Best Personal Loans for December 2019

Personal loans help you consolidate your credit card debt or pay off a big expense without over-burdening you with interest. They are usually awarded for a short period of time in amounts ranging from $1,000 and $100,000. Most personal loans are unsecured, meaning you don’t have to put down collateral to qualify. If you have a good credit score, you could receive your funds in as little as one or two days. The best loans usually come with fixed interest rates and fixed monthly payments that make it simple to budget in your monthly expenses.

Since the advent of online banking and fin-tech, loans are offered by different types of lenders, including traditional banks and online-only lenders. Choosing the best lender and getting the best loan rates can save you thousands of dollars. You don’t need perfect credit to get a personal loan. Even those with average to bad credit have options, and we’ll explore everything from the best options for people with excellent credit to the best bad credit loans.

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Best Personal Loan Companies of 2019

• Best Peer-to-Peer Lending: LendingClub
• Best Loans for Credit Checks: Prosper
• Best Traditional Bank Lending: LightStream
• Best No-Fee Lending: Marcus
• Best Loans for Excellent Credit: SoFi
• Best Loans for Average Credit: Avant
• Best Financial Support: Upgrade
• Best Fast-Funding Lending: Upstart
• Best Debt Consolidation Loans: OneMain
• Best Loans for Poor Credit: NetCredit
• Best Credit-Rebuilding Loans: OppLoans

LightStream Disclaimer: *Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66.

LendingClub

LendingClub loans are “peer-to-peer” loans that let you borrow money from a person or from a group of people instead of through a traditional bank. Borrowers are assigned a grade based on income and credit score. Your grade determines your interest rate. It offers a co-sign option to borrowers with a credit score of 600 and above (the co-signer can have a credit score as low as 540).

LendingClub also has a hardship plan in case you have trouble making payments. Borrowers can make interest-only payments for up to three months until you get back on your feet.

There is an origination fee of between 1% and 6% tacked onto your LendingClub loan, and they offer no rate discount for auto-payments. But, in 2019, LendingClub introduced a balance transfer loan for help when consolidating debt, and will send payments to up to 12 creditors to help pay off balances.

Disclaimer: All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 6.95% to 35.89%. For example, you could receive a loan of $5,700 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. *The origination fee ranges from 1% to 6%; the average origination fee is 5.2% (as of 12/5/18 YTD).* There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.

LightStream

LightStream is a division of SunTrust Bank that offers personal loans that can be used for most anything, from buying a vehicle to paying for medical bills. Interest rates on your LightStream loan will vary depending on the purpose of the loan. Applicants must have a credit score of 660 or above, but loan amounts are available up to $100,000.

LightStream does a hard credit pull on all applicants if you apply on its website. But, it also guarantees your satisfaction by offering you $100 back if you have had your loan for less than 30 days and are unhappy with the results.

LightStream claims to beat any competitors interest rate by 0.10%. However, you show you have been approved by the competition for a fixed-rate loan for the same amount, payment method and purpose.

Disclaimer: Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates under the invoicing option are 0.50% higher. If your application is approved, your credit profile will determine whether your loan will be unsecured or secured. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment Example: Monthly payment for a $10,000 loan at 9.84% APR with a term of three years would result in 36 monthly payments of $321.92. Please find our Rate Beat disclosures here.

Marcus

Marcus is the lending division of investment bank, Goldman Sachs, which offers loan flexibility, no sign-up fees, no prepayment fees ever. It also charges no origination fee or late fees if you miss a payment, and even offers online tools to help you track your credit score and pay down debt with your loan. Although you can take out a loan from Marcus for any reason, Marcus personal loans are available in amounts up to $40,000, and useful for things like consolidating debts, taking a vacation, weddings or for home improvements.

To qualify, you must have a credit score of at least 660, be over 18 years old, and have a valid U.S. bank account. If you pay 12 or more consecutive monthly payments, you can defer one payment as long as all payments have been made in full, on time. Your loan will be extended one month, but you don’t pay interest on the deferral month.

Rate Disclosure – For New York residents, rates range from 6.99% to 24.99% APR. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans). The available loan term may vary based on your creditworthiness (for example, 72-month loan terms will not be available to all applicants). Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your income must support your ability to repay your loan. Your monthly payment amount will vary based on your loan amount, APR and loan term. For example, a $402 monthly payment is based on a $15,000 loan with a 12.99% APR and 48 monthly payments.

SoFi

SoFi has high credit standards and members-only networking events, which means you can attend social events online or around the country for career and financial advice. Borrower’s minimum credit score must be at least 680, with an annual income of no less than $45,000. This company offers flexible payment options and won’t charge late fees for missed payments or overdrafts.

SoFi also offers both variable- and fixed-rate loans. Interest rates on fixed-rate loans tend to be higher, and variable-loan rates can go up over the life of your loan, to a maximum of 14.70%. Sofi also gives you the peace of mind of knowing that if you should lose your job, you can apply for forbearance for three months to 12 months.

Borrowers should know that qualifying for a SoFi loan is based more on how much of your income is left after expenses than your creditworthiness. It can also take up to seven days after applying to get your loan.

Disclaimer: Fixed rates from 5.99% APR to 17.88% APR (with AutoPay). Variable rates from 6.49% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of December 2, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.49% APR assumes current 1-month LIBOR rate of 1.81% plus 4.93% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636.

Prosper

Prosper is another peer-to-peer lender for unsecured personal loans that you can use for nearly any purpose, from debt consolidation to funding your next vacation. To qualify, you must pass Prosper’s proprietary risk-rating system, which takes into account things like credit history, income and credit score.

Applicants must have a minimum credit score of 640, two years of credit history, but there is no minimum annual income requirement. Prosper does not pay creditors directly if you’re consolidating debt, and you can’t adjust your payment schedule, as well as charging origination fees ranging from 2.4% to 5%, late fees and insufficient funds fees. However, Prosper offers fast funding and only does a soft credit check.

For example, a three-year $10,000 personal loan with a Prosper Rating of AA would have an interest rate of 5.31% and a 2.41% origination fee for an annual percentage rate (APR) of 6.95% APR. You would receive $9,759 and make 36 scheduled monthly payments of $301.10. A five-year $10,000 personal loan with a Prosper Rating of A would have an interest rate of 8.39% and a 5.00% origination fee with a 10.59% APR. You would receive $9,500 and make 60 scheduled monthly payments of $204.64. Origination fees vary between 2.41%-5%. Personal loan APRs through Prosper range from 6.95% (AA) to 35.99% (HR) for first-time borrowers, with the lowest rates for the most creditworthy borrowers. Eligibility for personal loans up to $40,000 depends on the information provided by the applicant in the application form. Eligibility for personal loans is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All personal loans made by WebBank, member FDIC. Prosper and WebBank take your privacy seriously. Please see Prosper’s Privacy Policy and WebBank’s Privacy Policyfor more details. Notes offered by Prospectus. Notes investors receive are dependent for payment on unsecured loans made to individual borrowers. Not FDIC-insured; investments may lose value; no Prosper or bank guarantee. Prosper does not verify all information provided by borrowers in listings. Investors should review the prospectus before investing.

Avant

Avant loans are an excellent choice for borrowers with a less-than-great credit score because it’s a competitive low-credit lender that offers unsecured personal loans. The average credit score to qualify at Avant is between 600 and 700, which is just below the national average. But, if you qualify, you can often receive a loan by the next business day.

Avant’s beginning APR of 9.95% is reasonable, but if you have bad credit, you will likely only qualify for a much higher APR which can be as much as 35.99%. Avant loans are best for someone with a modest gross income of at least $20,000 a year and a minimum credit score of 580. Avant does charge an administration fee of 4.75%, late fees, and returned check fee, but if you need flexibility with payments, emergency expenses, consolidating debt, making home improvements or repairing your credit, Avant is a good bet for a loan.

* The actual loan amount, term, and APR amount of loan that a customer qualifies for may vary based on credit determination and state law. Minimum loan amounts vary by state. **Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33. Avant branded credit products are issued by WebBank, member FDIC.

Upgrade

Upgrade loans support a wide range of incomes and credit scores. They are one of the few online lenders that consider cash flow (a monthly minimum of $800) over credit score. You must have a credit score of at least 620 to qualify. Upgrade also considers co-signers who meet minimum credit score requirements.

Upgrade charges an origination fee of between 1.5% and 6%, late fees for missed payments, no option for direct payment to creditors for debt consolidation and no secured loan option. However, Upgrade does offer hardship plans if you lose your job. Should this happen, you may qualify for a temporary reduction in your monthly payment or a loan modification for the term of your loan. Upgrade also does a soft credit pull, which will not affect your credit score. However, if you accept the loan, they will do a hard pull.

Personal loans made through Upgrade feature APRs of 6.98%-35.89%. All personal loans have a 1.5% to 6% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by WebBank, Member FDIC.

Upstart

Upstart loans are great for younger applicants and those with little or no credit history, but high earning potential. Upstart loans can be used for many purposes, such as college tuition, home improvements, medical expenses and debt consolidation. They provide quick funding, often within one day, but loans for education require a three-day waiting period before approval.

Borrowers must have a minimum credit score of 620 and a minimum annual income of $12,000. There is a small origination fee, and late fees of 5% of the past due amount or $15, whichever is greater. Also, Upstart’s rates, with a maximum of 35.99%, are higher than some competitors. If you’re a new borrower with no recent bankruptcies or delinquent loans who needs fast funding, Upstart may be a great choice.

* The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart Platform will have an APR of 19% and 36 monthly payments of $35 per $1,000 borrowed. There is no down payment and no prepayment penalty. Average APR is calculated based on 3-year rates offered in the last 1 month. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.
** Estimated savings are calculated based on the credit profiles of all loans originated by Upstart-powered lenders using the Upstart Platform as of April 1, 2019 in which the funds were used for credit card refinancing. Estimated savings are calculated by deriving current credit card APR using minimum monthly payment and 1% of the principal balance. The estimated credit card APR is then compared to the accepted loan to determine median savings per borrower. To evaluate savings on a loan you are considering, it is important to compare your actual APR from your existing debt to the APR offered on the Upstart Platform. More than 303,000 loans have been originated on the Upstart platform as of July 1, 2019. Images are not actual customers, but their stories are real.
† If you accept your loan by 5pm EST (not including weekends or holidays), you will receive your funds the next business day. Loans used to fund education related expenses are subject to a 3 business day wait period between loan acceptance and in accordance with federal law.
‡ While most of our borrowers opt for automated recurring payment for ease of use, we also accept payments by check or one time electronic payments. Borrowers have the flexibility to choose the repayment method that works best for them. 9 out of 10 Upstart users surveyed internally reported that they would recommend Upstart.
†† When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information will be reported to the credit bureaus.
§ Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Loans are not available in West Virginia or Iowa. The minimum loan amount in MA is $7,000. The minimum loan amount in Ohio is $6,000. The minimum loan amount in NM is $5,100. The minimum loan amount in GA is $3,100.

OneMain

Unlike bad credit loans or payday loans, which may disregard your credit history
but require full repayment when you receive your next paycheck, OneMain Financial allows you to make installment payments over time. For bad credit borrowers, OneMain is an option, but it comes with high starting rates of 18.00% and may charge an origination fee. Borrowers can get fast funding and free credit score access, and they also offer a co-sign option. OneMain does charge a fee for late payments and a return check fee.

Loans from OneMain can be used for debt consolidation, home improvements, auto refinance, wedding financing and more. You can also apply for a secured loan with a car title or other collateral. That option may get you a lower interest rate for the term of your loan. If you have bad credit and are shopping for a loan with fast approval, OneMain might be a great option.

OneMain Disclosure

NetCredit

NetCredit offers personal loans from Enova International that have much higher interest rates than many lenders, starting at 34% and soaring to 155% APR. Borrower’s APR will depend on their credit score, with a minimum score of 500. To qualify, you must also meet their minimum annual income requirement of $20,000 or higher.

Since only 14 states offer NetCredit loans, you’ll have to check prior to applying to see if they are available where you live. NetCredit does charge an origination fee of 5% of the loan amount and may charge a late payment fee, it does not charge a prepayment fee. NetCredit does offer fast funding, typically within three days of approval, and your loan can be used for anything from home improvements to debt consolidation, medical expenses and more. Because of its high APR range, NetCredit should be used in dire circumstances for fast funding by borrowers with low credit scores. Furthermore, loans from NetCredit should be paid off as soon as possible to avoid high interest stacking up on what you owe.

OppLoans

Like NetCredit, OppLoans interest rates on personal loans are substantially higher than many lenders, with numbers ranging from 59% to 199%. However, its website advertises that 199% APR is still better than the average 400% APR that accompanies traditional payday loans. Credit scores and credit history play a big part in what rate you’ll be charged. Loan amounts range from $500 to $5,000, and borrowers can use loans for home improvement projects, unexpected expenses, weddings and more.

With loan terms ranging from 9 to 24 months, borrowers can also opt for longer terms to take on larger amounts while keeping payments affordable. OppLoans does charge an origination fee of between 0% and 3%, and a late payment fee of $10. Applicants must have a credit score of at least 350 to qualify, and a minimum income of $18,000 or higher.

OppLoans also doesn’t charge a prepayment fee, which means if you choose to pay off your loan early, you won’t be charged. What’s more, if your loan is approved, you can expect funds to be in your account within three days.

Applicants must be 18 years of age to apply. Not all applications are approved. Applications processed and approved before 7:30 p.m. ET are typically funded the next business day. In some cases, we may not be able to verify your application information and may ask you to provide certain documents. Some customers applying for a loans may be required to submit additional documentation due to state law and qualification criteria. Please note: This is an expensive form of credit. This service is not intended to provide a solution for longer-term credit or other financial needs. Loans made or arranged by Opportunity Financial are designed to help you meet your short-term borrowing needs. Other forms of credit may be less expensive and more suitable for your financial needs including, but not limited to: borrowing from a friend or relative, home equity line of credit, existing savings, credit card cash advance. This website contains numerous testimonials from past clients. Testimonials provide the perspective of individuals who are enthusiastic about their experience, and therefore are not representative of everyone’s experience. Individual results will vary. Testimonials may be edited for clarity or brevity. No one has been paid to provide a testimonial. Please do not make any credit decisions or any financial decisions based solely what is said in the testimonial.

Best Personal Loan Companies: Summed Up

LENDER	APR	LOAN TERM	MIN. LOAN	MAX. LOAN
Avant	9.95% – 35.99%	2 to 5 years	$2,000	$35,000
Prosper	6.95% – 35.99%	3 to 5 years	$2,000	$40,000
OneMain	18.00% – 35.99%	2 to 5 years	$1,500	$20,000
LightStream	3.99% – 16.79%	2 to 7 years*	$5,000	$100,000
Upstart	5.69% – 35.99%	3 to 5 years	$1,000	$50,000
Marcus	6.99% – 28.99%	36 to 72 months	$3,500	$40,000
SoFi	5.99% – 17.88%	2 to 7 years	$5,000	$100,000
LendingClub	6.95% – 35.89%	3 to 5 years	$1,000	$40,000
OppLoans	99% – 199%	9 to 36 months	$500	$4,000
Upgrade	6.98% – 35.89%	3 to 5 years	$1,000	$50,000
NetCredit	34% – 155%	6 to 60 months	$1,000	$10,000

Unsecured loans vs. secured loans

Before you take out a personal loan, you should know there are two main types – secured and unsecured.

With an unsecured loan, you can borrow money without putting down any collateral. A secured personal loan, on the other hand, is backed up by an asset the bank can seize if you don’t repay — such as your car or home.

If you need to borrow money, understanding how these types of loans differ is key to choosing the best loan for your needs. Keep reading to learn how each loan type works, and which might be best for your situation.

Understanding unsecured loans

Because unsecured loans don’t require collateral that can be repossessed in the event of a default, lenders rely on something else to protect themselves from delinquent borrowers – your credit score.

Typically speaking, unsecured loans are mostly available to individuals with good credit and a solid credit history. The other important detail to understand is how flexible unsecured loans are. Since they aren’t backed with collateral, you can take out an unsecured loan for any reason.

If you stop making the payments on your unsecured loan, your lender won’t have an asset – or collateral – to collect as an alternative form of repayment. Instead, they can place negative marks on your credit report and pursue repayment via a collections agency. If you still refuse to pay, your lender can even take you to court and sue you for your remaining balance plus interest and fees.

Benefits of an unsecured loan:

• You don’t have to put down collateral to qualify.
• Unsecured loans are readily available through online lenders and traditional banks and credit unions.

Unsecured loan drawbacks:

• Since unsecured loans don’t require collateral, lenders tend to charge higher interest rates and fees to account for the greater risk.
• You usually need at least decent credit or better to qualify for an unsecured loan.

How secured personal loans work

We already mentioned that secured loans require collateral, but the type of collateral you put down depends on the type of loan. While loans can certainly vary, most lenders require collateral in the form of your home, your car, or your savings (for example, a certificate of deposit or savings account).

When people make large purchases like a home or a car, they often take out secured loans to do so. When you get a mortgage to buy a home, for example, your house serves as collateral — if you default on your mortgage, the lender can try to foreclose on the home to recover its losses. The same is true when you take out an auto loan to purchase a vehicle: Your loan is secured by the car you buy.

Other secured loans take place after a purchase is made. If you have equity in your home, for example — meaning it’s worth far more than what you owe on it — you can take out a home equity line of credit (HELOC) and use your home equity as collateral. Likewise, if you have some equity in your car, you can take out an auto title loan or auto equity loan and use your car as collateral. In both of those cases, the lender would hold the title to your car until the loan is repaid.

No matter which type of secured loan you choose, your lender can seize the asset you put down as collateral if you quit repaying your loan. In the case of a secured loan where your car is the collateral, the lender may send someone to repossess your vehicle. In the case of a secured home loan, they may proceed against you in court and begin the foreclosure process.

Benefits of a secured personal loan:

• Since secured loans require collateral, banks may consider them lower risk and charge lower interest rates.
• Because the collateral lessens the lender’s risk, you may be able to qualify for a fair or even poor credit loan.

Secured loan drawbacks:

• Offering an asset as collateral means you’re putting your own possessions on the line — and if you quit paying on your loan, your asset will be seized.
• You have to give up the title of your car or home until your loan is repaid if you’re using the asset as collateral.

When you should use a personal loan

Before you pull the trigger on a personal loan, you should make sure you understand how a loan could benefit you or hurt you. Here are some signs taking out a personal loan may be perfect for your needs:

You want to borrow money with a fixed interest rate and fixed monthly payment.

One of the biggest benefits of personal loans is the fact they offer a fixed repayment schedule and a fixed interest rate. This means you’ll be able to agree to a set monthly payment ahead of time, and you’ll never be surprised by a larger-than-usual bill.

If you need to borrow money but don’t want any surprises along the way, a personal loan may be exactly what you need.

You need to borrow money for a specific purpose and pay it down over time.

While you can use the funds from a personal loan to cover any expense you want, these loans are best for people who have a big expense they need time to pay off. This could include surprise medical bills, a new motor for your car, or a roof you had no idea you would need to replace this year.

With a personal loan, you can borrow a set amount of money then pay it back over several years. Most personal loans are offered in amounts up to $35,000, and your interest rate could be as low as 3%, depending on your creditworthiness.

You’ve used a personal loan calculator to figure your new monthly payment, and you’re sure you can afford it.

Just because you qualify for a personal loan, that doesn’t mean you can afford it. Before you take out a personal loan, you should use a loan calculator to find out your future monthly payment based on how much you want to borrow and the interest rate you can qualify for.

From there, you can take a look at your budget and expenses to see if the loan payment stretches you too thin. If it does, you should probably hold off on getting a personal loan — at least for now.

Your credit is in good shape, so you can qualify for a loan with an attractive rate and loan terms.

While it’s possible to qualify for a personal loan if you have poor credit or a thin credit profile, you’ll pay a much higher interest rate for the privilege of borrowing. How much? Some personal loans for people with bad credit come with an APR of over 35%.

If you have bad credit, you may want to put off your personal loan until you can take steps to boost your credit score. Start by getting any late bills you have up to date and make sure you make all your other monthly payments on time. Paying down debt and credit card balances can also have a marked effect on your credit since your utilization makes up 30% of your FICO score.

If you need access to credit to improve your credit score, you can also consider a secured credit card or a credit builder loan.

You want to consolidate high-interest debt into a new loan at a lower rate.

One of the best uses of a personal loan comes into play when you have a lot of high-interest debt. Of course, this is mostly just true if your credit is good enough to qualify for a personal loan with a great APR.

If you consolidate high-interest debt into a new personal loan with a lower, fixed interest rate, you’ll start saving money right off the bat. Going from several payments to just one each month can also simplify your finances and make debt repayment that much easier to bear.

When you should skip personal loans

While any of the reasons above are good ones if you want to take out a personal loan, there are plenty of reasons to skip personal loans — or any other type of loan — altogether. There are also scenarios where a different financial product would be more beneficial.

Some of the reasons a personal loan may not be for you include:

You’re struggling to keep up with your debts and need more cash to stay afloat.

If you’re struggling to make payments on credit cards, student loans, or other bills, chances are good borrowing more money will not help. In fact, borrowing more cash just to stay on top of your expenses could lead to a debt spiral in a hurry. After all, adding one more monthly payment to your life is probably a bad idea when you can’t keep up with the payments you already have.

If you’re truly struggling to keep the lights on as it is, it’s probably wise to take a holistic look at your finances before you borrow money. Consider where you could cut to improve your cash flow and whether you need to switch to a bare bones budget for a while.

If you can cut your spending in any way, you may be able to improve your financial situation without borrowing more.

You need money to fund college tuition.

While there’s nothing wrong with borrowing money for college, a personal loan is rarely the best deal. Most borrowers would be a lot better off taking out federal student loans to pay for school since they offer lower fixed interest rates and federal protections like deferment and forbearance.

Federal student loans also qualify for income-driven repayment plans that come with low monthly payments and, in some cases, eventual forgiveness of your loans after 20 to 25 years.

You want to splurge for a vacation or new furniture.

If you want to splurge for something expensive, borrowing money could leave you in a world of hurt. A vacation to Hawaii may sound like something you won’t regret borrowing for. However, paying off that trip for the next several years would surely change your tune three or four years afterward.

There’s nothing wrong with splurging, but you should try to save up the money to pay in cash if you want to treat yourself. Trust us; buying something you truly want is a lot more fun when you pay with money you already have.

You want to refinance a small amount of debt.

We already mentioned how a personal loan can be used to consolidate high-interest debts into a better financial product. However, this is mainly true when you have a lot of debt to refinance and need several years to pay it down.

If you only owe a small amount of debt you could pay down in a few years or less, you may be a lot better off with a balance transfer card. Balance transfer cards offer 0% APR on balance transfers for up to 21 months. Some even come without any balance transfer fees, which can help you pay down debt without any additional costs.

You want to remodel your home.

If you want to remodel your home, a personal loan can absolutely work. Still, you should also consider a home equity loan. These loans work similarly to personal loans in that they offer a fixed interest rate and a fixed monthly payment for a specific set of time. The difference is, home equity loans are secured — meaning your home acts as collateral, making it less risky for the lender — so they usually offer lower interest rates than you can get elsewhere.

Another option is a HELOC, or home equity line of credit. These loans work as a line of credit you can borrow against, and they tend to come with variable rates. Once again, rates on these loans tend to be lower since you’re using your home as collateral.

Fees for both home equity loans and HELOCs tend to be low, but you should watch out for origination fees and closing costs. Also keep in mind that some home equity loans and HELOCs are offered with no fees and extremely low rates.

Do You Need Good Credit to Get a Loan?

If you want the best interest rates, then yes, you need a good credit score, but it is possible to find a willing lender even with poor credit. You will likely end up paying higher interest rates in order to lessen the lender’s risk. In that case, only take out a bad credit loan if you’re confident you can pay back the money quickly. If you’re not interested in working with a company who provides personal loans for people with bad credit, you can try going directly to your bank or a credit union for a personal loan.

When trying to secure a loan with bad credit, keep this one tip in mind: If it sounds too good to be true, it probably is. For example, a company willing to hand over a large amount of money without even checking your credit score is likely a payday lender. You could find yourself with an interest rate in the triple digits that leaves you in a debt trap you can’t escape. Taking out a personal loan with a high interest rate negates the benefit of even having the loan in the first place.

If you’re only a few credit score points away from a lower rate tier, we recommend doing what you can to raise your score into the next tier before securing a loan, though in some situations, waiting might not be an option. If you do have the luxury of time, the following tips can help boost your credit score quickly.

4 Tips for Finding the Best Loan

1: Compare several offers.

Never sign on the dotted line with the first place you look. Each lender will have a slightly different formula when considering your application, which means your interest rate will vary from one lender to the next.

2: Watch out for fees.

Make sure you know whether there are fees associated with your personal loan other than the interest you’ll pay. One of the most common charges is an origination fee, which can range from 1%-8% of your loan total. Also 

3: Choose the right loan term.

Ask how flexible your lender is on loan terms. Some online lenders may only let you choose between three and five-year terms. Term is important because it affects how much you ultimately pay over the life of the loan. A longer term can help keep your monthly payments lower and more manageable, but it means you’ll be paying more in the end. On the flip side, a shorter term will mean higher payments, but you’ll pay out less in interest overall.

4: Beware of loan scams.

There’s no shortage of unscrupulous lenders looking to scam potential borrowers. Here are a few tips that will help you avoid scams and make sure you’re dealing with a legitimate company: Don’t pay upfront fees. Don’t pay to apply for the loan. You should feel in control. Take your business elsewhere if a lender threatens you in any way, tries to dissuade you from considering competitors’ offers, or tries to get you to borrow more than you owe.

The Bottom Line

All in all, finding the best personal loans and getting the money you need can go a long way toward helping you achieve your financial dreams. Whether your goal is to finally fix your roof, to get out from under the thumb of onerous credit card debt, or to take any other positive step on the road to financial freedom, a cash infusion from a personal loan can help you build a better future.