3 Ways to Snag the Lowest Personal Loan Rate Possible

If you've been thinking about taking out a personal loan, you're in good company. Between the final quarters of 2021 and 2022, U.S. personal loan balances grew from $167 billion to $222 billion, according to TransUnion.

As is the case with a credit card, you can use a personal loan to finance just about any purchase, whether it's furniture, home improvements, or even a much-needed vacation. But unlike credit cards, the interest rate you lock in on a personal loan will be fixed, so your ongoing payments for that loan will be predictable.

Also, personal loan interest rates tend to be much lower than those associated with credit cards to begin with (the exception being 0% interest rate credit cards, of course, but those 0% rates only apply for a limited window of time).

But while personal loans tend to offer competitive interest rates for borrowers, it still pays to do what you can to lock in the lowest rate possible. Here's how.

1. Boost your credit score

Personal loans are unsecured, so they're not tied to a specific asset. As such, the higher your credit score, the more competitive a personal loan rate you're likely to snag.

If your credit score is in the upper 700s or above, it means you're in pretty good shape to lock in the lowest interest rate a given lender is offering. But if your credit score could use work, you can boost it by paying all your bills on time and checking your credit report for errors.

Paying off some existing credit card debt can also raise your credit score. But if you're looking at taking out a personal loan, it's a sign that you may not have a pile of cash available to do that.

2. Shop around

Each lender offering personal loans sets its own rates and closing costs. It's a good idea to shop around for a personal loan rather than accept the first offer you get.

You may be in a hurry to get your hands on some money. But remember, personal loans tend to close pretty quickly -- sometimes within days. So it pays to do a little rate shopping for the savings involved.

3. Choose a shorter repayment term

It's common to pay off a personal loan in five years, and some lenders might give you even more time to get yours repaid. But if you're able to pay off your loan in a shorter period of time -- say, two years -- then you might get a lower interest rate as a result. That's because the less time you borrow for, the less risk your lender takes on.

These days, personal loan rates are up across the board because pretty much all types of consumer loans have gotten more expensive. And that's why it's so important to do what you can to lock in the lowest interest rate possible on one of these loans. Doing so could result in less money spent on interest -- and more money you get to spend on the things you love.