Athena Lent has been in personal finance for over six years and is the author of "Budgeting for Dummies." Her work has been seen on AOL, GOBankingRates, Money Under 30, and Yahoo Finance.
Charlie is an editor for Credible’s personal loans vertical. His time working on various desks has seen him edit a wide range of content, from long-form policy analysis to defense briefs and celebrity Q&As.
After getting his start at Stars and Stripes as a Dow Jones News Fund intern, Charlie spent more than 5 years copy editing articles for The Hill’s website and print edition.
Updated October 7, 2024
Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”
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To qualify for low-interest loans, you’ll typically need good to excellent credit.
Financing emergencies, home renovations, vacations, or other large expenses on credit cards can add up. The average credit card interest rate was 21.51%, according to the Federal Reserve. Rates on two-year personal loans, on the other hand, averaged 11.92%, making a low-interest loan a comparatively affordable alternative. And the lower the rate, the potentially higher the savings. This is why rate-shopping personal loans is crucial.
Our top pick for low-interest personal loans, LightStream, offers rates as low as 6.99% APR, with the possibility of same-day funding and loan amounts up to $100,000 — plus, no origination fees.
Compare low-interest personal loan rates in October 2024
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 20 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Loan amount
$5,000 to $100,000
Repayment terms
2 - 20 years, depending on loan purpose
Fees
None
Discounts
Autopay
Eligibility
Available in all states except RI and VT
Min. income
Does not disclose
Customer service
Email
Soft credit check
No
Time to get funds
As soon as the same business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Loan amount
$1,000 to $50,000
Fees
Origination fee
Discounts
None
Eligibility
Available nationwide
Min. income
$12,000
Customer service
Phone, email
Soft credit check
Yes
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Loan amount
$2,500 - $40,000
Repayment terms
3 - 7 years
Fees
Late fee
Discounts
None
Eligibility
Available in all 50 states
Min. income
$40,000
Customer service
Phone
Soft credit check
Yes
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Loan Amount
$5,000 to $100,000
Repayment terms
2 - 7 years
Fees
Option to pay an origination fee in exchange for a lower rate
Discounts
Autopay, direct pay
Eligibility
Available in all states
Min. income
Does not disclose
Customer service
Phone, email, live chat
Soft credit check
Yes
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 9.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Loan amount
$2,000 to $50,000
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Discounts
None
Eligibility
Available in all states except DC, IA, VT, and WV
Min. income
None
Customer service
Phone, email
Soft credit check
Yes
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Repayment terms
2 to 7 years
Fees
Origination fee
Discounts
Autopay and direct pay
Eligibility
Available in all states
Min. income
Does not disclose
Customer service
Email
Soft credit check
Yes
Time to get funds
1 business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Zable offers relatively small loan amounts — ranging from $1,000 to $35,000 — that can be deposited in your account as soon as the same day you are approved, if it is by the lender's deadline. It’s an option for fair-credit borrowers, with a minimum credit score of 600, as well as those with lower incomes.
Its origination fees range from 5% to 9%, however, and it does not offer discounts, secured loans, nor the option to add a cosigner to your application. Zable also currently does not offer loans in 21 states.
Loan amount
$1,000 to $35,000
Repayment terms
1 to 5 years
Fees
Origination fees (5% to 9%)
Discounts
None
Eligibility
Not available in CO, CT, IN, KS, LA, ME, ND, NE, NH, NJ, NV, OK, OR, PA, RI, SC, SD, VT, WV, WI, or WY
Min. income
$1,000 per month
Customer service
Email, phone
Soft credit check
Yes
Time to get funds
As soon as the same day
Loan uses
Debt consolidation, credit card refinancing, home improvement, major purchase, car financing
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 20 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Loan amount
$5,000 to $100,000
Repayment terms
2 - 20 years, depending on loan purpose
Fees
None
Discounts
Autopay
Eligibility
Available in all states except RI and VT
Min. income
Does not disclose
Customer service
Email
Soft credit check
No
Time to get funds
As soon as the same business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Loan amount
$1,000 to $50,000
Fees
Origination fee
Discounts
None
Eligibility
Available nationwide
Min. income
$12,000
Customer service
Phone, email
Soft credit check
Yes
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Loan amount
$2,500 - $40,000
Repayment terms
3 - 7 years
Fees
Late fee
Discounts
None
Eligibility
Available in all 50 states
Min. income
$40,000
Customer service
Phone
Soft credit check
Yes
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Loan Amount
$5,000 to $100,000
Repayment terms
2 - 7 years
Fees
Option to pay an origination fee in exchange for a lower rate
Discounts
Autopay, direct pay
Eligibility
Available in all states
Min. income
Does not disclose
Customer service
Phone, email, live chat
Soft credit check
Yes
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 9.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Loan amount
$2,000 to $50,000
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Discounts
None
Eligibility
Available in all states except DC, IA, VT, and WV
Min. income
None
Customer service
Phone, email
Soft credit check
Yes
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Repayment terms
2 to 7 years
Fees
Origination fee
Discounts
Autopay and direct pay
Eligibility
Available in all states
Min. income
Does not disclose
Customer service
Email
Soft credit check
Yes
Time to get funds
1 business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Zable offers relatively small loan amounts — ranging from $1,000 to $35,000 — that can be deposited in your account as soon as the same day you are approved, if it is by the lender's deadline. It’s an option for fair-credit borrowers, with a minimum credit score of 600, as well as those with lower incomes.
Its origination fees range from 5% to 9%, however, and it does not offer discounts, secured loans, nor the option to add a cosigner to your application. Zable also currently does not offer loans in 21 states.
Loan amount
$1,000 to $35,000
Repayment terms
1 to 5 years
Fees
Origination fees (5% to 9%)
Discounts
None
Eligibility
Not available in CO, CT, IN, KS, LA, ME, ND, NE, NH, NJ, NV, OK, OR, PA, RI, SC, SD, VT, WV, WI, or WY
Min. income
$1,000 per month
Customer service
Email, phone
Soft credit check
Yes
Time to get funds
As soon as the same day
Loan uses
Debt consolidation, credit card refinancing, home improvement, major purchase, car financing
The Credible editorial team is independent and unbiased, which means that partners do not influence our editorial content. To help you find the best low-interest personal loan for your situation, we analyzed over 1,000 personal loan data points. Using data-driven methodologies, we scored criteria that are important to you. This approach allows us to objectively rank personal loans. To learn more, read our methodology below.
Best low-interest personal loans
“The top factor in our selection of the best low-interest loans is the annual percentage rate (APR). This number accounts for both the interest rate on the loan and any upfront costs, like an origination fee. That's why it's better for comparing borrowing costs than the interest rate alone.” — Charlie Tarver, Editor, Personal Loans
But APR isn't the only thing we considered. We also looked at available loan amounts, time to fund, repayment term options, other fees, credit and income requirements, customer access, lender reputation and consumer reviews, plus other features to determine the best low-interest personal loans of 2024.
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 20 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Loan amount
$5,000 to $100,000
Repayment terms
2 - 20 years, depending on loan purpose
Fees
None
Discounts
Autopay
Eligibility
Available in all states except RI and VT
Min. income
Does not disclose
Customer service
Email
Soft credit check
No
Time to get funds
As soon as the same business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
No minimum credit score requirement on lender site
Low minimum APR
Trustpilot score of 4.9/5 stars
May charge a high origination fee
No discounts offered
More details
Overview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Loan amount
$1,000 to $50,000
Fees
Origination fee
Discounts
None
Eligibility
Available nationwide
Min. income
$12,000
Customer service
Phone, email
Soft credit check
Yes
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Loan amount
$2,500 - $40,000
Repayment terms
3 - 7 years
Fees
Late fee
Discounts
None
Eligibility
Available in all 50 states
Min. income
$40,000
Customer service
Phone
Soft credit check
Yes
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Loan Amount
$5,000 to $100,000
Repayment terms
2 - 7 years
Fees
Option to pay an origination fee in exchange for a lower rate
Discounts
Autopay, direct pay
Eligibility
Available in all states
Min. income
Does not disclose
Customer service
Phone, email, live chat
Soft credit check
Yes
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Scored second in J.D. Power's Consumer Lending Satisfaction Study
Funds in 1-3 business days
High close rate on loans through Credible platform
Origination fees
No discounts
Not available in DC, IA, VT, or WV
More details
Overview
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 9.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Loan amount
$2,000 to $50,000
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Discounts
None
Eligibility
Available in all states except DC, IA, VT, and WV
Min. income
None
Customer service
Phone, email
Soft credit check
Yes
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Repayment terms
2 to 7 years
Fees
Origination fee
Discounts
Autopay and direct pay
Eligibility
Available in all states
Min. income
Does not disclose
Customer service
Email
Soft credit check
Yes
Time to get funds
1 business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Maximum loan amount is lower than most other lenders
Origination fee
Not available in CO, CT, IN, KS, LA, ME, ND, NE, NH, NJ, NV, OK, OR, PA, RI, SC, SD, VT, WV, WI, or WY
More details
Overview
Zable offers relatively small loan amounts — ranging from $1,000 to $35,000 — that can be deposited in your account as soon as the same day you are approved, if it is by the lender's deadline. It’s an option for fair-credit borrowers, with a minimum credit score of 600, as well as those with lower incomes.
Its origination fees range from 5% to 9%, however, and it does not offer discounts, secured loans, nor the option to add a cosigner to your application. Zable also currently does not offer loans in 21 states.
Loan amount
$1,000 to $35,000
Repayment terms
1 to 5 years
Fees
Origination fees (5% to 9%)
Discounts
None
Eligibility
Not available in CO, CT, IN, KS, LA, ME, ND, NE, NH, NJ, NV, OK, OR, PA, RI, SC, SD, VT, WV, WI, or WY
Min. income
$1,000 per month
Customer service
Email, phone
Soft credit check
Yes
Time to get funds
As soon as the same day
Loan uses
Debt consolidation, credit card refinancing, home improvement, major purchase, car financing
Methodology
Credible evaluated the best low-interest personal loans based primarily on interest rates, but also took into account customer experience, origination fees, loan amounts, loan terms, discounts, the availability of secured loans, whether cosigners are accepted, and more. Credible's team of experts gathered information from each lender's website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.
It’s essential to consider the following when comparing low-interest personal loans:
APR: The lower the APR, the less you’ll pay for the loan overall. A higher rate can also equal a higher monthly payment, leaving your budget strapped.
Loan amounts: Some lenders can approve you for loans up to $100,000 or more, but remember, the higher the loan, the more you pay back over time. It’s imperative that you only borrow what you need.
Repayment terms: Most lenders offer terms between 1 and 7 years. Choose the one that best fits your needs, as a manageable repayment schedule can help you repay your loan successfully. Check the payment amount and date to ensure you can make your payments.
Fees: Some, but not all, lenders charge origination fees, which may be deducted upfront from the loan amount, as well as more common fees, like late fees and NSF fees.
Cosigner option: If you have fair or bad credit and a lender allows a cosigner, you might be able to secure a lower interest rate than you would have on your own. Keep in mind that a cosigner is responsible for payments if you’re unable to pay.
Time to fund: If you need money by a certain time, check how long it will take the lender to send funds once approved. Many lenders can fund your loan as soon as the same or next business day, while others may take as long as a week.
How does a low-interest loan work?
Personal loans with low interest rates are like other installment loans. Once approved, you receive a lump-sum payment transferred to your checking account or, perhaps, transferred directly to your creditors in the case of debt consolidation loans. After receiving your funds, you’ll repay your loan monthly in fixed payments based on a predetermined payment schedule and interest.
Most lenders let you pay off a loan early without penalty, but check with yours to make sure before doing so.
Good credit score: A FICO score of 670 or higher is considered good credit, which most lenders prefer. It’s possible to secure a loan with a lower score, but your APR will likely be much higher.
Low debt-to-income ratio: Your debt-to-income ratio (DTI) is how much you pay monthly toward debt, divided by your pretax monthly income and expressed as a percentage. The lower this is, the more likely lenders consider you to be able to repay your loan on time. Most lenders prefer a DTI of 35% or less.
Sufficient income: The lender needs to see that you have enough income available to make monthly payments for the size of loan you want. They also prefer to see a stable source of income.
Credit unions often offer low-interest loans, but with most you must be a member to qualify.
Average personal loan interest rates
Depending on your credit score, and the lender you choose, you can expect the following average interest rates, based on Credible data from October 2024:
No-interest loans such as “buy now, pay later” apps, in-store financing, and 0% APR credit cards, may seem comparable to low-interest personal loans. And if you can pay off the balance of the loan within the no-interest timeframe, they may be a better choice.
However, once this timeline ends, or you miss a payment, you could accrue late fees and/or the standard APR may be applied to the remaining balance. The details depend on what type of financing you used. But in most cases, the loan will no longer be no-interest or even low-interest. Especially if you consider that some credit card APRs can be 30% or higher.
In contrast, low-interest loans require paying interest from the start, but there's no promotional period after which the interest rate rises. You will have a consistent monthly payment with no surprises and a set end date for paying off your loan.
Pros and cons of low-interest loans
Here are some benefits and drawbacks to consider.
Pros
Lower payments: A low-interest loan will collect less in fees over the life of the loan, which means you pay less.
Helps build credit: Making on-time loan payments can increase your score, as payment history makes up 35% of your FICO credit score.
Easy to manage: Low-interest loans have a set payment schedule with a fixed amount, making it easier to budget and have money leftover for other financial goals.
Cons
Fees: Some lenders add fees for early repayment, missed payments, applications, and origination.
Ability to borrow too much: Getting a large lump sum at once may influence you to borrow more than you can realistically afford to pay back in the long run, leaving you worse off than before.
Hard inquiry: Lenders will perform a hard inquiry that can ding your credit score. It’s important to note if you’re working to clean up your credit.
How to apply for a low-interest loan
Once you’ve decided to apply for a low-interest loan, here’s what you need to do:
Research and compare lenders: Look for personal loan lenders who specialize in low-interest loans. Consider other factors for your needs such as APR, time to fund, and loan amounts.
Prequalify: You can prequalify with most lenders to get an idea of what you might qualify for before submitting your loan application. With prequalification, a lender performs a soft credit check, which won’t harm your credit score. However, prequalification is not an offer of credit, and the rate you receive may not be the final rate you qualify for once you formally apply.
Fill out and submit the application:Fill out your application online or in person. You’ll likely need to provide proof of income such as a W-2, a legal form of personal identification like a driver’s license, and proof of address such as a credit card statement. Once you submit your application, the lender will perform a hard credit pull, which will temporarily lower your credit score.
Wait for approval and get your funds: Some lenders can provide your funds the same or next business day once you're approved. But you may wait a week, depending on the lender.
Alternatives to low-interest loans
If you’re unable to qualify for a low-interest loan, consider these other options.
0% APR credit card: A 0% APR credit card can be easier to secure than a low-interest loan. But once the promotional period ends, the standard APR will apply, which is generally much higher than the average personal loan.
Buy now, pay later: Some of these services allow you to split a purchase into 3-, 6-, or 12-month installments, usually with interest. Many also offer shorter plans with no interest, however, if you make a payment every two weeks (usually for a six-week period).
In-house financing: Many companies offer in-house financing as an alternative to a low-interest loan. You can set up a payment plan with the company directly. Like credit cards, once any promotional offers end (such as 0% APR), the standard rate will resume and you’ll also have deferred interest.
FAQ
What factors influence low-interest loan rates?
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Factors that influence the rate on a low-interest loan are your credit score, income, and overall debt-to-income ratio. Lenders want to see proof that you can manage to repay your loan promptly.
Can I get a low-interest loan with bad credit?
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Typically no, as you usually need good to excellent credit to qualify for a low-interest loan. However, you can boost your credit score by paying off smaller debts to lower your DTI or by reviewing your credit report and correcting any errors.
Athena Lent has been in personal finance for over six years and is the author of "Budgeting for Dummies." Her work has been seen on AOL, GOBankingRates, Money Under 30, and Yahoo Finance.