For those of you who might be looking to get a personal loan in the near future to cover some of your costs, you have likely recently looked up your credit report or score using some kind of service (if you have yet to look up your credit reports, we do recommend signing up for a free account through Credit Karma as you will be able to track your credit without paying a cent – unless you want to, of course). However, if you don’t really know what the numbers stand for or what you want them to be when you apply for a personal loan, looking up the reports is not going to help much as far as getting your finances in order.
That being the case, you should understand what credit score you need for a personal loan and what number ranges will land you which kind of interest rates. Since personal loans aren’t secure like some other forms of credit (this just means they’re not supported by something physical like a car or home loan), the interest rates available from various creditors can be all over the place. And even though with so many laws in place, unsecured personal loans have still seen huge variations on the interest rates offered, ranging from around 4 percent up to a monolithic 42 percent.
As far as the credit score you’ll need to receive a personal loan is concerned, you will want to have your score anywhere above 620.
You may also like: Links for Credit-Related Resources
For the most part and even if you have a credit score lower than 620 (which many consider baseline for “decent” credit), you should never accept and loan that has an interest rate of over 20 percent. Period. If you’re in a situation where you feel like you have to consider taking a loan with an interest higher than that, your best bet is to put in your due diligence and find a better creditor than the one who just happened to make receiving the loan easy on you. Otherwise, you could find yourself in a situation where you borrow, say, $5,000 at an APR of 35 percent for four years. It is precisely those kind of loans where people talk about having to pay back twice what they borrowed over the life of the loan, and that simply does not make good financial sense in any situation.