Is now a good time to take out a loan?
Whether or not it is a good time to take out a personal loan really depends on your own needs and your credit score. Interest rates for personal loans are largely determined by the borrower’s credit score. The better the score, the lower the interest rate. The average personal loan interest rate as of July 2020 is 11.8% with rates ranging from 5% to 36%. Since COVID-19 has left many people in difficult financial situations, many lenders have changed their loan options, lowered interest rates, dropped fees and allowed payment deferrals. You may be able to take advantage of these changes, but compare your options carefully before locking yourself into a loan.
The 8 best personal loans of 2020
- Marcus – Best overall
- LightStream – Highest loan amount
- Payoff – Best for credit card consolidation
- Avant – Best for average credit
- OneMain Financial – Best for same-day funding
- LendingClub – Best P2P lender
- Earnest – Most flexible terms
- SoFi – Best member perks
Marcus – Best overall
Marcus by Goldman Sachs checks all the boxes for the best online lenders. The bank’s personal loans have several important features that make Marcus a winner. First of all, the lender’s motto is, “Truly, no fees. Ever.” You don’t have to worry about additional application fees, lending or prepayment fees. And Marcus doesn’t even charge late payment fees either.
The bank’s personal loan rates are competitive, running from 6.99% to 19.99% with autopay discount. And a special payment deferral feature is helpful if something unexpected comes up — Marcus allows you to put off or defer one payment with no interest after you’ve made 12 consecutive ones on time and in full. You won’t be charged a late fee and your credit score won’t be affected.
LightStream – Highest loan amount
LightStream is Suntrust Bank’s online lending division, for customers out of the bank’s service area or that prefer to handle their financial tasks online. LightStream loans are available for up to $100,000 so you can finance nearly anything you need. LightStream doesn’t put restrictions on what you do with the money. You can use the loan to consolidate your debt, buy a vehicle or fund an emergency.
The loan limits are high, but the interest rates are as low as 3.49% APR, so you don’t have to worry about getting bogged down by high-interest payments. And if you borrow an amount on the higher side, you can opt for a repayment term of up to 144 months, so your monthly payments remain affordable. Choose autopay so your monthly loan payment drafts automatically from your bank account and LightStream will award you with an interest rate discount of 0.50%.
Payoff – Best for credit card consolidation
Payoff has the best online loans for credit card consolidation — it’s what Payoff specializes in. The lender doesn’t offer any other types of loans.
If you’re overwhelmed by meeting several credit card payments, consider a debt consolidation loan. Doing so can simplify your life and save you money. You won’t have to worry about several different card payment, and due dates. And if you forget to make your payments, you won’t hit with more than one late fee.
A Payoff loan consolidates all your debt into one payment. And the difference in interest rate is significant — Payoff’s personal loan rates are as low as 5.99%, compared to the national average card interest rate of 12.67% to 26.14%.
Avant – Best for average credit
If your credit score could be better, your odds of getting approved for a personal loan are best with Avant. Most lenders will save their best loan products for customers with high credit scores. According to Avant, the average customer that receives a loan has a credit score of 600 to 700. Plus, you can apply for a loan to see what Avant’s willing to offer you, without affecting your credit — Avant only does a soft credit pull. Avant offers unsecured personal loans starting at 9.95%.
One of Avant’s best features is its loan refinancing program. Most loans lock you into an interest rate for a set period of time. Avant’s loan refinancing program is all about building a relationship with the lender. If you’ve made at least six months of payments on time, you could qualify to refinance your loan for better terms. Doing so may help you get a lower interest rate on your existing loan, or you may even be eligible to borrow additional funds.
OneMain Financial– Best for same-day funding
Financial emergencies happen, and when you’re in need of money fast, you don’t have time for the lengthy underwriting process that comes with most traditional loans. OneMain Financial’s personal loans can get you the money you need quickly.
Apply for OneMain Financial’s online personal loans in just a few minutes by checking or filling out only 12 boxes. You’ll need to choose your loan type, enter your name, contact information, Social Security number and income details. Once you check the box agreeing to the terms and conditions and click on ‘submit’, you’ll receive an answer in 10 minutes or less.
Once you’re approved, you can request same-day funding. You’ll need to pick up the check at a location near you if you’re in a hurry. Or you can provide your bank details to request an electronic payment, which takes one to two business days to receive. Have your bank account number and routing number handy to request the electronic transfer.
LendingClub – Best P2P lender
Peer-to-peer lending matches up borrowers with lenders through an online marketplace. And the LendingClub is one of the earliest adopters. The P2P business model gives borrowers more lending options. Individuals willing to make some interest on the money they lend can step in to offer borrowers funding, all through the LendingClub’s platform.
Getting a personal loan from the P2P platform is a bit different than a traditional approach. LendingClub examines an applicant’s income and credit history to assign the prospective borrower with a grade. You won’t be able to see your grade, only the lenders and investors can. The grade classifies you for one of LendingClub’s tiers of interest rates and helps lenders determine if they’re willing to fund your loan.
If you’re in need of a personal loan from LendingClub, give yourself at least two weeks (if not longer). The whole application and approval process takes about seven business days. Once you’re approved, you’ll receive your loan electronically, which may add another couple of days to the process.
Earnest – Most flexible terms
Earnest is best known for its student loans, but also provides online personal loans that allow borrowers to set up payment schedules that work best for their needs. Most lenders will set your term length and payment due date, and you don’t have much control over when your payments are due and how much you have to pay. With Earnest, you decide how fast you want to repay the loan and change up the payment amount — plus, you can change your mind at any time.
Once your loan is set up, you can make changes to your payment schedule as often as you’d like through the online dashboard or on the mobile app. Login to move your payment due date by pushing it back up to seven days or move it up sooner. You can also increase your monthly minimum payments to speed up your repayment schedule and view how changing the speed and quantity of your payments affect the life of your personal loan.
SoFi – Best member perks
SoFi is different from your average personal loans provider. Qualifying for a SoFi loan is like joining a club. Once you’re in, you’ll have access to members-only social events such as dinners, sporting events and get-togethers. And if you’d like to grow your financial literacy or simply network with other financially-conscious people, head over to the active online forums for advice and talk about money, finances and careers.
The entertaining and networking perks are a great bonus. But another cool feature you won’t find at other lenders is SoFi’s forbearance program for borrowers who were laid off or lost their job through no fault of their own. The temporary suspension of monthly payments lets you take a breather for up to three months at a time and up to 12 months total over your loan’s length. Interest will still accrue in the three month grace period, but you won’t have to worry about late fees or hits to your credit score.
|Lender||Loan Amount||APR||Terms||Key Benefit|
|Marcus||$3,500 – $40,000||6.99% – 19.99%||36 – 72 months||Great rates, no fees|
|LightStream||$5,000 – $100,000||3.49% – 19.99%||24 – 144 months||Affordable larger loan amounts|
|Payoff||$5,000 – $35,000||5.99% – 24.99%||24 – 60 months||Specialized in credit card debt consolidation|
|Avant||$2,000 – $35,000||9.95% – 35.99%||24 – 60 months||600 – 700 credit score accepted|
|OneMain Financial||$1,500 – $20,000||18% – 35.99%||24 – 60 months||Get a check same day|
|Lending Club||$5,000 – $35,000||10.68% – 35.89%||36 – 60 months||Investors may fund your loan|
|Earnest||$1,000 – $100,000||4.99% – 17.24%||24 – 84 months||Easy-to-use mobile app|
|SoFi||$5,000 – $100,000||5.99% – 16.19%||36 – 84 months||Financial advisors available for borrowers|
Rates accurate as of July 21, 2020
What is a personal loan?
Personal loans are fixed-amount loans distributed as a lump sum and paid over monthly installments. They’re typically unsecured, which means no collateral, such as a car or home, is required to acquire the loan. Unlike a credit card, the borrower pays the loan back over a fixed period of time and a fixed interest rate that doesn’t fluctuate throughout the life of the loan.
Every bank has its own limitations for how much you can borrow and over what length of time, depending on your credit score and other factors. People use personal loans for a variety of reasons, but the most common are to consolidate debt, pay off credit cards, and make home improvements.
Should I take out a loan to consolidate debt?
It’s easy to become overwhelmed by credit card debt, especially when you have balances to pay off on multiple cards with varying interest rates and due dates. Debt consolidation is one of the most common uses for personal loans because it allows the borrower to combine their outstanding balances into one simple payment. You won’t have to worry about your interest rate (or monthly payment) going up, so you know what to expect every month. Payments are manageable and the borrower doesn’t feel overwhelmed.
The key is finding the best possible rate and calculating your total payments over time to determine whether a consolidation loan will save you money.
Should I take out a loan for moving expenses?
Moving between states or across the country can cost thousands and not all employers reimburse your relocation expenses. That’s why some people use a personal loan to make ends meet to move into a new home.
The personal loan can be used to pay for movers, buy moving supplies, arrange for storage, lodging, or even purchase new furniture for your home. Taking out a personal loan for moving expenses can be a great option if you find a good rate and ensure you can afford the monthly payments, especially if you’re moving for a job that offers a higher salary.
Should I take out a loan for home improvements?
Looking to remodel your kitchen? Maybe you’ve dreamed about an in-ground swimming pool, or you’re ready to build a new suite for your in-laws. Unless you have tens of thousands in savings, personal loans are definitely an option for home remodeling and renovation.
Many people who don’t want a home equity line of credit — which requires you to put up your home as collateral — opt for a personal loan to help finance home improvement projects. A personal loan can help you make changes to increase the value of your home, but it’s important to remember that during a fluctuating economy, loan interest rates will go up and down, so you could end up paying more in loan interest than any increase in property value that your home improvements make.
Should I take out a loan for my wedding?
Wedding costs add up quickly. A wedding venue, planner, photographer, catering for guests and smaller expenses like invitations, a wedding cake, and flowers can turn even the smallest of weddings into an expensive affair. Getting into debt over a wedding may not be the best use of your hard-earned money, but to many, their wedding is worth every penny spent.
Many people find it easier to pay for a wedding with a personal loan because they have the flexibility to use the funds however they want. Some couples even use personal loans to pay for engagement rings. As with any personal loan, it’s important to be strategic: calculate exactly how much you’ll need, don’t borrow more than that, and find a monthly payment you can afford (including interest).
Should I take out a loan for vacation?
The smartest reason to get a personal loan is to borrow for an investment that will be returned somehow. For example, borrowing for college will lead to a higher-paying job, investing in debt consolidation will save you money and get you out of debt and investing in home improvements will raise the price of your home when you sell.
People do sometimes take out personal loans for travel since some prioritize experiences or time spent with loved ones. But getting a personal loan for a vacation is arguably more of a luxury than an investment. Make sure you shop around to find a great rate and you’re 100% confident you can afford to pay the entire loan back on time.
The final word
Finding the best personal loan can be a daunting task, but by outlining your priorities and needs, you can identify which option is a good fit for you. Start by determining your credit score and how much cash you need to borrow, and then compare loan options before making your selection. Be sure to pay close attention to interest rates, additional fees and payment schedules.