According to MoneyGeek, the average credit score for personal loan borrowers in 2024 is 660, which is considered fair. However, some lenders may accept borrowers with lower scores, while others may require higher scores. Therefore, it is advisable to check your credit score before applying for a loan, and take steps to improve it if necessary.
Some ways to boost your credit score are:
- Pay your bills on time: Your payment history accounts for 35% of your credit score, so make sure you pay all your bills on time, every time. This includes your credit cards, loans, utilities, rent, and any other obligations.
- Reduce your debt: Your credit utilization ratio, which is the percentage of your available credit that you use, accounts for 30% of your credit score. The lower your credit utilization, the better for your score. Therefore, try to pay off your existing debt, especially high-interest debt, and avoid using more than 30% of your credit limit.
- Review your credit report: Your credit report contains the information that is used to calculate your credit score, such as your accounts, balances, and inquiries. You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year at annualcreditreport.com. Review your credit report for any errors or inaccuracies, and dispute them if you find any.
- Diversify your credit mix: Your credit mix, which is the variety of credit types that you have, accounts for 10% of your credit score. Having a diverse credit mix, such as credit cards, installment loans, and mortgages, can show that you can handle different kinds of debt responsibly. However, do not open new accounts just for the sake of diversifying your credit mix, as this may hurt your score in the short term.
Prepare Your Application
Once you have chosen a lender and improved your credit score, you are ready to prepare your application for a loan. Depending on the lender, you may be able to apply online, over the phone, or in person. You will need to provide some personal and financial information, such as:
- Your name, address, phone number, email, and date of birth
- Your Social Security number and driver’s license number
- Your income, employment, and bank account details
- Your loan amount, purpose, and term
- Your consent to a credit check and verification of your information
Some lenders may also ask for additional documents, such as pay stubs, tax returns, bank statements, or proof of identity and residence. Make sure you have all the required documents ready before applying, and submit them in a timely manner. This will speed up the approval process and reduce the chances of rejection.
Compare the Best Online Personal Loans of 2024
If you are looking for the best online personal loans of 2024, here are some of the top options, according to Forbes Advisor and NerdWallet:
- SoFi: Best overall online personal loan. SoFi offers loans from $5,000 to $100,000, with interest rates from 8.99% to 25.81% with autopay, and terms from two to seven years. SoFi has no fees, and provides perks such as unemployment protection, career coaching, and financial planning. SoFi also considers factors beyond your credit score, such as your education, income, and cash flow.
- LightStream: Best online loan for low interest rates. LightStream offers loans from $5,000 to $100,000, with interest rates from 7.49% to 25.49% with autopay, and terms from two to 12 years. LightStream has no fees, and offers a rate beat program, which means it will beat any competitor’s rate by 0.1 percentage points. LightStream also has a loan experience guarantee, which means it will pay you $100 if you are not satisfied with the service.
- LendingPoint: Best online loan for fast funding and below-average credit. LendingPoint offers loans from $2,000 to $36,500, with interest rates from 7.99% to 35.99% with autopay, and terms from two to five years. LendingPoint has an origination fee of up to 6%, but no prepayment penalty. LendingPoint can fund your loan as soon as the next business day, and accepts borrowers with credit scores as low as 600.
- Upgrade: Best online loan for bad credit. Upgrade offers loans from $1,000 to $50,000, with interest rates from 8.49% to 35.99%, and terms from three to seven years. Upgrade has an origination fee of 2.9% to 8%, but no prepayment penalty. Upgrade considers borrowers with credit scores as low as 580, and also looks at your free cash flow and debt-to-income ratio. Upgrade also offers credit monitoring and financial education tools.
- Universal Credit: Best online loan for comparing multiple offers. Universal Credit is an online lending platform that connects borrowers with multiple lenders that offer personal loans. You can fill out one simple form and get prequalified offers from lenders such as Upgrade, Avant, Prosper, and more. You can compare the offers based on the loan amount, interest rate, term, and fees, and choose the one that suits you best.
- Discover: Best online loan for no interest if repaid within 30 days. Discover offers loans from $2,500 to $40,000, with interest rates from 7.99% to 24.99%, and terms from three to seven years. Discover has no fees, and offers a 30-day money-back guarantee, which means you can return the loan within 30 days and pay no interest. Discover also provides free access to your FICO score and financial education resources.
- Upstart: Best online loan for loans as low as $1,000. Upstart offers loans from $1,000 to $50,000, with interest rates from 6.40% to 35.99%, and terms from three to five years. Upstart has an origination fee of up to 8%, but no prepayment penalty. Upstart uses artificial intelligence and machine learning to evaluate borrowers based on more than their credit score, such as their education, job, and income.
- Avant: Best online loan for a range of repayment terms. Avant offers loans from $2,000 to $35,000, with interest rates from 9.95% to 35.99%, and terms from two to five years. Avant has an administration fee of up to 4.75%, but no prepayment penalty. Avant accepts borrowers with credit scores as low as 580, and provides a range of repayment options, such as autopay.
Apply for the Loan and Wait for Approval
After you have prepared your application and gathered all the required documents, you can submit your application to the lender of your choice. Depending on the lender, you may get an instant decision, or you may have to wait for a few hours or days for the approval.
