If you have good credit, the world is your oyster. You’ll qualify for a wide range of loans at competitive rates, whether you want to finance a move, buy a car, or both. Here are some of the best sources for personal loans for people with good credit scores in 2021.
Lending Sources for People with Good Credit
Personal Loans from Banks and Credit Unions
Banks and credit unions are the two most common financial institutions for personal loans. They’re much alike, with the difference being that banks are for-profit and credit unions are non-profit. Both use the five C’s of credit to evaluate a person’s creditworthiness:
- Character – Is the borrower trustworthy and credible?
- Cash flow – Can the borrower repay the loan?
- Capital – Does the borrower have “skin in the game”?
- Conditions – What are the reasons for the personal loan?
- Collateral – Does the borrower have collateral to secure the loan?
People with good credit are more likely to pass this evaluation. A well-established credit history bodes well for a person’s character, while a high credit score demonstrates ample cash flow. Borrowers will also have more banks and credit unions to choose from if they have good credit.
Home Equity Loans or Lines of Credit (HELOC)
Home equity loans let borrowers use the equity in their house to borrow money. The house serves as collateral, so lenders typically offer competitive interest rates. That means you’ll pay less in financing fees over the loan’s duration.
Banks, credit unions, and other lending institutions underwrite home equity loans, just like any other loan. Most institutions require you to have at least 20% equity in your property before filling out the application. There’s also a direct correlation between how much you can borrow and your property’s value.
Figure is a San Francisco-based lender that opened in 2018. The company uses blockchain technology and artificial intelligence to provide home equity lines of credit (HELOCs), a variation on home equity loans. People can borrow $15,000 to $250,000 in as little as five days¹.
Figure gives people a more efficient way to secure a loan compared to brick-and-mortar institutions. It approves the average application in five minutes and offers APRs as low as 2.49%² (The advertised rate of 2.49% APR includes a combined 0.75% discount for opting into a Credit Union Membership (0.50%) and enrolling in AutoPay (0.25%). This rate also includes the payment of a 4.99% origination fee in exchange for a reduced APR, which is not available to all applicants or in all states) Figure is ideal for anyone with good credit who also wants to pay as few fees as possible.
Figure Lending LLC dba Figure. 15720 Brixham Hill Avenue, Suite 300, Charlotte, NC 28277. (888) 819-6388. NMLS ID 1717824. For licensing information go to www.nmlsconsumeraccess.org. Equal Housing Opportunity. Licensed in Alabama 22533, Alaska AK1717824, Arizona 0948458 and 1015091, Arkansas 114692, California: Loans are made and arranged pursuant to a Finance Lenders Law License, Licensed by the California Department of Financial Protection and Innovation under the California Finance Lenders Law (License 60DBO81967), Colorado 1717824, Connecticut ML-1717824, District of Columbia MLB1717824, Florida MLD1636, Georgia Residential Mortgage Licensee 61229, Idaho MBL-9625, Illinois MB.6761349, Indiana 39933, Iowa 88893478 and 2018-0048, Kansas MC.0025537 and SL.0026703, Louisiana 1717824, Maine 1717824, Massachusetts Mortgage Lender License ML1717824, Michigan FL0021494, Minnesota MN-MO-1717824, Mississippi 1717824, Missouri 19-2421, Montana 1717824, Nebraska 1717824, Nevada 4823, New Hampshire 22423-MB, Licensed by the N.J. Department of Banking and Insurance, New Mexico 1717824, North Carolina L-180811, North Dakota MB103310, Ohio RM.804317.000, Oklahoma ML011894, Oregon ML-5698, Pennsylvania 66882, Rhode Island 20183626LL, South Dakota ML.05202, Tennessee 151185, Virginia MC-6844, Vermont 7310, Washington CL-1717824, Wisconsin 1717824BA, Wyoming 3217
¹ For the Figure Home Equity line, approval may be granted in five minutes but is ultimately subject to verification of income and employment. Five business day funding timeline assumes closing the loan with our remote online notary. Funding timelines may be longer for loans secured by properties located in counties that do not permit recording of e-signatures or that otherwise require an in-person closing.
² The Figure Home Equity Line is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw.
Other Loan Sources to Consider
Think of aggregators as the matchmakers of the financial world. Their goal is to bring lenders and borrowers together so that people can find the best personal loans with good credit. The new breed gives borrowers access to many financial products while limiting risk exposure for lenders.
The beauty of the system is that you have multiple lenders working on your behalf. After you fill out an application, the aggregator works to find you the best deal. The arrangement puts you in touch with a network of lenders and loans that you wouldn’t necessarily find independently.
Fiona makes it easy to compare multiple lenders side by side. All you have to do is enter your credit rating, zip code, loan purpose, and desired loan amount. Fiona will auto-populate the screen with the best personal loans from financial institutions such as Marcus by Goldman Sachs and Upgrade.
Fiona uses an algorithm to tailor personal loans to your desired specifications. That includes options for personal loans, student loan refinancing, and life insurance. The platform requires a minimum credit score of 620 and lets people borrow up to $100,000.
Credible is a free loan aggregator that offers personal loans, credit cards, mortgages, and student loan refinancing. The company started in 2012 and has more than a million users. The platform lets people compare loans risk-free without requiring hard credit checks or fees.
Credible’s personal loans start at 4.99% APR, though specific rates depend on the partnering lenders. Borrowers can request anywhere from $600 to $100,000. Once you review your loan offers, you can select a lender, complete the application, and close your loan within minutes.
Personal Loan Lenders
Personal loan lenders are online platforms that offer borrowers different types of personal loans. They specialize in fast and efficient service, even if you have some blemishes on your credit history. Some common reasons people use personal loan lenders include home improvement projects, debt consolidation, and medical bills.
If your credit is on the lower side of the “good” spectrum, you should consider OppLoans. The online lender provides no-credit-check personal loans for people that need cash quickly. OppLoans lets you borrow $500 and $4,000 and makes the funds available in as little as one business day.
If these perks sound too good to be true, that’s because there’s a catch. OppLoans charges 5.9-9.9% APR and has a maximum repayment period of 18 months. OppLoans is not available in 12 states, including New York, North Carolina, and Colorado.
Upstart is an online lending platform that specializes in non-traditional personal loans. The company started in 2012 with an Income Share Agreement product that lets people raise money by promising a percentage of their future income in return. It pivoted two years later to offering personal loans instead.
The company requires a minimum credit score of 600, making it ideal for people with fair or good credit. You can secure loans up to $50,000 and receive the funds in as little as one business day. Upstart will even approve your loan application if you have a limited credit history.
Getting a personal loan has never been easier than with Monevo. The U.K.-based company lets borrowers use an online loan matching platform to find available lenders. Monevo works in real-time, unlike other loan aggregators, so you get the most accurate rates possible.
Monevo is free to use. The company turns a profit based on the lenders you match with on the site. Monevo has a straightforward application that takes a minute to complete. You can borrow from $500 to $100,000 and never have to worry about hard credit checks.
P2P lenders, also known as peer-to-peer lenders and social lenders, allow people to get loans from other individuals. The institutions cut out the intermediaries, providing people favorable loan terms compared to banks if they have good credit. Some of the most prominent P2P lenders include Prosper, Lending Club, StreetShares, and Upstart.
Make sure to consider a lender’s specialties before searching for a loan. For instance, StreetShares caters to small businesses, while LendingClub has financing options for medical professionals. Most lenders let you borrow $1,000 to $40,000 with terms ranging from one to five years.
Prosper is one of the original P2P lenders. The company has loaned $17 billion to more than one million people since 2005. The platform requires a minimum credit score of 630, making it optimal for anyone with good credit.
Prosper lets users borrow anywhere from $2,000 to $40,000 with terms up to five years. Your APR will depend on your credit history and credit score. If Prosper approves your application, you can expect funding within three to five days.
No P2P lender has more cachet than LendingClub. It has given out $50 billion in loans to three million people over the past decade and a half. The loans favor people with fair or good credit who want to borrow between $1,000 and $40,000.
APR ranges from 10.68% to 35.89%, making borrowing more expensive than competitors. You can lower your APR with a co-signer or a joint loan application. LendingClub also makes direct payments to your creditors if you apply for debt consolidation and reports directly to the three nationwide credit bureaus, so your credit score rises with each installment.
Getting an Auto Loan with Good Credit
According to an Experian report, the average credit score for new-car loans was 721 in 2020. Average credit scores for used-car loans came in at 657. The report also noted that 70% of people had credit scores of 600 or higher.
There’s a strong correlation between a credit score and loan terms. People with good credit can get an APR of 4.68% on new cars and 6.04% on used vehicles. If you have a credit score below 600, you should expect APRs of 11.92% and 17.74%, respectively.
Lenders view poor credit as a red flag. While it’s possible to secure an auto loan with less-than-perfect credit, it’s harder than doing so with good credit. Good credit also saves you money when it comes to purchasing car insurance.
Getting a Mortgage with Good Credit
You don’t need flawless credit to buy a home. You can get a mortgage with a credit score in the 500s, though it probably won’t be your dream house. Credit scores measure your trustworthiness, so lenders reward high credit scores with low interest rates and vice versa.
You can get a conventional mortgage with a credit score as low as 620. The federal government does not back or insure these loans. Instead, you would work with a private lender, such as your bank or credit union. If you cannot make a 20% down payment on a conventional loan, you’ll have to pay private mortgage insurance.
Good credit also makes you eligible for VA loans, USDA loans, and jumbo loans. A VA loan caters to men and women who have served in the armed forces. While the Department of Veterans Affairs doesn’t set a minimum credit score, most lenders that offer VA loans require a credit score of 640.
The same applies to USDA loans. There’s no minimum credit score requirement, but a 640 will give you access to streamlined credit processing when you submit your application. The United States Department of Agriculture primarily offers these loans to people in rural communities.
A jumbo loan, also known as a jumbo mortgage, is a loan that exceeds Fannie Mae and Freddie Mac’s limits. You can only get jumbo loans through private companies because Fannie Mae and Freddie Mac are government-sponsored. These mortgages are riskier than other loans, so lenders typically require a credit score above 700.
The coronavirus pandemic hit the United States in January 2020, though its grip on the economy didn’t take hold until March. On March 12, the Dow Jones Industrial Average, NASDAQ, and S&P 500 fell 12-13%. It was the largest one-day drop in stock market history.
The coronavirus and its impact on the economy led to two primary changes in personal loans. First, interest rates plummeted. The Federal Reserve Bank cut the Federal Funds Rates to near zero for only the second time in U.S. history.
This drop gave consumers a golden opportunity to refinance. The lower the benchmark rate, the less you will pay in interest over a loan’s lifetime. If you needed a loan and still had a job, March and April were the best times to do it.
Second, millions of people lost their jobs. The extraordinary spike in unemployment meant that the federal government had to take unprecedented action. It offered loan forgiveness to small businesses that retained employees and gave eligible individuals $1,200 stimulus checks.
Many banks, credit unions, and other lending institutions followed suit. They allowed customers to skip a payment without a penalty and freeze payments on their loans. These acts of good faith made it easier for people to repay their good-credit loans.
Loan Sources to Avoid
Pawn Shop Loans
Pawnshop loans target people that need money fast. They let borrowers pawn valuable items, such as a car or computer, for a few weeks or months. The problem is that these loans can have APRs as high as 120%.
You should avoid pawnshop loans, even if you desperately need money. They also come with storage, service, and other fees. If you decide to take out a pawnshop loan, make sure to read the terms and conditions before you sign.
Car Title Loans
You can receive half of your car’s value through a car title loan. The deal comes with steep interest rates (25%) and short repayment periods (30 days). For instance, if you borrow $1,000 on June 1, you have until July 1 to repay $1,250, or the lender can repossess your vehicle.
The federal government passed the Military Lending Act of 2006 because these loans were popular with military members. The law limits interest rates to 36% and repayment periods to up to six months. It also bars lenders from forcing borrowers to go into arbitration if there’s a dispute.
Payday loans are short-term, unsecured loans that typically provide up to $500. These loans can have APRs upwards of 400%, causing borrowers to default 46% of the time. According to The Atlantic, defaults make up 20% of operating expenses for some payday lenders.
Payday loans can get expensive fast. It’s why 12 states, including Massachusetts, New York, and Pennsylvania, have banned the loans, and other states have restricted them. If you need to borrow money urgently, you’re better off asking friends or family or using a credit card.
Related: Payday Loan Alternatives
Private Student Loans
Most student loans come through the federal government. People can also secure one through a credit union, bank, or another financial institution. These loans often have higher interest rates than their federal counterparts and less flexibility on repayment plans.
Usually, this part is where we would generally tell you why private student loans are better than public ones. The problem is that we can’t because private student loans are worse in almost every conceivable way. One of the few reasons people get private student loans is because the government caps federal loans at $31,000, which isn’t enough to cover tuition at some colleges.
How to Choose the Best Good-Credit Loan Company
You should know your credit score, loan amount, and desired APR before you look at lenders. This information helps narrow down where to search for loans. For instance, someone with credit on the lower end of the “good” spectrum might apply to Avant or Rocket Loans, while people with higher credit scores should look at Marcus by Goldman Sachs or SoFi.
The best lenders make it easy to get the information you need for an informed decision. Many organizations post details about interest rates and fees on their website. You shouldn’t have doubts about the company’s transparency or credibility before you agree to a loan.
Online review sites, such as the Better Business Bureau and Angie’s List, can help you find the best personal loans with good credit. They let you read about other people’s experiences and the quality of services. You shouldn’t base your entire decision on reviews, but they can provide the nudge you need to pick one lender over another.
Don’t forget to comparison shop when looking for personal loans. While researching multiple lenders takes a little more time, the process lets you compare rates side by side. It helps you find the best personal loan for your needs and wallet.
Learn More: Best Personal Loans Rates and Offers
Types of Good-Credit Loans
You have access to a wide range of personal loans, even if you don’t have perfect credit. Most of these loans are unsecured and have fixed repayment periods. Some loans exist that you can secure with collateral or opt for variable interest rates.
Unsecured Personal Loans
Unsecured personal loans do not require collateral, such as a car or house. Lenders charge borrowers slightly higher interest rates to offset the risk of default. Rates vary between 5% and 36%, and repayment terms can last for seven years.
Secured Personal Loans
Secured personal loans involve collateral for loan approval. If the borrower defaults, the lenders can claim the collateral as compensation. These loans often have more favorable rates for borrowers and less risk for lenders.
Fixed-rate loans let borrowers make the same payment amount each month. If your installment was $500 at the end of the first month, it would be $500 when you finish. Fixed-rate loans offer both parties consistency and predictability because the interest rate never changes.
Variable-rate loans vary based on the benchmark rate that financial institutions set. The figure is lower during recessions and higher during economic booms. While borrowers can take advantage of low APR in an economic lull, they run the risk of their monthly payments rising over time.
Debt Consolidation Loans
Debt consolidation loans let you combine multiple debts into a new one. These loans often have lower APR, so borrowers can save money when paying back interest. The consolidation also simplifies the repayment process since people make one payment instead of multiple.
Personal Lines of Credit
Most loans give people a lump sum of money and have them pay it back over time. Personal lines of credit are like credit cards, starting with a draw period when borrowers can borrow as much money as they need, up to a predetermined limit. After the draw period ends, they pay back what they owe plus interest.
How to Spot Good-Credit Loan Scams
The adage is that “if it sounds too good to be true, it probably is.” That applies to a lot of things, but especially to personal loans. Some unscrupulous lenders entice people with fantastic initial offers, only to take advantage of them in the terms and conditions.
Some common red-flag phrases include “no credit score required” or “guaranteed approval.” While there are lenders that accept most applicants, no legitimate business accepts them all. Companies with these slogans tend to have predatory loans tailored to people who desperately need money.
Beware of hidden or upfront fees. The Truth in Lending Act requires financial institutions to disclose their APR and charges, such as prepayment penalties and late fees. Reputable lenders will place this information on their website.
Some other things to look out for include:
- Poor online reviews
- Lack of registration in your state
- Loan offers over the phone
- No physical address
- Immediate commitment requirement
What Is Considered Good Credit
The definition of good credit varies between lenders. Each one has a slightly different definition of what “good” means, and they score people on a scale from 300 to 850 (Who came up with those numbers? We have no idea).
You can find some commonality among lenders in their credit score ranges. For instance, good credit scores typically fall between 670 and 739. According to Experian, 61% of Americans have good, very good, or excellent credit.
How to Improve Your Credit
The first step to improving your credit score is knowing what it is. You can get a free credit report from the three nationwide credit bureaus (Equifax, Experian, and TransUnion) each year. You also get one from your local bank or a credit scoring site.
Make sure to dispute any errors that you find. Some of the most common mistakes include misattributed accounts, inaccurate personal information, and incorrect credit limits. You can use this sample dispute letter to get started filing your claim.
Some of the other ways to improve your credit score include:
- Paying your bills on time
- Lowering your credit utilization ratio
- Eliminating your debts
- Diversifying your credit strategically
- Leaving lines of credit open
- Avoid too many hard credit checks
Improving your credit score won’t happen overnight. It requires time and patience. If you want someone to guide you through the process, check out Experian Boost. The service helps customers improve their FICO score by giving them credit for phone and utility bills while also offering credit monitoring and alerts.
Documents Requirements for a Loan Application When You Have Good Credit
Getting a loan requires more paperwork than it did a decade ago. The Great Recession forced many lenders to vet customers more thoroughly during the application process. While the exact documents will vary between financial institutions, here are some of the things you’ll need to secure a loan:
- Pay stubs or other proof of income
- Bank statements
- Credit history
- Government-issued IDs, such as a driver’s license or passport
- Proof of address
Collecting all of these documents can be a hassle. Fortunately, more financial institutions than ever allow customers to apply for loans online. All you have to do is attach the necessary files, type in your personal information, and click “Submit.”
Most personal loans don’t require collateral, so qualifying depends on your credit history, income, and debts. Each lender has different criteria for what constitutes a creditworthy borrower. Most institutions consider credit scores between 670 and 739 as “good.”
Prequalification involves getting a credit estimate from your lender to determine how much you can borrow. The conditional process helps lenders assess your creditworthiness and speeds up loan approval. Prequalification requires a soft credit check, which won’t affect your credit score.
Origination fees are fees that cover loan processing. The specific amount varies between lenders, though you should expect to pay 1% to 6% of the loan’s value. Some lenders don’t charge origination fees, and instead, raise the interest rate a fraction of a percent.
People with good credit can choose from a wide variety of fixed interest loans that range from $1,000 to $100,000. Many lenders offer free perks, such as credit monitoring and flexible repayment options, on top of competitive rates. The best personal loans with good credit often have an 18% APR, though some places provide discounts to existing members.