If you have great credit, you are in luck. Personal loan rates for 60-month terms for people with credit scores of 761 and above are down to 14.95%; 36-month terms are down to 13.71%. Personal loans are a viable option if you are looking for the best debt consolidation loans. However, you can expect to pay more if your credit score is not the best of the best. 

The basics

Personal loans can range between $1,000 and $100,000 to cover expenses like home improvement, weddings, honeymoons, unexpected medical expenses, and more. They can generally not be used for education expenses or business expenses, as there are specific loan types for those categories with different requirements. You typically pay on the loan monthly for anywhere from one to seven years. Most loans are unsecured, which means that you do not have to offer collateral and you are more likely to get approved. 

Personal loans are a great way to consolidate multiple debts into a single monthly payment. Consolidating debts allows you to make a concrete plan on how to pay off debts in a timely manner. APR on credit cards can be high, so consolidating through a personal loan can save you some money. Make sure to only take out what you need and be prepared for origination fees. These fees can be anywhere from 1% to 8%, so make sure to include that in the amount of loan you are applying for so you have all of your bases covered. By only borrowing what you need, you prevent overpaying interest unnecessarily. 

Getting the best interest rate on a personal loan really comes down to your credit score. Your credit score tells the lender how trustworthy the borrower is and how likely the borrower is to repay the debt. Lower credit scores tend to be more risky, so the lender charges more interest. 

Although interest rates on personal loans for borrowers with high credit scores are going down, they remain high for those with low credit scores. Rates are getting even higher across the credit profile, with average interest rates for 60-month personal loans coming in at 24.1%. Personal loans have higher rates than some other types of loans because they are unsecured, but this is a great option if you do not have anything to put up as collateral. 

What to do

If you have a low credit score, you can take a few steps to try and increase it before getting a personal loan to potentially lower your rate. Always pay your payments on time and try to pay more than the minimum due. Regularly monitor your credit report and dispute any account or issue that you do not recognize. Try to keep your debt-to-income ratio as low as possible, and do not use more than 30% of your available credit. 

If you practice healthy financial habits, you can increase your credit score while simultaneously improving your odds of getting approved for a personal loan and lowering the interest rate that you will pay on it.