What are some good fixed rate personal loans?

Personal loans affect your credit score in the short-term and in the long-term. In the short-term, a personal loan may damage your score because it causes a hard credit inquiry and increases your debt load. But in the long-term, a personal loan can either help or hurt your credit, depending largely on whether or not you pay the bills on time. Ultimately, it’s up to you how much impact the personal loan will have.… read full answer

How a Personal Loan Affects Your Credit Score:

• Does temporary damage with an initial hard inquiry. When you first apply for a personal loan, your credit score will immediately take a small hit. That’s because applying for a personal loan triggers a hard inquiry into your credit history. But this shouldn’t drop your score by more than 5 points or so, and you should be able to bounce back quickly.
• Adds to your overall debt. If you’re approved for a personal loan, you will immediately have a higher debt load, which may cause your credit score to drop in the short-term. That’s because the more debt you have, the riskier it is for banks and credit unions to lend to you.
• Reports to the major credit bureaus monthly. The banks, credit unions and online lenders that issue personal loans report payment information to the major credit bureaus on a monthly basis. If you make on-time payments, you can expect your score to increase. But if you are late or don’t pay altogether, your score will drop.
• Improves your credit mix. Proving yourself capable of managing multiple types of loans and lines of credit responsibly is good for your credit score. It shows you can be trusted to repay what you borrow in a variety of situations. So if you only have one or two other types of accounts on your credit report, such as credit cards or student loans, your score may benefit in the long run from getting the personal loan.
• Could help reduce credit utilization. Personal loans give you a lump sum up front, which you pay back in monthly installments. This is different from a credit card, where you can borrow up to a certain amount any time you want. Credit cards are known as “revolving credit,” and a big part of your credit score is how much of your revolving credit you use up each month, or your “credit utilization ratio.” Personal loans don’t count toward this ratio, so if you use them to pay off revolving debt, you can lower your ratio and improve your score.

In conclusion, as long as you’re sure to pay on time each month, a personal loan should eventually increase your score by a lot more than the initial inquiry caused it to fall. You can also avoid wasting hard inquiries by getting pre-qualified for a loan first. Pre-qualification only uses a harmless soft inquiry. And while it doesn’t guarantee approval, it will let you know if your odds are good.

Personal loans let you borrow a sum of money from a lender and then pay it back in monthly installments over a set term – usually anywhere from 12 to 84 months. Those monthly payments include equal portions of the original loan amount, plus interest and fees. For example, there may be an origination fee to process the application – sometimes charged upfront, sometimes added to the balance or deducted from the funds. Personal loans can be used for debt consolidation, home improvements, vacations, big purchases and more. Applicants generally need at least good credit for personal loan approval.… read full answer

For added context, the average personal loan in 2018 was for about $6,400, with interest accruing at a 17.31% APR. Personal loans sometimes work better in theory than in practice, however. Roughly 3.21% of personal loan borrowers were seriously delinquent on payments, as of August 2018, according to data from TransUnion.

Plenty of people who take out a personal loan find a way to make the process work for them. Understanding how things will go, from the time you apply to when you submit your final payment, is the key to making personal loans work for you.

How Personal Loans Work:

1. Application. You will need to provide personal information (such as your address and SSN), financial information (such as your income and employment status) and more. The lender will evaluate and hopefully approve you.
2. Disbursement of funds. The issuer of the loan will deposit the money into your bank account as a lump sum. You can do whatever you wish with the money, unless the terms of the loan say otherwise.
3. Interest. From the day you take out the loan, the amount will begin accruing interest at a rate set by the issuer. So no matter how long it takes you to pay the loan back, you’ll always owe more than you originally took out.
4. Monthly payments. The lender will give you a required amount to pay each month. You can pay more if you’d like, but make sure that there’s no penalty for paying the loan off earlier than the terms of the contract stipulate. Some lenders may charge a fee.
5. Credit building. The lender will report to the credit bureaus whether you’ve paid on time each month. Once you’ve paid off the entire balance, including interest and fees, the lender will report your loan as paid in full. Abiding by the terms of your loan can help increase your credit score.

Personal loans are pretty simple. You just have to make sure to submit your payments every month, and setting up automatic monthly payments from a bank account can go a long way in that regard. The most complicated part of the process is probably selecting the correct loan, but WalletHub’s comparison tool makes that easy.