Low Interest Personal Loans for Good Credit

Low Interest Personal Loans

Things must be getting better. Driving around you can see more banks promoting “Personal Loans – No collateral, just sign and go.” Just a few years ago, you would be hard pressed to find a bank actively promoting personal loans, or “signature loans” as they are also called. Credit was very tight, and people were nursing shaky credit reports.  

That seems to have changed and personal loans are rising in popularity among people looking for a quick infusion of cash to consolidate debt, pay for a wedding, start a business, or any number of reasons.  Just what is a personal loan and how do they work? We explore it in depth.

OneMain Financial Personal Loans give you an instant, on-screen response when you apply, as well as an email confirmation. Meanwhile, your application is sent to a local OneMain Fiancial branch. Your local branch representative will discuss loan options with you, and you could receive your money as soon as the very next day! OneMain Financial Personal Loans give you a decision and your loan faster...apply today!

What Are Personal Loans?

Also known as a signature loan, or a character loan, it’s an unsecured loan obtained through a bank or lending institution that only requires a borrower’s signature. These loans, issued up to $25,000 or higher in some cases, can be used for any purpose and are usually repaid over a one to 5 year period depending on the amount of the loan and the credit standing of the borrower.

The interest charged can range from rates that are equivalent to home equity loans (3%) to as high as 25%, again, depending on the borrower’s credit.  Generally, the lowest rates are reserved for people with excellent credit.

The primary source for personal loans is banks and credit unions, although there are more online finance companies starting to offer them as well.  Most of the online companies specialize in “bad credit” signature loans, which are also unsecured; however, they charge much higher rates of interest.

 The fees on personal loans can also add up.  Borrowers can find themselves paying a range of fees including a broker fee, a loan origination fee, a payment security fee, and processing fees. Some lenders charge a pre-payment fee as well.

 Why Use a Personal Loan?

For people with good credit who need an influx of capital, a personal loan can be a better alternative than a credit card if they can obtain better loan terms. Or, they may not have the credit available on their existing lines of credit.

With most banks or credit unions, you can walk in, apply for a personal loan and walk out with cash in your account. So, it’s quick and convenient. A common use for personal loans is debt consolidation, which would make sense if you could reduce the total cost of your debt. But, if you wind up defaulting on a personal loan it could significantly hurt your credit.

 For people with sketchy credit, a bad credit loan can be issued quickly as well, but they will be looking at high interest costs and higher fee costs. A personal loan is a much better alternative than a payday loan, which is designed for a very short term need for cash. Most banks won’t issue bad credit loans, so these would have to be obtained from a finance company, many of which are available online.

Getting a Personal Loan

Many banks and credit unions are now offering personal loans, and they make them available to customers with good to excellent credit histories. You won’t need to put up any collateral, such as your savings, just your signature.

But you will need to be able to document your financial situation and provide income verification. In addition to a credit check, the bank will want to review your personal balance sheet and cash flow situation. You may have to provide an employment reference as well as some personal references.  If approved, you loan will be funded within one business day.

While it’s good to see the banks lending again, you should carefully consider whether a personal loan might be the best option for you. If you have good credit, you could be better off applying for a loan through a peer-to-peer lender, such as Lending Club. 

You may be able to borrow higher amounts and the interest charges and fees can be much more favorable.  As with any type of credit product, it’s important to not only study the fine print, but also to know your capacity to repay the loan.

Qualifying for a Low Interest Personal Loan

Personal loan lenders consider many factors, other than credit score, when they are looking to approve a borrower for a loan. Here are a few of the factors the consider:

• Job Time - How long you have been steadily employed in the same profession
• Disposable Income - How much cash you will have left after taking the loan.
• Previous Installment Loans - Car payments and other personal loan history.
• Debt to Income Ratio - Do you have too much credit?
• Collateral - Is the loan to be secured or unsecured
• Use of the Loan - Are you consolidating debt or are you buying a new toy?
• Assets - Do you have a 401k or savings account set up?

If you have average or sagging credit scores, it IS entirely possible to still get a low interest personal loan if the above factors are favorable. It is also possible to be turned down with good credit scores if the above factors don't fall into line.