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Taking out a personal loan based on an advertised interest rate does not mean that you automatically receive the advertised rate. So how can a lender advertise a certain rate for personal loans, but not give you that rate?
Right now, the average interest rate for personal loans is between 10 percent and 28 percent. At first glance, this seems like a fairly wide range. However, it is based on a number of factors which influence the actual interest rate that a borrower receives when taking out a loan. Some of these factors include:
Another very important factor which determines the interest rate is your credit score. Whether you have Excellent, Good, Average, or Poor credit, your score directly influences the APR (annual percentage rate) of your personal loan. Below is a sample of the APRs borrowers might receive based on their credit scores:
The above rates are listed as an example. Actual rates received by borrowers will be different. In some cases, APRs will be higher, especially for those with Average or Poor credit scores. For these people, the APR range might be higher.
A number of things influence a borrower’s credit score. According to Investopedia, there are five major factors used to calculate your credit score:
Your credit score is not affected by other things including your marital status, age, occupation, income, employment, the area of residence, religion, race, or national origin.
There are factors which affect APR when applying for a personal loan. Some of these are outlined below:
When asking for a personal loan from one of LoanStart’s affiliate lenders, it is important to remember that multiple factors are reviewed when a loan offer is extended at a certain interest rate. Your credit score is one of the biggest factors because it shows how likely or unlikely you are to repay a loan and directly affects the APR. Also, the amount you borrow and the length of the loan affect the APR.