11 Best Personal Loans of October 2019

When should I get a personal loan?

Taking a personal loan makes sense when it's the least expensive form of credit, when it's used toward something that has the potential to increase your financial standing, like debt consolidation or home improvements, and when you can afford the monthly payments without stressing your budget.

On the other hand, a personal loan used for discretionary expenses, like a vacation, can be expensive. NerdWallet recommends using savings for nonessentials, to avoid finance charges.

If you're borrowing for emergency or medical expenses, consider less-expensive alternatives first, such as community assistance or payment plans.

Personal loans vs. credit cards

Average interest rates on personal loans can be lower for good-credit borrowers than average rates on credit cards. In some situations, the fixed interest and monthly payments associated with personal loans, which are installments loans, can be preferable to the revolving credit that credit cards have.

In general, personal loans work better for large expenses that you can repay over years, while credit cards are best for smaller expenses that you can pay off each month.

Before you take a personal loan

• You don't need good credit to get a personal loan, but doing what you can to strengthen your credit before you apply can boost your chances of qualifying and get you a lower interest rate.
• Use our personal loan calculator to see estimated rates and payments based on credit scores.
• Shop around and compare loans, not just interest rates but also fees and features. The APR gives an apples-to-apples way to compare total costs between loans.
• If you're getting a personal loan to consolidate debt, make a plan to pay off your creditors and avoid running up debt again. Building a budget that accounts for debt repayments is a good place to start.

Personal loan interest rates and fees

Personal loan interest rates vary by lender, and the rate you receive will depend on factors such as your credit score, income and debt-to-income ratio.

Borrowers with high credit scores generally receive lower rates. The estimated APR for a borrower with excellent credit is 13.9%, 18% for good credit, 21.8% for fair credit, and 27.2% for bad credit, according to NerdWallet’s 2018 lender survey.

Some lenders charge origination fees to cover the cost of processing the loan. Lenders deduct the fee from the loan proceeds or roll it into the balance. This one-time, upfront fee is included in the loan’s APR, so keep this in mind when comparing costs between lenders.

Other fees to watch out for include late fees, fees for paying off your loan early and insufficient funds fees.

Pre-qualify for a personal loan

Most online lenders will give you an estimated interest rate by performing a soft check of your credit. This won’t affect your credit score, so it pays to take the steps to pre-qualify for a loan with multiple lenders and compare rates and loan features. You can pre-qualify on NerdWallet and see rates from lenders that partner with us.

After you compare offers and select a loan with the lowest rate and payments that fit your budget, you'll formally apply for the loan.