Best Personal Loans of June 2023

A personal loan is when a borrower receives money from a lender and has to pay it back in monthly installments.

It’s best for borrowers who have a plan on how to spend the money and repay it. Whether you have excellent credit or bad credit, the best personal loans listed below can be great for meeting your financial goals.

To get the best rates from loan companies, follow these three steps:

1. Maintain a high credit score. A FICO® Score of at least 720 is normally enough to qualify for the lowest personal loan interest rates.
2. Get a cosigner. If your credit score is not high enough to qualify for a good interest rate, a personal loan cosigner with an excellent credit score can help you get a better interest rate.
3. Shop around for the best rate. Consider looking at traditional banks, credit unions, or even online personal loans. Do your research to find a lender that is offering the best personal loan rates. Many have an online prequalification tool that will give you a rate without hurting your credit score. In some cases, lenders will offer promotions and limited-time discounts.

If you know how you're going to spend the money and have a plan to repay it, a personal loan can be a good tool for accomplishing your goals. Most lenders don't care how you spend the money, as long as you pay it back as promised.

If you need the money quickly, make sure to check the lender's approval and funding timeline. Many lenders offer next day funding, and some even offer funding as quickly as the same day you're approved. The best loans like these can help you overcome financial roadblocks, even when you need fast cash.

Let's compare personal loan rates. Say you need to borrow $20,000 to replace the roof of your house, and you plan to get a loan with a five-year term. You're considering two options: Lender A and Lender B. Below, we've summarized these two imaginary lenders and how their interest rates would impact the cost of your loan. Even a small percentage change can result in significant savings. It's clear that the lender offering the lower interest rate can save you money over the life of the loan. These are funds you can use in some other way, like investing for your future.

You may only pay an extra $13 per month for a loan from Lender B, but that small difference costs you $780 more over the life of the loan. For help finding low interest personal loans, check out our guide to good interest rates for personal loans.

What if I have bad credit?

You will likely pay a higher interest rate for a personal loan. If this is your situation, you have two options. You can take steps to raise your score and wait until it's in better shape before applying for a loan. The second option is to get a loan now, then refinance your personal loan later (when your credit score is higher and you can get a better rate).

While personal loans can be used for anything, the key is to use them to improve your financial wellbeing. Here are some of the best reasons to get a personal loan:

• Debt consolidation: Credit cards generally have higher interest rates. A personal loan can be used to consolidate your higher-interest debt to a lower-interest loan.
• Home renovations: Certain home renovations can increase the value of your home. If you have equity in your home, a home equity line of credit may be a better financing option.
• Career advancement: Paying for professional certifications, education, and training can boost your career prospects and opportunities for promotion or a higher-paying job.
• Unexpected expenses: People should have an emergency savings account that has three to six months of expenses. If you don't, a personal loan can help cover a family emergency or help you recover from unexpected and expensive inconveniences.

Personal loans have higher interest rates than secured loans and if not used properly, can just increase your debt payments. It may be better to cut expenses or find additional ways to increase your income rather than take out a personal loan. These are reasons you should not use a personal loan for.

• Extravagant vacations: A short-term trip can lead to long-term consequences. A personal loan should not be used to fund an elaborate vacation if the loan can't be paid back.
• Celebrations (weddings/birthdays/graduations): If you can't afford to pay the loan back, you shouldn't get a personal loan for events that only last a day. Celebrations generally are planned out in advance, so it is better to save up for it.
• Extra spending money: Taking out a personal loan to raise your standard of living is not a good idea. You should avoid a lifestyle your current finances can't support.

No matter where you apply to get a personal loan -- a bank, credit union, or an online personal loan lender -- the application process is the same.

Here are the steps to take:

Gather documents

No matter where you apply, the lender is likely to ask for the same documents. Getting them together before you apply can streamline the process and save you a great deal of stress. Here's what you need:

• Proof of identification
• Proof of address
• List of monthly expenses
• Evidence of how much your collateral is worth (if you're applying for a secured personal loan)

Whether it's a secured personal loan or an unsecured personal loan, the lender may ask about the purpose for the funds -- some personal loans are designated for specific purposes, like those to help consolidate existing debt, but those loan types are relatively uncommon.

Shop lenders

Take the time to shop for the best lender. Lenders make loan decisions based on a "soft" credit check, which has no impact on your credit score. This soft credit check gives the personal loan lender a sense of your credit history, including credit card debt and other debt (like an outstanding installment loan). If your credit score is not quite perfect, look for lenders that specialize in personal loans for fair credit or personal loans for bad credit.

Don't leave any gaps -- fill out the entire loan application and provide the lender with all documents requested. If you do this, it should not take long to hear whether your loan has been approved. Some of the best lenders let you know within minutes if your application has been approved.

Compare loan offers

Compare loans of the same type side by side. If you have applied for unsecured loans, compare them only to other unsecured loan offers. And if you've applied for secured loans, compare them only to other secured loan offers.

Here's what to look for:

• The lowest annual percentage rate
• A repayment term that fits your budget
• Loan amounts that match your borrowing needs
• Lowest loan fees (ideally, you'll find a loan with no origination fee or prepayment penalty)
• Perks like loan deferment when you're unemployed

Commit to a lender

A lender does not run a "hard" credit check until you let them know you want to proceed with a loan. So if you applied with five banks, only the bank you choose to work with runs a hard credit check.

A hard credit check is a deeper dive into your credit history, and helps the personal loan provider make sure a borrower meets their minimum credit score requirement and has paid bills on time. Although the hard credit check may decrease your credit score, it's typically by less than five points. After a few months of regular payments, your score should rebound to its pre-loan level.

Note: If a low credit score means you don't receive a loan offer that works for you, consider taking time to improve your credit score. Boosting your score can only help you in the long run. Small changes like reducing your credit utilization, paying bills on time, and only applying for credit when needed can help raise your FICO® Score.

Sign loan documents

Whether you're working with an online lender or a brick-and-mortar financial institution, most lenders allow you to sign documents electronically. Read through the documents thoroughly before signing. Once you've signed, you're legally committed to whatever is written inside the four corners of the contract.

Wait for loan funding

Funds usually hit your bank account one to 14 days from the time of loan approval. If you need the money quickly, ask lenders about their fund distribution times as you shop for the loan. If you can't wait, make sure to work only with a lender that promises a quick distribution of funds.

If your personal loan is denied, the first step is to find out the reason. Typically, you will be denied if your credit score does not meet the minimum qualifications. You may have negative items on your credit report, not enough credit history, or high credit card balances. Another reason may be that your income doesn't meet the minimum requirements or your debt-to-income ratio is too high. There are other factors that could impact loan approval, such as your employment history, cash flow history, and available assets.

If you are denied, work on improving your credit history and credit score. Making on-time payments makes up the bulk of your credit score. Keep your credit card balances and utilization low. Pay down your credit card debt and ask your credit card company to raise your limits to help with your utilization. Avoiding too many hard inquiries can also improve your credit. After you have increased your credit score, you will be in a better position to qualify for a personal loan.

Personal loans are not for everyone. Depending on your circumstances -- for example, if you need money to fund a project or pay an unexpected expense -- you may want to look at other options.

Here are two alternatives to personal loans:

Credit cards

A credit card can provide fast cash in an urgent situation. If you qualify for a 0% APR credit card, you have months (typically 12 to 18) to pay off the debt with no interest. Only use a credit card with a 0% transfer offer if you're confident you can pay it off in full before the promotional rate expires. At the end of the promotional period, the interest rate shoots up to its standard rate, and you could get stuck trying to pay down debt as high interest piles on top.

Secured line of credit

A secured line of credit can help you snag the best rates for personal loans. When you take out a secured line of credit or secured personal loan, you typically pay a lower interest rate because you put up something of value as collateral. This may be anything of value, such as your car, home, boat, or jewelry. A line of credit offers greater flexibility. You can borrow up to your credit limit, depending on what you need, and you only pay interest on the amount you borrow.

Online personal loan companies rarely offer secured lines of credit, so if that's the route you choose, plan on working with a brick-and-mortar bank or credit union.

Since personal loans typically have higher interest rates, you want to pay them off as fast as you can. You will pay less interest and have more peace of mind if you don't have potentially tens of thousands of dollars to pay back. Here are some simple tips to help you pay back your personal loan faster without breaking the bank. Make sure you check with your lender to see if there are any penalties for paying off your personal loan early.

1. Make bi-weekly payments. Most loans require you to make monthly payments. Instead, make a half-payment every two weeks. By doing this, your payments will be applied to the principal more often, so you end up paying less interest over time. Also, by making payments on your personal loan every two weeks, you will be making 26 total payments. This translates to one whole extra payment a year. This can shorten your loan payoff by months and in some cases years.
   
2. Make an extra payment. If your lender will not allow you to split your loan payments, make an extra payment every year. Use a bonus, tax refund, or extra income for the extra payment. If the amount is too much to pay it at once, divide it by 12 and add it to your monthly payment to spread it out over time. The more money you are able to pay towards the loan the faster you can pay it off. Consider getting a side hustle, selling things you don't need, or cutting your expenses to put extra money towards the loan.
   
3. Round up your monthly payment. Round up your loan to the nearest $50 dollars. For example, if your loan payment is $230, round up to $250. For an even bigger impact, you could round up to the nearest $100. In this case, it would be $300. The extra amount may be small enough to not impact your budget, but it would help you pay down your personal loan sooner.
   
4. Refinance your loan. If you have a high interest rate on your loan, look to refinance to get a better rate. Your credit score may have improved since you got the loan. Shop around to find the best rates.

If you look through our loan suggestions but don't find a loan that fits your needs, don't worry. No loan fits every borrower or every set of circumstances. Here are a few others to consider:

• LendingPoint: Good for people with low credit scores
• Upgrade: Good for debt consolidation and people with fair credit
• Wells Fargo Personal Loans: Good for low APRs for Wells Fargo customers

Taking out a personal loan is a big deal. You're committing to years of working with a specific financial institution and taking on new debt. Take your time to decide if you can comfortably afford a personal loan. If you decide you can, take time to find the loan that's just right for you.