Mortgage rates are rising – and thanks to Federal Reserve action, so are credit card rates. But the average personal loan rate is falling, according to Credible.com.
Last week, the average rate for qualified borrowers – those with a credit score of at least 720 – fell from 0.17% to 10.85%. In contrast, the average credit card rate for new accounts was 18.32% last month.
A personal loan is normally used to make a large purchase or to consolidate high-interest debt, such as credit cards. The borrower seeks a specific amount of money which is repaid over a specified period of time with a fixed monthly payment.
Unlike a mortgage, which can only be used to buy a home, or a car loan, which can only be used to buy a vehicle, personal loans can be used to buy a variety of things. This is why they have become a popular type of loan since their introduction.
Cheryl Ann of Kalispell, Montana turned to personal lender Best Egg late last year to get out of high-interest debt.
“With the stress of Christmas and moving into a new house, the credit card bills are piling up and resulting in spending $800 a month just to pay the credit card bills,” Cheryl Ann wrote in an article. ConsumerAffairs magazine. Best Egg took that stress away with a personal loan. Something I can manage and get rid of my debt. The process was simple.
Income and good credit are important factors
The rate charged by lenders for a personal loan is determined by several factors, including income. But the borrower’s credit rating is an important factor. The higher the credit score, the lower the interest rate.
For example, Experian says a borrower with “super-prime” credit — a score between 781 and 850 — could get a rate as low as 6.59%. Someone with “deep subprime” credit – a score between 300 and 499 – would pay a rate of 15.3%, which is lower than many credit card rates.
This is why it is beneficial for borrowers to work on improving their credit score before applying for a personal loan or any other type of loan. The easiest and most productive step is to pay all bills on time each month. Consumers who reduce their credit card debt, which will increase their amount of available credit, will also see an increase in credit scores.
It’s also a good idea to get a copy of your credit report from all three agencies — Experian, Equifax, and TransUnion — and look for incorrect information that could lower your score.