Personal loans are a convenient source of cash to help cover unexpected expenses, pay for projects, or keep in reserve for a rainy day.
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!
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 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.
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!)
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.
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?”
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:
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%!
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:
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:
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:
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?
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!