When it comes to borrowing money, whether for home improvements, consolidating debt, or covering unexpected expenses, personal loans can be a great solution. However, the catch is that you want to find the best deal to save money on interest over time. The world of personal loans is vast and filled with different options, but not all lenders offer the same rates, fees, or terms.
So, how do you ensure you’re getting the lowest interest rates on your personal loan? To help you navigate this complex landscape, we’ve compiled a list of the top five personal loan companies that offer some of the lowest interest rates in the industry today. We’ll also dive into what makes each company stand out, the types of loans they offer, and their eligibility requirements.
Why Personal Loan Interest Rates Matter
Before diving into the best companies, let’s first understand why interest rates are so important when applying for a personal loan. The interest rate directly affects the amount of money you’ll pay back in addition to the loan amount.
For example, let’s say you take out a $10,000 loan with an interest rate of 5% over a 5-year period. In this case, you’d pay back around $2,645 in interest over the course of the loan. If the interest rate is 20%, however, you’d be looking at about $6,100 in interest over the same term.
The difference can be substantial, making it essential to secure the lowest interest rate possible. But how do you know which lender offers the best deal? That’s exactly what we’re going to explore below.
1. SoFi: Best for Low Rates and Flexible Terms
Overview:
SoFi, short for Social Finance, is a leading online lender that has earned a reputation for offering low-interest personal loans and flexible terms. With its sleek online platform, SoFi is particularly popular among millennials and tech-savvy borrowers who prefer a streamlined, digital-first lending experience.
Interest Rates:
SoFi offers competitive rates starting as low as 5.99% (with autopay). The interest rate varies based on factors like creditworthiness, loan amount, and repayment term. SoFi’s rates are generally among the lowest in the industry, especially for borrowers with excellent credit.
Loan Amounts and Terms:
- Loan Amounts: $5,000 to $100,000
- Loan Terms: 24 to 84 months
Key Benefits:
- No fees: SoFi charges no origination fees, late fees, or prepayment penalties, making it a cost-effective choice.
- Unemployment Protection: One standout feature of SoFi is its unemployment protection. If you lose your job, you may be able to temporarily pause payments while you search for new employment.
- Flexible Loan Terms: You can select from a variety of loan term options ranging from two to seven years.
Eligibility Requirements:
- Credit Score: Typically 680 or higher
- Annual Income: SoFi does not specify a minimum income requirement but looks for borrowers with strong financial standing.
2. LightStream: Best for Excellent Credit Borrowers
Overview:
LightStream, a division of SunTrust Bank, is known for offering some of the lowest personal loan rates available on the market. This lender is a great choice for borrowers with strong credit and a history of managing debt responsibly.
Interest Rates:
LightStream offers rates as low as 3.49% for borrowers with excellent credit. For secured loans, rates can be even lower. Keep in mind that the best rates are usually reserved for borrowers with excellent credit scores and financial stability.
Loan Amounts and Terms:
- Loan Amounts: $5,000 to $100,000
- Loan Terms: 24 to 144 months (up to 12 years)
Key Benefits:
- Fast Funding: Once approved, LightStream offers same-day funding in some cases. This is an excellent option if you need funds quickly.
- No Fees: There are no origination fees, prepayment fees, or late payment fees.
- Low APRs for Secured Loans: LightStream provides even lower rates for secured loans, making it an attractive choice for homeowners or anyone with valuable assets.
Eligibility Requirements:
- Credit Score: Typically 700 or higher
- Income: LightStream doesn’t have a strict income requirement, but it does expect borrowers to have a solid financial profile.
3. Marcus by Goldman Sachs: Best for Debt Consolidation Loans
Overview:
Marcus by Goldman Sachs is an online lender that provides personal loans with no fees and transparent rates. It is particularly popular for debt consolidation, allowing borrowers to consolidate multiple high-interest credit card balances into one manageable loan with a much lower interest rate.
Interest Rates:
Marcus offers rates starting as low as 6.99% (with autopay). Their rates are highly competitive, especially considering the lack of fees and the flexibility of terms.
Loan Amounts and Terms:
- Loan Amounts: $3,500 to $40,000
- Loan Terms: 36 to 72 months
Key Benefits:
- No Fees: Marcus does not charge any fees, including origination fees, late fees, or prepayment penalties.
- Customizable Loan Terms: Borrowers can adjust the terms of their loan to fit their budget, with terms as long as six years.
- Debt Consolidation Tools: Marcus has tools to help borrowers assess how much they can save by consolidating debt, which is a key feature for many applicants.
- Autopay Discount: Customers who enroll in autopay can reduce their interest rate by 0.25%.
Eligibility Requirements:
- Credit Score: Typically 660 or higher
- Income: Marcus does not specify a minimum income but prefers borrowers with stable income and a strong credit profile.
4. Upstart: Best for Borrowers with Fair Credit
Overview:
Upstart is an online lender that uses artificial intelligence (AI) to help determine borrowers’ creditworthiness. This means that Upstart can provide competitive rates to individuals with less-than-perfect credit, making it an excellent choice for people who are new to credit or have a less-than-ideal credit history.
Interest Rates:
Upstart’s rates start as low as 6.18% (with autopay). While Upstart’s rates are not as low as some of the others on this list, they are still very competitive for borrowers with fair or limited credit histories.
Loan Amounts and Terms:
- Loan Amounts: $1,000 to $50,000
- Loan Terms: 36 to 60 months
Key Benefits:
- AI-Based Approval Process: Upstart uses AI to assess your application, allowing it to take into account factors other than just your credit score, such as your education and work experience.
- Flexible Loan Terms: With loan terms ranging from three to five years, borrowers can adjust the length of their loan to suit their needs.
- Fast Funding: Once approved, Upstart can fund loans quickly, sometimes on the same day.
Eligibility Requirements:
- Credit Score: Minimum of 600
- Income: While Upstart doesn’t have a strict income requirement, it does prefer borrowers who have a steady job or income source.
5. Discover Personal Loans: Best for Customer Service
Overview:
Discover, a well-known name in the financial world, offers personal loans that come with low interest rates and great customer service. It is often praised for its outstanding customer support, which is available seven days a week.
Interest Rates:
Discover offers rates starting as low as 6.99% (with autopay). They offer competitive rates for borrowers with good to excellent credit scores.
Loan Amounts and Terms:
- Loan Amounts: $2,500 to $35,000
- Loan Terms: 36 to 84 months
Key Benefits:
- No Fees: Discover charges no origination fees, late fees, or prepayment penalties, making it an affordable choice for many borrowers.
- Great Customer Service: Discover’s customer service team is available by phone or online chat seven days a week to assist you throughout the loan process.
- Autopay Discount: Like many lenders, Discover offers a 0.25% interest rate discount for borrowers who set up automatic payments.
Eligibility Requirements:
- Credit Score: Typically 660 or higher
- Income: Discover does not specify a minimum income but expects borrowers to have a stable financial situation.
Conclusion: Which Lender is Right for You?
Choosing the right personal loan company is a crucial decision that can save you a lot of money over time. While low interest rates are important, it’s also essential to consider factors like customer service, loan amounts, and terms.
If you have excellent credit and want the lowest possible rates, LightStream or SoFi might be your best bet. If you’re looking to consolidate debt, Marcus by Goldman Sachs offers a great solution with no fees. For those with fair or limited credit histories, Upstart provides a great alternative with its AI-based approval process.
FAQ
1. What factors determine the interest rate on a personal loan?
The interest rate on a personal loan is influenced by several factors, including:
- Your credit score: Lenders use your credit score to assess the risk of lending to you. Higher credit scores typically result in lower interest rates.
- Loan amount and term: Larger loan amounts and longer repayment terms can sometimes lead to higher interest rates.
- Income and employment history: Lenders will consider your income stability and employment history when determining your rate. A steady income may lead to a better rate.
- Debt-to-income ratio: This ratio reflects the amount of debt you currently have compared to your income. A lower ratio is more favorable.
2. Can I get a personal loan with bad credit?
Yes, it is possible to get a personal loan with bad credit, but it may come with higher interest rates. Lenders typically look for a credit score of at least 600 to 650, but some companies, like Upstart, are known for offering loans to borrowers with fair credit by considering additional factors like education and work history.
To increase your chances of approval, you may want to consider:
- Securing the loan with collateral (for example, a car or home).
- Applying with a co-signer who has better credit.
- Looking for lenders who specialize in subprime loans.
3. How quickly can I get the money from a personal loan?
The time it takes to receive your personal loan funds varies by lender. Some online lenders, such as LightStream and SoFi, offer same-day or next-day funding if you’re approved. For most lenders, once your loan is approved, you can expect to receive the funds within 1 to 3 business days. It’s important to read the fine print of each lender’s process to understand exactly how long it will take.
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4. Should I pay off my personal loan early?
Paying off your personal loan early can be a good way to save on interest charges, but it depends on the lender’s terms. Many lenders, such as Marcus by Goldman Sachs and Discover, don’t charge prepayment penalties, so paying off the loan early is encouraged. However, it’s always a good idea to check the loan agreement before making early payments to ensure there are no penalties for doing so.
5. Are personal loans secured or unsecured?
Most personal loans are unsecured, meaning they don’t require collateral like your home or car. This makes them a less risky option for the borrower, but lenders typically charge higher interest rates because they’re assuming more risk. However, some lenders, like LightStream, offer secured personal loans at even lower interest rates if you provide collateral. It’s essential to understand whether your loan is secured or unsecured because a secured loan means you risk losing the asset if you default on the loan.