- The Ascent
- Best Personal Loans for 2020
Best Personal Loans of January 2021
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The best personal loans have the perfect combination of low interest rates, terms that fit your budget, and excellent customer service. These are some of the things we look for as we scour the market to find the best personal loan lenders.
If you're like most people, you'll have a lot on your mind as you try to decide on the personal loan that's right for you. In addition to whatever it is you need (or want) to fund, you may wonder about the best rates on personal loans, how to know when you've found the right deal, and whether there's anything about new loans that you should know before signing on the dotted line.
If you're considering a new loan in 2020, you're in the right place. We heavily researched hundreds of personal loan options to bring you the best offers on the market today.
The Ascent's picks of the best personal loans for January 2021:
- Reducing high interest debt: Upstart
- Borrowers with good credit: LightStream
- Low overall APR: Marcus
- Low APR for borrowers with high income: SoFi
- Reducing high-interest credit card debt: Payoff
- Borrowers with poor credit scores: Avant
- Diverse offerings: FreedomPlus
- Debt consolidation: Discover Personal Loan
Ratings Methodology
Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. The availability of a loan offer and the terms of your actual offer will vary due to a number of factors, including your loan purpose and our evaluation of your creditworthiness. 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). Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.
Best for Reducing high interest debt
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Minimum credit score: 580
Upstart
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Upstart was started by some former Google employees in 2012 and it immediately became a unicorn in the personal lending industry. Young borrowers with little credit history (but plenty of earning potential) suddenly had access to a lender that took their applications seriously. That's because Upstart's underwriting process is unique -- it takes things like education and career history into account, as well as other factors unrelated to credit score. Read our Upstart review to learn more.
Best for Borrowers with good credit
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Minimum credit score: 660
LightStream
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
LightStream's lowest interest rate currently sits at an impressive 3.49%. That fact alone was enough to get this highly flexible lender onto our best loans list. Not only does LightStream offer a wide range of terms, but they also promise no fees or prepayment penalties. Read our full LightStream review to learn more.
Best for Low overall APR
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Minimum credit score: 660
Marcus
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Marcus (a division of Goldman Sachs) targets its products to consumers with good credit scores and plenty of credit history. Marcus offers flexible terms, no prepayment, origination, or late fees, and one of the lowest interest rates on the market. For borrowers with excellent credit, the interest rate can be as low as 6.99%. Read our full Marcus by Goldman Sachs review to learn more.
Best for Low APR for borrowers with high income
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Minimum credit score: 660
SoFi
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
For those with excellent credit, SoFi offers personal loans at interest rates as low as 5.99%. Equally impressive is the fact that if you sign up for SoFi's AutoPay interest rate reduction, its highest interest rate tops out at 16.19%, far below most of its competitors. Given that SoFi's average borrower earns more than $100,000 per year and has a credit score over 700, it's no wonder that they offer unemployment protection and don't charge origination fees. If SoFi sounds like your kind of lender, read our full SoFi review to learn more.
Best for Reducing high-interest credit card debt
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Minimum credit score: 640
Payoff
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Payoff is a peer-to-peer lender that issues loans to those looking to get out of credit card debt. Its interest rates are as low as 5.99%, and it offers loans of up to $40,000 for terms of two to five years. If you are saddled with high-interest credit card debt, you may benefit from Payoff's personalized service, which will walk you through the journey out of debt. Read the full Payoff review to learn more.
Best for Borrowers with poor credit scores
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Minimum credit score: 580
Avant
Rating image, 4.0 out of 5 stars.
4.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Avant is designed for borrowers who may have trouble securing a personal loan through other lenders. Not only is the minimum credit score relatively low, but Avant offers a fast loan approval time. Read the full Avant review here.
Best for Diverse offerings
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Minimum credit score: 640
FreedomPlus
Rating image, 4.0 out of 5 stars.
4.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
According to FreedomPlus, the minimum credit score needed to qualify for one of their personal loans is 640. If you are approved, the lender has no hidden fees and quick funding times. Read our full FreedomPlus review to learn more.
Best for Debt consolidation
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Minimum credit score: 660
Discover Personal Loan
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Borrowers with high-interest debt have up to seven years to pay it off by consolidating through a Discover Personal Loan. The downside to repaying a loan over a long period is that you will pay more in interest overall. However, this loan may be the perfect solution for a borrower who wants to keep their monthly payments low in order to live within their budget. Read our full Discover personal loan review to learn more.
Let's treat this like the most practical finance class ever and cover the basics of personal loans to help you weigh your personal loan options.
What is a personal loan?
A personal loan is money borrowed from a bank, credit union, or online lender in a lump sum. The best loan rates are usually offered to borrowers with the highest credit scores. The loan is repaid in monthly installments over a set period of time, referred to as the "loan term." While other loan types are used to pay for specific purchases, like a home or vehicle, the best unsecured personal loans can be used for a variety of purposes.
When is a personal loan a good option?
Personal loans are a good idea when you have a clear purpose in mind. For example, the top personal loans can provide a smart, convenient way to pay for repairs to your home or remodeling your house. If you need a loan now, look for one with a streamlined approval process. The very best personal loans of 2020 offer streamlined approval, minimizing the time you have to wait for funds to be deposited into your bank account. That means if you run into a financial roadblock, a personal loan can help you over it.
TIP
Coronavirus hardship loans
If your income was cut due to the coronavirus pandemic, you might qualify for a coronavirus hardship loan.
These are small, low-interest loans designed to help people make ends meet during the pandemic. They can be used to pay rent, buy food, pay off medical bills, or cover other expenses. To find one, you can reach out to one of the lenders on this list, or you can call your bank or credit union and ask about their loan options.
For more information, read our guide to getting a coronavirus hardship loan.
What should I look for in a personal loan?
There is a wide range of personal loan options available, and that's why it pays to know what will benefit you the most. Whether you enjoy excellent credit or are specifically looking for loan options for bad credit, at their core, the best personal loans have three things in common.Â
Here's what you should look for:
- Low interest rate: The best personal loan lenders offer rates that save you money over the life of the loan. Let's say you need to replace the roof of your house and it's going to cost $20,000. Lender A offers an interest rate of 5.5%, and Lender B offers 6.9%. On a five-year loan, your monthly payment through Lender A would be $382, while it would run to $395 with Lender B. The higher interest rate will only cost you an extra $13 per month, but that small difference amounts to $780 over the life of the loan.
- Loan terms that work for you: There is a sweet spot when it comes to personal loans. A longer repayment term usually means a lower monthly payment but the interest rate may be higher and you'll pay more overall. For example, you might find a great rate, but only if you can pay it back in 36 months. If that cuts your budget dangerously close, you might have to turn it down. On the other hand, you don't want the repayment term to be stretched out for too long because the longer it takes you to repay a loan, the more you will pay in interest. The shortest term with the most affordable payment is your personal loan sweet spot.
- Low fees: The best personal loan rates mean little if they are coupled with expensive fees. For example, many lenders charge origination fees to cover the cost of processing and distributing your loan. Origination fees range from 1% to 8% of the amount you borrow. Using the scenario above, if you borrow $20,000 to replace a roof, that means you could pay between $200 and $1,600 in origination fees alone. Some of the best personal loan lenders charge no origination fees and keep other costs, like prepayment and late fees, to a minimum.
How to get a personal loan
When you apply for a personal loan, it helps to be prepared. Whether you want to work with a traditional bank, credit union, or peer-to-peer lender, here are the steps to take:
- Check your credit score. The higher your score, the better the personal loan rates and terms you will qualify for. Visit AnnualCreditReport.com to receive a free report from all three credit bureaus -- Experian, TransUnion, and Equifax. If you are confident that your credit is high enough to qualify for the best personal loan rates, move on to step #3.
- Improve your credit score. If you can get by without a personal loan in the short-term, take the time to improve your score. It could save you thousands of dollars as you'd be able to access the very best loan personal rates. As many as 1 in 5 people find errors in their credit reports, so the first step toward improving your score is to go over your credit reports with a fine-tooth comb. You can also increase your score by paying down debts to reduce your debt-to-income ratio (DTI), using credit only when necessary, and creating a budget that prioritizes debt reduction.Â
- Gather the items you will be asked to provide. These include identification, proof of income, where you want the money deposited, and how much you want to borrow for your personal loan.
- Apply for the loan that best meets your needs. For example, if you need $2,000 for car repairs, look for a lender that offers small loans. If you want to consolidate debt, search for a lender that specializes in consolidation loans and can make the process easier.
Pre-qualifying for a personal loan
Take the opportunity to pre-qualify with several different lenders. If you qualify, lenders will let you know how much you can borrow, the interest rate you will be charged, and how long you will have to repay the loan. Compare pre-qualification offers carefully. If you do not qualify, you can learn what you need to do to improve your odds of getting a personal loan.
What are the alternatives to personal loans?
The best personal loan lenders offer great loan products at a low interest rate, but they are not the only game in town. If you need money to fund a project or pay an unexpected expense, here are two other options:
Credit cards
A credit card can provide fast cash in an urgent situation. If you qualify for a card with a 0% APR introductory offer, you have months (generally between 12 and 18) to pay the debt off with no interest. One caveat: Never use a credit card with a 0% transfer offer unless you are confident you can pay it off in full before the promotional rate expires and the interest rate shoots up to its standard rate.
Secured line of creditÂ
A secured line of credit can help you snag the best rates for personal loans. That's because a secured line of credit requires you to risk something of value as collateral. It may be your car, home, boat, jewelry, or other property of value. The lender typically charges a lower interest rate because it knows that if you default on payments it can repossess whatever you used as collateral and recoup some of its money.
All financial decisions -- including whether to take out a personal loan -- can have serious implications. Take time to decide if a new loan fits comfortably within your budget before rate shopping the best personal loan for you.
Other personal loans to compare
We recognize that not every one of our best personal loans picks will be right for everyone. Which is why it may be important to also consider quality picks that didn't land a spot on this list. Here are several more picks that may suited to your needs:
- LendingPoint review: Good for people with low credit scores
- Upgrade review: Good for debt consolidation and people with fair credit
- Wells Fargo Personal Loans review: Good for low APRs for Wells Fargo customers
To recap, here are the best personal loans for 2020:
FAQs
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A personal loan is money you borrow in a lump sum and pay back in regular installments. Unlike an auto loan or a mortgage, a personal loan can be used to pay for a variety of things.
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The ideal personal loan combines a low interest rate, reasonable repayment terms, and low fees.Â
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The best rates are offered to the most qualified borrowers. Ensure that your credit report is correct and your credit score is high enough to qualify for the loan you want. Remember that lenders will calculate your debt-to-income (DTI) ratio, so keep your debts low in relation to your income. Be prepared to provide supporting documentation, like ID and proof of income. Know how much you need to borrow and where you want the funds deposited.Â
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Yes, depending on your situation. If you're struggling to make ends meet because of the pandemic, you might qualify for a coronavirus hardship loan. See our guide to coronavirus hardship loans for more information on this type of loan.
About the Author
Dana has been writing about personal finance for more than 20 years, specializing in loans, debt management, investments, and business. Her work has appeared on San Jose Mercury News, The Detroit News, Oakland Tribune, and Dun & Bradstreet. After moving around the globe, she's thrilled to be living in her hometown of Kansas City.
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