue personal loans at lower rates if a loan is secured by a lien on an asset.

  • A secured loan allows the lender to take ownership of the asset if the borrower defaults, and can be a more affordable option due to the decreased default risk.
  • The alternative is an unsecured loan, where a lender will charge a higher rate because of the added risk. Being delinquent on an unsecured loan will harm a borrower’s credit, which will make borrowing in the future more expensive. In some cases, a borrower may have to declare bankruptcy if their debt becomes unmanageable. Credit can be repaired over time, but declaring bankruptcy will permanently affect a borrower’s ability to take on debt in the future.

The 3 Most Common Types of Personal Loan

Loan types vary in purpose, loan amount, repayment terms and, of course, the interest rate on the loan. Of the more common personal loans types are:

  • Installment Loan

Just as the name implies, installment loans are paid back at set intervals over a period, for example as once-a-month payments. The borrower receives a sum of money upfront, which is then repaid over the period of the loan. These repayments are not set in stone, as they can occasionally fluctuate according to interest rate changes or specific loan terms. The longer the repayment period of an installment loan, the lower the payments and the higher the interest rate. There may be a few options of loan periods available, so take the payments and interest rates into account when choosing the best installment loan for you.

  • Revolving Loan

With a revolving loan, the amount borrowed varies, meaning that your payments will vary, too. You can either pay the balance owed in full or you can pay only a portion of it. The most common type of revolving loan is a credit card.

  • Line of Credit

A line of credit is a form of revolving loan that is usually associated with home equity loans. Once approved, you’ll be allocated a line of credit and be allowed to borrow up to that amount. You can either borrow all the money upfront, or withdraw it on an as-needed basis. Payments have similar flexibility – you can repay the loan over any period.

There is a limitation to a line of credit that you won’t come across with credit cards – a time interval when you will no longer be able to draw from your credit line, and will need to start making repayments for a certain period.

Fixed vs. variable interest rates

There are actually three main factors that will determine a borrower's interest rate: their credit rating, the term of the loan (how long they have to pay it back), and whether they choose a fixed or variable rate.

A fixed interest rate will remain the same over the life of the loan. The borrower will thus know exactly how much they will have to pay each month until the loan is paid off, and the total amount that the loan will cost them. A variable interest rate will fluctuate over the life of the loan. It is tied to an index that could either go up or down over time. The index is dependant on the Federal Reserve's decisions to either raise or lower the federal interest rate periodically in its efforts to maintain a healthy economy and how that affects the interest rates that banks charge each other. In tough economic times the Fed lowers interests rates to encourage borrowing, while in better economic times it may raise interest rates to avoid inflation.

Variable interest rates begin lower than fixed rates, however they can potentially go up over the life of the loan. A borrower may choose to opt for a variable rate if the term of the loan is shorter, thus lessening the window in which interest rates might fluctuate. Those who choose a variable rate must also be sure they can afford the risk. Unlike a fixed rate, they will not be able to know the total amount the loan will cost them ahead of time. Some variable rate loans have caps, meaning that even if interest rates go up, there is a limit beyond which the loan's interest rate cannot rise.

Autopay and its effect on reducing APR

Borrowers can get a lower APR and ensure that they never miss a payment if they sign up for autopay, in which their loan payments are automatically taken out of their bank account each month.

Many lenders offer an autopay option which lowers the interest rate by 0.25%. For the lender, autopay ensures that they will get their money on time every month.

This is significant savings that could equal hundreds of dollars over the life of the loan. However, the borrower must be certain that they have sufficient funds in their account to cover the payments over the entire term of the loan.

Top Personal Loan Providers

Those who've decided that a personal loan is the right choice for them have a number of options to choose from in the peer-to-peer lending and online loans arenas. We have extensively reviewed the industry's leading loan providers, checking where they stand on the key parameters discussed above. Your loan provider will play a very important role in your financial future and therefore must be trustworthy and reliable. Below are some of the top loan providers in the industry.

 

​SoFi stands for Social Finance and it began by helping students drowning in debt get loans. The institution has since expanded, offering mortgages, personal loans to pay off expenses—such as credit card debt—and wealth management services. The following are some of the key points about SoFi that can help you determine if they fit your needs:

  • SoFi offers loans ranging from $5,000 to $100,000.
  • It’s geared to those with good credit, requiring a minimum score of 660, as well as proof of income.
  • SoFi offers both fixed and variable interest rates, with APRs ranging from 5.49 to 14.49 percent. The rates are lower if you opt for automatic payments, and there are no origination fees or hidden fees.

Visit the unabridged Sofi review to learn more about this top notch loan provider. 

 

​LendingTree is not a direct lender, it is a whole marketplace of reliable lenders competing for your business by offering you the best rates possible. Potential borrowers fill out a pre-approval form for Lending Tree, which then sends them a list of lenders that fit their needs. As a borrower, you can choose the lender with the most beneficial loan terms. Here are some of the highlights of LendingTree:

  • LendingTree can connect you with lenders that offer loans ranging between $1,000 and $35,000. A lower credit score does not mean that you will be denied a loan, although it might result in higher interest rates.
  • Because LendingTree is a platform for various lenders, APRs can range widely, from 5.99 to 35 percent. LendingTree allows borrowers to avoid the complicated process of applying for several loans separately. Instead, LendingTree handles all the heavy lifting by delivering a list of lenders that are likely to approve you for a loan.

Visit the full LendingTree review to learn more about this notable loan provider. 

Discover is well-known as one of the biggest credit card brands in the US and it has successfully transitioned into personal loans as well. It caters to those with good to excellent credit. Qualified borrowers can get a loan decision the same day they apply, and they can have the funds sent to their account by the following business day. Below are some key facts about Discover:

  • Discover customers can receive anywhere from $2,500 to $35,000 dollars in funding.
  • APRs range from 6.99 to 24.99 percent, with no origination fees.
  • Borrowers can choose loan terms of 3 to 7 years to best suit their needs. A Discover personal loan may be a good solution for people with good credit and a strong financial history.

Visit the extended Discover review to learn more about this leading loan provider. 

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You may experience a moment in your life when you need to borrow money. A personal loan can be a great way to quickly get the finances you need, but make sure you do your homework before signing an offer. Keep in mind that with a personal loan, you can expect to pay much higher interest rates, with a short period to repay the funds. Armed with this knowledge, read from our list of expert-reviewed lenders to find the best personal loan for your needs.