Personal Loan Rates by Credit Score
| Credit Score | Typical APR | Rating |
|---|---|---|
| 740+ | 6-10% | Excellent |
| 670-739 | 10-15% | Good |
| 580-669 | 15-25% | Fair |
| Below 580 | 25-36% | Poor |
When a Personal Loan Makes Sense
Debt consolidation: If you're carrying $15,000 on credit cards at 22% APR, a personal loan at 10% cuts your interest cost in half. One payment instead of multiple. Just don't rack the cards back up.
Large purchases: Medical bills, home repairs, major purchases where interest-free financing isn't available. Better than credit cards if the amount exceeds what you can pay off in one billing cycle.
When it doesn't: Vacations, discretionary spending, anything you can wait and save for. Borrowing at 10% for something optional is a bad trade.
Watch for Origination Fees
Many lenders charge 1-8% origination fee deducted from your loan amount. Borrow $15,000 with a 5% fee and you receive $14,250 but owe $15,000. This raises the effective APR above the stated rate. Some lenders have zero origination fees. Compare the total cost, not just APR.
Personal Loan vs. Credit Card
Credit cards charge 18-28% APR on unpaid balances. Personal loans typically run 6-18% for decent credit. The math favors personal loans for amounts you can't pay within a month or two. Credit cards win for small amounts paid quickly, especially with a 0% intro APR offer.
One advantage of personal loans: fixed payments on a fixed schedule. You know exactly when the debt is gone. Credit cards with minimum payments can stretch for decades.
Comparing Loan Offers
When comparing offers, look at three numbers: monthly payment, total interest paid, and APR including fees. A loan with lower APR but higher origination fee might cost more than one with slightly higher APR and no fee. Run both through this calculator to compare total cost.