A personal loan can be used for any number of things in life, from building an addition on your house to consolidating your debt. And when you have good credit, doors open even more widely compared to those with bad credit. You’ll have access to unsecured loans, meaning you don’t have to put up any type of collateral in order to qualify for funds. You’ll also get offered the best interest rates so you’ll have a lower payment each month. Another perk? You could qualify for the highest loan amounts. After all, just because a lender offers a particular loan maximum doesn’t mean every borrower gets that deal.
So what is the definition of good credit? You’ll need to have a credit score between 690 and 720. Anything above 720 is considered excellent credit. If that sounds like you, then you could qualify for the absolute lowest interest rates available. Finding the best loan terms is easier than ever with a plethora of online lenders competing for your business. Selecting an online lender is convenient, too; in fact, most provide a funding decision the same day you apply and your money could be available in as little as one or two business days. To get you started, we’ve pulled together the five best personal loans for good credit, along with how the loan process typically works from start to finish.
Types of Online Lenders
When you start to review online personal loans, you need to know that there are a few different types of lenders out there. Understanding which type you’re working with helps to clarify much of the process, from how your personal loan is funded all the way to how you’ll repay it. Many traditional financial institutions are making their way into the online loan market as well. You might be familiar with some of the names; however, many banks with brick and mortar stores can’t offer interest rates that are as competitive as strictly online lenders because they have much higher expenses to cover. Some banks are better at this than others, so always be sure to shop around.
Another burgeoning type of lender is the alternative lender. Many of these companies are startups seeking to fill a gap in the need for different loan requirements than what traditional banks offer. Several lenders have created their own algorithms to analyze financial and other types of data to determine what kind of loan terms borrowers qualify for. They typically don’t have branch locations so they’re able to keep their overhead costs low and focus on passing savings to borrowers in the form of low interest rates.
Finally, one of the oldest types of online lender is the peer to peer or P2P lender. Originating in England and working its way to the U.S. in the early 2000s, P2P lending allows individual investors to fund personal loans and collect the interest as their return. While there is still a formal application process to go through, these lenders have opened the doors to greater access to credit for those with lower credit scores. And if you do have good credit, you get to take advantage of low rates and flexible repayment terms.
Applying for Personal Loans Online
It’s easy to get nervous about applying for any type of loan, and a personal loan is no exception. Luckily, online lenders make it easy for borrowers to get offers within minutes of entering a few pieces of basic information. There are typically two types of online applications: the pre-approval process and the formal application.
Through the pre-approval process, many lenders allow you to check your loan offer without performing a hard check on your credit report. This lets you find out what kind of interest rates and monthly payments you can expect so you can compare offers without stacking up the inquiries on your pristine credit report.
Once you find loan terms you approve of, it’s time to fill out the real application form. During this time, you’ll enter your personal and financial information to verify your ability to repay, and you’ll usually also get a hard pull on your credit report at this point. You’ll probably also have to upload copies of some important documents that help to verify your identity and financial information, such as your driver’s license and pay stubs. The exact requirements vary depending on each individual lender.
What Lenders Look For
Traditionally, lenders place the greatest importance on two factors: your credit history and your current financial ability to repay the loan. It’s pretty obvious that they’ll look at your credit report and score to determine how well you’ve paid your current and past obligations. But if you’re reading this with a good credit score, you most likely won’t have an issue with late payments crowding your credit report.
Lenders also review your current outstanding debt, as well as your income. They compare the two using a formula called the debt to income ratio, or DTI. If you carry too much debt for the amount of money you earn each month, then you might not be viewed as very creditworthy. Even if you have good credit, it’s worth taking a look to see how your DTI stacks up.
While those are historically the most important criteria for traditional lenders, remember that many online lenders began specifically to replace the old underwriting standards. Many place greater importance on other factors besides your credit score and debt, like your education, earning potential, and the types of debt you owe. Depending on your personal situation, you might be better suited with a lender that takes the bigger picture into account.
Our Top 5 Personal Loans for Good Credit
Lenders can vary greatly in the type of personal loans they offer and the type of borrower they want to lend to. We’ve pulled together our top five personal loans for individuals with good credit. Each one has a slightly different approach to lending, so you’ll see a bit of each company’s personality along with their loan rates and borrower requirements. There’s a little something for everyone, so don’t forget to compare offers to see which one fits you best.
Starting off as a student loan company, SoFi now offers personal loans and even mortgages. It is a unique online lender that uses its own underwriting process to offer good credit borrowers competitive rates on both fixed and variable rate loans. Instead of focusing strictly on your credit score, SoFi also looks at your education, current career, income, expenses, and your financial history. A long credit history is stressed less than having a high income potential in a growing job market sector. As long as your existing payment history is positive and you make enough money to meet your monthly expenses, then you could very well qualify for a low interest personal loan. And everyone gets an automatic 0.25% discount on their interest rate when they sign up for autopay.
APR: 5.95% to 13.24% [when enrolled in autopay]
Loan Range: $5,000 to $100,000
Term Length: 3, 5, or 7 years
Minimum Credit Score: None (average is above 700)
Similar to SoFi, Pave places greater importance on earning potential than on credit score, though you’ll still need a positive history to qualify. And while you can use your personal loan for a variety of purposes, Pave targets Millennials looking to improve themselves. You’ll get a few nice perks if you’re using your loan money to fund a portion of your education or a professional development course, such as deferring your first three payments and qualifying for a lower rate if the course could boost your future income. While Pave does have a required minimum credit score of 660, the lender conveniently considers both your FICO score and your VantageScore. If one is slightly higher than the other, you could still get some of the best rates available.
APR: 7.18% to 24.31%
Loan Range: $3,000 to $25,000
Term Length: 2 or 3 years
Minimum Credit Score: 660
Lending Club is a P2P lender and one of the first in the country. The funding process is a bit slower than other online lenders because of how the loans are financed. Once your application is approved, you still have to get investors to back your loan with funds. They’ll review your profile and credit grading (created by Lending Club) to determine whether or not they want to invest in you. Don’t worry about whether or not you’re going to get picked; most investors automatically invest in a diverse portfolio of different graded loans without actually reviewing the specifics. And while Lending Club offers low credit loans, most borrowers maintain a credit score of 699.
APR: 5.32% to 30.99%
Loan Range: $1,000 to $40,000
Term Length: 3 or 5 years
Minimum Credit Score: 600
LendingTree is unique because it’s not actually a lender, it’s a personal loan marketplace. That means that by submitting a single application on LendingTree’s website, you get loan offers from multiple lenders so you can easily compare your options. Once you select a single offer, you work directly with the lender to complete the application process and verify your information. How you receive your money and how quickly you get it also depends on the lender you select. One of the oldest players in the online loan field, LendingTree has been around since 1998 and has facilitated over 55 million loan requests.
APR: 5.32% to 36%
Loan Range: $1,000 to $35,000
Term Length: Varies
Minimum Credit Score: None (most borrowers are above 660)
Earnest is another alternative lender originating personal loans based on its own lending standards. You actually can have thin credit and still get a loan from Earnest, although most borrowers have excellent credit. Using a “merit-based system,” Earnest assesses your education, employment history, and your financial behavior to determine your loan offer. And they truly do look at your financial behavior. As part of the application, you must grant Earnest read-only access to your bank accounts in order to determine how well you spend and save, particularly compared to your income. It may sound strange, but it’s a great way to prove that you know how to handle your wallet.
APR: 5.25% to 12%
Loan Range: $2,000 to $50,000
Term Length: 1 to 3 years
Minimum Credit Score: None (most borrowers are above 720)
Why Take Out a Personal Loan
Once you find the right lender, getting a personal loan can help you in many different ways. An extremely popular option these days is debt consolidation because personal loan rates are so much lower than credit card rates, especially if you have good credit. Other people use personal loans for home improvement, major life events like weddings, and vacations. Before you apply for any loan, make sure the lender offers personal loans for your intended use. Most want to know exactly what the funds will be used for before making the loan. And because that information is in your legal loan agreement, you’ll want to stick to your word.
No loan decision should ever be made lightly, so make sure you do your research before reaching a conclusion. You’ll want to know that you can make your monthly payments even if something major comes up, like a job loss or medical emergency. Keep that good credit intact by keeping a padded monthly budget and a healthy rainy day fund. Once you’re confident that you’ve found the right loan, you’ll enjoy an ever strengthening credit history by maintaining steady, on-time payments each and every month. And that, along with funding a significant purchase or life event, can feel like a great accomplishment.