Do Personal Loans Have Penalty APRs?

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When you make your late credit card payment, you are often subject to late fees and an APR penalty, which is a temporary increase in your interest rate.

American Express’s Blue Cash Preferred® card, for example, has a variable APR of 13.99% to 23.99% (after a 12 month introductory period at 0% APR), but the APR penalty is an APR. variable of 29.99% (see prices and fees). Penalty APRs typically last at least six months, but card issuers often reserve the right to extend them, especially when you continue to make late payments. A look at the conditions of the Citi® Double Cash Card shows us that the “Penalty APR may apply indefinitely”.

Penalty APRs certainly aren’t a trap you want to fall into, but they’re usually not something you need to worry about if you have a personal loan. Personal loan lenders can, however, charge a late fee of up to $ 39 per late payment. Whether your loan has late fees depends on the quality of the loan you qualify for, and it depends on your credit score, your borrowing history, and your ability to make your payments.

Personal loans also tend to charge lower interest rates than credit cards. The average personal loan interest rate for two-year loans is currently 9.46% according to the Federal Reserve’s first quarter 2021 data, compared to 15.91% for credit cards.

Typically, interest rates for personal loans are around 2.49% to 24%, but personal loans for applicants with bad credit can have an even higher APR – so do your research before you apply. .

Other ongoing charges related to personal loans include:

  1. The interest: The monthly fees you pay to borrow money
  2. Original costs: One-time upfront fees that your lender subtracts from your loan to pay for administration and processing fees
  3. Late charge: One-time fee charged for each payment you fail to make by your due date or within your grace period
  4. Prepayment penalty: Fees incurred when you pay off your balance faster than expected (because the lender misses months of expected interest payments)

As you can see, personal loans can be expensive even without an APR penalty. It is obviously best to avoid paying additional charges whenever possible. This is easier to do when your credit rating is good to excellent because you will qualify for better loan options.

Select has a free tool to help you match up with personal loan deals without hurting your credit score.

None of the loans on our best personal loan list charge origination fees or prepayment penalties, but some may charge late fees.

Our top picks for the best personal loans

For pricing and fees for the American Express Blue Cash Preferred® card, click here.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.

About Judith J. George

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