Personal loans are a convenient source of cash to help cover unexpected expenses, pay for projects, or keep in reserve for a rainy day. So, what’s a good personal loan interest rate?
The rates for a traditional personal loan are about 13% to 29% but can be as low as 7.5% if you get a loan from your local credit union. Personal loan rates are much more affordable than payday loan rates, which can equal an APR as high as 600%.
Read on to find out more about interest rates on personal loans and payday loan alternatives!
Factors That Determine Interest Rates
Many factors go into setting interest rates on personal loans. That’s why there’s no single answer to the question, “What rate will I get for my personal loan?”
The Federal Funds Rate
The Federal Reserve sets an interest rate that credit unions and other financial institutions charge each other to borrow money overnight, so they always have a required amount of funds in their deposit accounts.
The Federal Funds Rate has a ripple effect through the economy, impacting the rate you get for your personal loan! The Federal Reserve can choose to raise the rate (to cool inflation) or lower the rate (to recover from a recession). Currently, the rate is 0.5% but it’s expected to go up.
Your Financial History and Income
Did you know that different people get different rates for their personal loans? That’s why you often see the annual percentage rate (APR) shown as a range, like 7.50% to 18%.
People with excellent credit and higher income will get the 7.50% and people with lower credit scores and moderate income may get the 18%. (If your credit and income are too low, you may not be approved for an unsecured personal loan—but there are other options for you!)
Your Loan Term
The term you choose for your personal loan will also impact the rate you get. Shorter terms get lower rates, while longer terms get higher rates. This is because short terms are considered safer bets!
You may be able to lower your rate if you agree to certain conditions. For example, Baton Rouge Telco offers a 0.5% discount if you sign up for automatic deduction of your loan payments from your checking account, plus direct deposits.
Interest Rates for Personal Loans
Each type of personal loan comes with different rates. So you need to consider which loan you’re applying for when you ask the question, “What’s a good personal loan interest rate?”
Read More: How Many Personal Loans Can You Have at Once?
Traditional Personal Loan
A traditional personal loan is unsecured, which means you don’t need to provide any collateral. Like all personal loans, you can use the funds for just about anything, including bills, repairs, vacations, weddings, or tuition.
Here’s what you can expect for a personal loan from Baton Rouge Telco:
- Rates of 7.49% to 18.00% (including discount)
- Terms of 12 to 48 months
- Loan amounts of $500 to $25,000
Other financial institutions may offer personal loan rates of 13% to 29%. So, depending on your credit score, a good rate for a personal loan could be anything under 18%—and even better if you qualify for a rate under 10%!
Secured Personal Loan
A secured loan is ideal for people who want to build or establish credit. You need to provide collateral, like funds in a savings account or even stock. Depending on the type of collateral you provide, an unsecured personal loan from Baton Rouge Telco offers these features:
- Rates of 2.49% to 8.49%
- Terms up to 84 months
- Minimum amounts of $500 to $5,000
When you’re short on cash, you may be tempted to apply for a payday loan to get you through to your next paycheck—but payday loan rates of 391% to 600% make it a very expensive option.
Here’s how a payday loan works:
- You can typically borrow between $50 and $1,000
- You agree to a finance charge of, say, $15 per $100 you borrow (it could be much higher)
- This charge equals an APR of a whopping 391%
- You usually need to pay the loan back on the day of your next paycheck via a pre-written check or automatic deduction
- If the funds aren’t present in your account when the lender seeks repayments, your bank may charge you a penalty
- Timely payments don’t usually have any positive impact on your credit—but missed payments and collections will hurt your score
Another problem with payday loans is that many people need to roll over the loan into the next pay period and beyond. This means you have to pay a new, higher finance charge.
According to incharge.org, the average payday loan amount is $375. If the finance charge is $15/$100 borrowed, your loan total becomes $431.25. Then if you roll that loan over, you now pay the $15/$100 finance charge on $431.25 = $64.69 for a new loan total of $495.94.
In one month, your loan amount has soared from $375 to almost $500!
Read More: Are Personal Loans a Bad Idea?
Luckily, there’s another type of loan that can help you in times of need. A Baton Rouge Telco Solutions Loan offers a lower APR than a payday loan—by far.
You can take advantage of these great features of a Solutions Loan:
- An APR of 28.00% compared to at least 391% for a payday loan
- A low $20 application fee
- Terms of up to six months
- Loan amounts of $200 to $1,000
- No minimum credit score needed
- Your payments will help build your credit score
As long as you have no open bankruptcy or foreclosure, a Solutions Loan is a stress-free way to get funds so you can sleep at night knowing your bills are paid.
Read More: What Can I Use a Personal Loan For?
Get a Great Rate on Your Personal Loan
By now, we’ve hopefully answered your question, “What’s a good personal loan interest rate?” Yes, the rate you get will depend on your financial situation. But this article has shown that you want to aim for a rate that’s under 18%. Meanwhile, 28% is a great rate for a special Solutions Loan.
Learn more below!