Low Interest Personal Loans – Possible?

Personal loans are nearly universally expected to carry terrible interest rates and ludicrous fees because people almost always think of them as payday loans. But that’s not completely accurate. You can also think about personal loans as signature loans, and those can very often be had at low interest rates.

So let’s talk about what it would take to lock up low interest personal loans. What’s the most predictable qualification for a low interest rate on any loan, personal or otherwise? That’s right, it’s a good credit score. If you want a bank to hand over a chunk of money with based on nothing but a signature and a handshake, it will only be because they can look at your credit history and see that it’s basically immaculate. I’m talking about a 700+ fico score. If you don’t have that taken care of, don’t expect to qualify for a personal loan with low interest.

But it doesn’t end there. The bank wants you to have a good credit score, but there’s something else they want you not to have, which is too much debt. Part of their analysis of you as a borrower is going to be to look at all the monthly payments you’re responsible for and then add the minimum payment that will come with the loan they’re about to give you. If that minimum payment will push you past a certain monthly payment load, no loan for you. I’m actually very glad that lenders have this practice. I know they only do it to protect their bottom line, but it also protects your bottom…line.  Working hard for your money and then watching it all flow right back out due to your high monthly debt service is a recipe for burnout and stress. You don’t need that headache.

So I guess part of the low rate personal loan equation is either not having much other debt, or having an income so high that your monthly debt isn’t a big factor. But I’m guessing that’s not the case with most people looking for some short term financing.

In any case, take good care of your finances. If you can’t get low rate short term loans now, work at it and the day will come. Of course, when that day comes you may not (hopefully) need them anymore.