How to get the best personal loan rates

A personal loan may be the best option if you're looking for quick cash or debt consolidation.

Personal loans offer one-time, lump-sum payments, and you can use the funds for anything you like. They're also unsecured, meaning you don't need any sort of collateral to qualify.

If you think you could benefit from taking out a personal loan, get started today. You may be eligible to get cash in a lump sum quickly.

If you're considering taking out a personal loan, here's what you need to know about interest rates — and how to get the best one. 

How to get the best personal loan rates

Your personal rate will depend heavily on the following:

• Your credit score: The best way to get a low personal rate is to improve your credit score. The best rates are reserved for those with 800 credit scores or higher. If your score's not quite at that point, you can improve it by paying down debts, disputing errors on your credit report and paying your bills on time. (Here's how to check your credit score)
• Your financial history: Financial institutions may look at your history with repaying debt.
• Relationships with banks or credit unions: In some cases, having a pre-existing relationship with the bank or credit union that loans you the money can give you a lower rate. You might also get rate discounts for setting your account on autopay. 
• Loan term: Offerings may vary based on the loan term you choose.

Generally speaking, the better your credit score and stronger your payment history are, the lower rate you'll qualify for. If you have a low credit score or a history of late payments, you can usually expect a higher interest rate. This is how the lender compensates for the extra risk you present. 

To put yourself in the running for the lowest interest rates you should first repair your credit. This is a process and won't show results overnight so it's better to get started soon. 

What is considered a good personal loan rate?

Interest rates on personal loans fluctuate, but according to the Federal Reserve Bank of St. Louis, the average rate on a two-year personal loan currently sits at 8.73%. So if you can get that rate or lower, then you're on the right track.

Generally speaking, personal loans have higher rates than other types of loans — especially collateralized ones. Mortgage loans, for example, are currently hovering around 6%. 

Personal loan rates do tend to be lower than credit card rates, though. This is why they're often smart debt consolidation options for consumers with lots of credit card debt. The average rate on a commercial credit card, for example, was over 15% in May 2022 — well above the average personal loan rate.

If you want to see what kind of personal loan rate you qualify for, lenders are standing by to assist you.

How to apply for a personal loan

To get a personal loan, you'll need to find a lender first. To make sure you're getting the best deal, apply for prequalification with at least a few different places— including your home bank or credit union, an online lender and one other. This will give you a full range of loan alternatives, as well as a variety of fees, terms and rates to consider.

When you apply, you'll need to provide your Social Security number, date of birth, contact and employment information, monthly mortgage or rent details and your gross monthly income. You should also know the loan amount and term you want. If you're not sure, a personal loan calculator can help you zero in on what works for your budget and ideal monthly payment.  

You might also be asked to provide the following documents:

• Copies of your most recent W-2s and tax returns
• A recent utility bill with the current address shown
• Your most recent pay stubs
• A copy of your driver's license or Social Security card

There may be other items, too, but it depends on your lender and your unique financial situation. When you apply for a loan, you'll be assigned a loan officer who will guide you through the process. They'll let you know if any more documents are necessary.

Ready to get started? See what kind of personal loans you qualify for right now.

Other options to explore

If personal loans don't sound like something that would benefit you - or if you don't think the interest rates are cost-effective - there are some other reliable ways to access large sums of cash.

If you have a home consider cash-out refinancing. This is when you take out a new mortgage loan for a larger amount than what you currently owe. You then pay off the original loan amount and pocket the difference in cash. That additional money can then be used for many of the same things you would have used a personal loan for.

And if you're an older homeowner you may benefit from a reverse mortgage. A reverse mortgage allows homeowners (62 and older) who have fully paid off their mortgage (or paid a sizable amount), to take out a portion of their home's equity. This would qualify as tax-free income. It needs to be repaid, however, if the homeowner dies or elects to sell the home. Still, depending on how much money you owe and your home's current value, this could be a way to access funds to use as you wish.