Best Personal Loans For August 2022

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Best Personal Loans for August 2022


Best Personal Loans for August 2022

Whether you want to consolidate debt, finance a home improvement project or need access to a large stream of money, a personal loan can be a helpful tool. With lower interest rates and more flexible repayment terms than credit cards, personal loans offer financing for a variety of uses.

We've evaluated the major national personal loan providers and highlighted the best personal loan options below. As interest rates continue to rise, you can expect personal loan rates to also climb throughout the year. We'll update this list regularly as interest rates change and new loan products are released.

Rates as of Aug. 3, 2022.

LightStream
  • APR: 4.99% to 19.99% (With Autopay)
  • Repayment terms:2 to 7 years*
  • Funding amounts:$5,000 to $100,000
  • Funding timeline: As soon as same business day (conditions apply)
  • Origination fee:None
  • Other fees: None
  • Minimum credit score required:Good credit

LightStream delivers just about everything you want in a personal loan: flexible repayment terms, a $100,000 maximum, no fees and same-day funding (note, it's possible, but not guaranteed). There's also a low APR range -- though, of course, your interest rate will reflect your specific credit profile. As such, we think it's a great place to start your search for a personal loan. (Note that LightStream is a division of SunTrust Bank, which recently became Truist.)

Personal loans through LightStream also come with longer repayment terms. While home improvement loans have longer repayment terms, general personal loan repayment terms extend up to seven years. 

If you have a checkered credit history or blemished financial profile, keep in mind that LightStream's credit requirements are stringent. When asked about its criteria for good credit, the company said that there's "no single definition," but that people who qualify for loans usually have several years of credit history with few delinquencies, a "manageable" amount of revolving credit card debt, some liquid savings and a stable and sufficient income.

SoFi
  • APR: 6.99% to 22.73% (with AutoPay)
  • Repayment terms:2 to 7 years
  • Funding amounts: $5,000 to $100,000
  • Funding timeline:Up to 7 days
  • Origination fee:None
  • Other fees: None
  • Minimum credit score required:680

SoFi's personal loans have low rates, a $100,000 maximum loan amount and no origination, administrative or late fees. It's also one of the few lenders that's transparent about its credit score requirements -- though all loan providers take into account factors such as credit history and debt-to-income ratio when determining eligibility. It's worth noting that SoFi routinely runs promotions on its site. At the moment, the company is offering a bonus of up to $310 on some loans.

Sarah Tew/CNET
  • APR:5.74% to 20.99%
  • Repayment terms:1 to 7 years
  • Funding amounts:$3,000 to $100,000
  • Funding timeline:Next business day
  • Origination fee:None
  • Other fees: Rejected payment: $39; late payment: $39
  • Minimum credit score required:None

The personal loan market has come to be dominated by a fleet of online banks that, in most cases, don't have physical branches. (With no branches to maintain, they can often offer better online personal loan terms.) But some people may feel more confident borrowing money after an in-person conversation with an employee from a bank located in their neighborhood. Among the big national lenders, Wells Fargo offers a reasonable range of APRs, no fees, flexible repayment terms and a wide array of funding amounts. One caveat: Wells Fargo may change fees for rejected payments (also called NSF or nonsufficient-funds payments) and late payments. And those can add up.

Avant
  • APR:9.95% to 35.99%
  • Repayment terms:2 to 5 years
  • Funding amounts:$2,000 to $35,000
  • Funding timeline:Next business day
  • Origination fee:Up to 4%
  • Other fees: Rejected payment: $15; late payment: $25
  • Minimum credit score required:600

For those with less than excellent credit -- referred to as fair credit by lenders -- Avant could be a good loan option. Though the company will accept a loan application from anyone, applicants with a score of 600 or higher "have the best chance of being accepted," according to a company representative. 

As with most financial products, if you have a less stable financial standing or consistent credit card debt, you should expect to pay higher fees and more interest for a personal loan. Avant charges up to 4.75% in administrative fees, depending on factors including your credit history and where you live. And if your credit score is 600 or lower, you will likely end up with a higher APR. Avant's top rate annual percentage rate is a whopping 35.99%, which could end up costing you thousands of dollars in interest over the course of a loan. Proceed with caution.

Happy Money
  • APR:5.99% to 24.99%
  • Repayment terms: 2 to 5 years
  • Funding amounts: $5,000 to $40,000
  • Funding timeline: 2 to 5 business days
  • Origination fee: Between 0% and 5%
  • Other fees: None
  • Minimum credit score required:640

With a low credit score requirement, lower-than-average APR and fairly flexible repayment terms, Happy Money is a personal loan worth considering if you have credit card debt. We like that Happy Money, formerly known as Payoff, allows you to check your rate and determine different repayment options before it runs a hard pull on your credit. That means if you want to compare personal loan offers -- and you should -- no harm will be done to your credit score until you officially apply.

Its loan funding amount is lower than many competitors, but with average credit card balances for Americans sitting at $5,525 as of the beginning of 2022, this shouldn't be an obstacle for average borrowers. Happy Money also notes that on average, borrowers who paid off at least $5,000 in credit card debt saw an average FICO credit score increase of 40 points after their first few payments, according to a 2021 Happy Money survey.

Best personal loans, compared

Best for Overall No fees Flexible terms Low credit Credit card debt
Lender LightStream SoFi Wells Fargo Avant Happy Money
APR 4.99% - 19.99% (with Autopay) 6.99% - 22.73% (with autopay) 5.74% - 24.49% 9.95% - 35.99% 5.99% - 24.99%
Repayment terms 2 - 7 years* 2 - 7 years 1 - 7 years 2 - 5 years 2 - 5 years
Funding amounts $5,000 - $100,000 $5,000 - $100,000 $3,000 - $100,000 $2,000 - $35,000 $5,000 - $40,000
Funding timeline As soon as same day (conditions apply) 7 days Next business day Next business day 2 - 5 business days
Origination fee None None None Up to 4% 0% - 5%
Other fees None None Rejected payment: $39; late payment: $39 Rejected payment: $15; late payment: $25 None
Credit requirement (estimated) 700 - 800 680 and up N/A 600 and up 640

FAQs

What is a personal loan?

Most people take out a personal loan to consolidate debt, finance home improvements, or pay for a wedding, a family-related expense or a medical emergency. You can generally use personal loan funds for any purpose, other than paying for school and educational costs or investing.

A personal loan is a type of installment loan, meaning you repay the balance in fixed installments over the lifetime of the loan. Though lenders may advertise different types of personal loan options for specific purposes, there are only two major types of personal loans -- secured and unsecured loans. A secured personal loan requires you to put up an asset as collateral before you can secure loan funding, like with a car loan or home loan. With an unsecured personal loan, collateral is not needed.

Personal loan amounts generally fall between $5,000 and $50,000, though some lenders will lend you as little as $1,000 or as much as $100,000. The average repayment period (or term) is between three and five years. Most institutions charge an interest rate between 10% and 15%, though they can go as low as 3.99% and as high as 36%. Borrowers may tailor a loan to their specific circumstances, though lenders may be less flexible if your credit history has blemishes.

How do I choose a personal loan?

With interest rates rising, we recommend shopping around for the least expensive personal loan. Your credit score is the main criteria lenders will use to determine your loan APR, or annual percentage rate, which is the amount of interest and fees you'll pay a lender, over the duration of your loan. We recommend comparing APRs and loan terms to find the best option for your budget.

For example, borrowing $10,000 at a 9.99% APR paid back over five years would require 60 monthly payments of $212.42 -- and would cost you $2,745.27 in total interest. However a $10,000 loan at a lower rate of 8.99% APR, repaid over seven years would require 84 payments of $160.84 -- and would cost you $3,510.56 in interest overall. So, even though the APR on the first loan is higher, because the loan terms are shorter, you save on interest. You can use a loan calculator like Bankrate's to help you compare personal loan offers.

Some loans may offer perks, such as autopay discounts. On the flip side, pay special attention to any origination fee, loan application fee, prepayment penalties or rejected payment fee. And be aware that submitting a loan application will trigger what's called a hard pull, which may temporarily impact your credit score, even if you aren't approved or decide not to take out the loan. 

What credit score do I need for a personal loan?

Most lenders look at an array of factors to determine eligibility for a personal loan. Yes, your credit score is important -- but so is your credit history, current financial situation (including employment status and annual income), debt-to-income ratio and any other debts and obligations. Lenders want to understand how likely you are to pay off the loan on time.

Having a credit score of 700 and up increases your chances of being approved and receiving a lower APR. A credit score under 600 may make it more challenging, though not impossible. Happy Money, for instance, recommends having a minimum credit score of 600 to apply -- but that doesn't mean you'll be disqualified with a lower score. Some lenders, like Upgrade, also use alternative credit history, such as rent and utility payments and a steady job history, to help determine your eligibility. 

If you have low credit -- say a FICO credit score under 600 -- check out our best loans for bad credit recommendations.

What are the alternatives to a personal loan?

Generally a personal loan will offer lower interest rates than alternatives. But, if you're not able to get approved for a personal loan or want to consider a different option, you could apply for a balance transfer credit card or other card that offers an introductory 0% APR period. With both options, you should make sure you can repay the total balance before the balance transfer or 0% introductory APR period ends -- otherwise interest will start accruing. And credit card APR is typically much higher than personal loan APR. So, if you can't confidently repay the balance before your intro period ends, a personal loan is a safer, less expensive option.

What happens if I miss a payment or default on a loan?

Even if a lender doesn't immediately charge you a fee if you miss a payment, you're still responsible for paying off the loan. If your payment is more than 30 days late, your loan could be considered in default. Defaulting on a loan can carry severe consequences; your credit history will suffer, your credit score will plunge -- as much as 100 points per late payment -- and you'll be far less likely to get another loan in the future.

If you continually miss payments, a lender can sell your debt to a collection agency that may charge its own fees and aggressively pursue you through emails and phone calls. Ultimately, a lender can take you to court to seek reparations if you don't remedy the situation. Be careful, make your payments promptly and don't borrow money that you can't pay back.

More loan advice

*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.

Payment example: Monthly payments for a $10,000 loan at 5.73% APR with a term of 3 years would result in 36 monthly payments of $303.00. 

Truist Bank is an Equal Housing Lender. © 2022 Truist Financial Corporation. Truist, LightStream, and the LightStream logo are service marks of Truist Financial Corporation. All other trademarks are the property of their respective owners. Lending services provided by Truist Bank.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

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This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.

What's happening

Inflation slowed slightly in July, but prices remain at record highs. Economists still worry that a recession, or even stagflation, is a risk.

Why it matters

Soaring prices mean that gas, food and necessities are more expensive, and a slow economy means it's harder for Americans to earn money, secure employment and save.

What's next

The Fed raised rates last month to try to combat staggering inflation. The central bank meets again in September to determine whether more interest rate hikes -- which could slow down the economy -- are necessary.

The newest Consumer Price Index numbers for July are out -- and while inflation cooled slightly, prices still remain at record highs. The index for gas fell by 7.7%, but that decline was offset by increases in food and housing. That places overall inflation at 8.5% over the last 12 months, a slight decrease from June's 9.1% reading. 

In July, prices for shelter, medical care, car insurance, household furnishings, new vehicles and recreation all ticked up. Prices declined in July for airline fares, used cars and trucks, communication and apparel. Even if you remove energy and food from the equation, which tend to have volatile pricing, inflation still rose by 0.3% in July -- compared to 0.7% in June. 

Last month, in an attempt to stifle runaway inflation, the Federal Reserve raised the federal funds rate by another 75 basis points. That marked the Fed's fourth rate increase of the year. While containing inflation is the Fed's primary goal right now, many financial experts worry that raising rates too aggressively and quickly could push the economy into a recession. Or, if inflation remains high as unemployment rates start ticking up, the US could find itself in a period of stagflation.

What does all of this mean, exactly, and should you be worried? We'll break down what inflation is, how we got to this point and explain the difference between a recession and stagflation. Here's everything you need to know about rising prices and where the economy might be headed.

What is inflation?

Simply put, inflation is a sustained increase in consumer prices. It means a dollar bill doesn't get you as much as it did before, whether you're at the grocery store or a used car lot. Inflation is usually caused by either increased demand (such as COVID-wary consumers being finally ready to leave their homes and spend money) or supply side factors like increases in production costs and supply chain constraints. 

Inflation is a given over the long term, and it requires historical context to mean anything. For example, in 1985, the cost of a movie ticket was $3.55. Today, watching a film in the theater will easily cost you $13 for the ticket alone, never mind the popcorn, candy or soda. A $20 bill in 1985 would buy you almost four times what it buys today.

Typically, we see a 2% inflation rate from year to year. It's when the rate rises above this percentage in a short period of time, like it has throughout 2022, inflation becomes a concern. As wages fail to keep up with skyrocketing prices for basic goods and more companies initiate layoffs, US households, particularly low-income Americans, are feeling severe financial strain on their wallets. 

Right now, gasoline, food and housing are the biggest drivers of our current high levels of inflation. However, prices are up across the board. Even outside of "core inflation," price indices for medical care, car insurance, clothing, household furnishings and recreation all rose last month.

What's a recession?

The slowdown in the US economy during the first quarter of 2022 has raised concerns of a recession. This refers to a period of prolonged economic decline and market contraction where the unemployment rate goes up and production goes down, generally slowing inflation. 

Looking back at previous US recessions tells us that, during a period of recession, unemployment rates tend to go up and the prices of goods begin to drop. It's generally harder to obtain financing during a recession, as banks tighten their requirements, to minimize their risk of lending to borrowers who may default on loans.

What about stagflation? Is it the same as a recession?

Stagflation, on the other hand, refers to a period where a recession is uniquely coupled with high inflation. According to Bank of America's fund manager survey in June, 83% of investors expect a period of stagflation within the next 12 months. 

A mash-up of "stagnation" and "inflation," the term "stagflation" was coined in 1965, when British politician Iain Macleod lamented the country's growing gap between productivity and earnings: "We now have the worst of both worlds -- not just inflation on the one side or stagnation on the other, but both together. We have a sort of 'stagflation' situation and history in modern terms is indeed being made."

Stagflation became more widely known during what was known as the Great Inflation in the US in the 1970s. As unemployment hit 9% in 1975, inflation kept ratcheting upward and reached more than 14% by 1980. Memories of this dismal economic period have factored into current fears about out-of-control inflation. 

Economic circumstances today have some parallels to the 1970s, but also major differences. During the energy crises then and today, a disruption in the supply chain helped fuel inflation, followed by a period of relatively low interest rates, in an attempt to expand the supply of money in the economy. Unlike the 1970s, though, both the dollar and the balance sheets of major financial institutions are strong. The official US unemployment rate also still remains low, currently sitting at 3.5%, according to the Bureau of Labor Statistics.

When do we know we're in a period of inflation?

Inflation isn't a physical phenomenon we can observe. It's an idea that's backed by a consensus of experts who rely on market indexes and research. 

One of the most closely watched gauges of US inflation is the Consumer Price Index, which is produced by the federal Bureau of Labor Statistics and based on the diaries of urban shoppers. The CPI reports track data on 80,000 products, including food, education, energy, medical care and fuel.

The BLS also puts together a Producer Price Index, which tracks inflation more from the perspective of the producers of consumer goods. The PPI measures changes in seller prices reported by industries like manufacturing, agriculture, construction, natural gas and electricity.

And there's also the Personal Consumption Expenditures price index, prepared by the Bureau of Economic Analysis, which tends to be a broader measure, because it includes all goods and services consumed, whether they're bought by consumers, employers or federal programs on consumers' behalf. 

The current inflationary period generally started when the Labor Department announced that the CPI increased by 5% in May 2021, following an increase of 5% in April 2021 -- a rise that caused a stir among market watchers. 

Though a rise in the CPI in and of itself doesn't mean we're necessarily in a cycle of inflation, a persistent rise is a troubling sign. 

How did we get such high inflation in the first place? 

Today's inflation was originally categorized as "transitory" -- thought to be temporary while economies bounced back from COVID-19. US Treasury Secretary Janet Yellen and economists pointed to an unbalanced supply-and-demand scale as the cause for transitory inflation, provoked when supply-chain disruptions converged with high consumer demand. All of this had the effect of increasing prices.

But as months progressed, inflation started seeping into portions of the economy originally undisturbed by the pandemic, and production bottlenecks persisted. The US was then hammered by shocks to the economy, including subsequent COVID variants, lockdowns in China and Russia's invasion of Ukraine, all leading to a choked supply chain and soaring energy and food prices.

"I think I was wrong about the path that inflation would take," Yellen told CNN in late May. "There have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn't -- at the time -- didn't fully understand, but we recognize that now."

How can the Federal Reserve try to ease inflation?

The Fed, created in 1913, is the control center for the US banking system and handles the country's monetary policy. It's made up of 12 regional Federal Reserve banks and 24 branches and is run by a board of governors, all of whom are voting members of the Federal Open Market Committee, which is the Fed's monetary policymaking body.

While the BLS reports on inflation, the Fed moderates inflation and employment rates by managing the supply of money and setting interest rates. Part of its mission is to keep average inflation at a steady 2% rate. It's a balancing act, and the main lever it can pull is to adjust interest rates. In general, when interest rates are low, the economy and inflation grow. And when interest rates are high, the economy and inflation slow. 

The federal funds rate is the interest rate banks charge each other for borrowing and lending. When the Fed raises this rate, banks pass on this rate hike to consumers, driving up the overall cost of borrowing in the US. Consequently, this often drives consumers, investors and businesses to pause their investments, rebalancing the supply-and-demand scales disrupted by the pandemic.

Raising interest rates makes it more expensive for businesses and consumers to take out loans, meaning buying a car or a home will get more expensive. Moreover, securities and cryptocurrency markets could also be negatively affected by this: As interest rates increase, liquidity in both markets goes down, causing the markets to dip.

With rates well over the 2% inflation goal, the Fed reacted by raising rates a quarter percentage point in March, a half point in May, three quarter points in June and another three quarter points in July. The Fed has noted that we are likely to see more rate hikes this year -- as many as six total.

What about deflation, hyperinflation, shrinkflation?

There are a few other "flations" worth knowing about. Let's brush up.

Deflation

As the name implies, deflation is the opposite of inflation. Economic deflation is when the cost of living goes down. (We saw this, for example, during parts of 2020.) Widespread deflation can have a devastating impact on an economy. Throughout US history, deflation tends to accompany economic crises. Deflation can portend an oncoming recession as consumers tend to halt buying in hopes that prices will continue to fall, thus creating a drop in demand. Eventually, this leads to consumers spending even less, lower wages and higher unemployment rates. 

Hyperinflation

This economic cycle is similar to inflation in that it involves an increase in the cost of living. However, unlike inflation, hyperinflation takes place rapidly and is out of control. Many economists define hyperinflation as the increase in prices by 1,000% per year. Hyperinflation is uncommon in developed countries like the US. But remember Venezuela's economic collapse in 2018? That was due in part to the country's inflation rate hitting more than 1,000,000%.

Shrinkflation

Tangentially related to inflation, shrinkflation refers to the practice of companies decreasing the size of their products while keeping the same prices. The effect is identical to inflation -- your dollar has less spending power -- and becomes a double whammy when your dollar is already weaker. Granola bars, drink bottles and rolls of toilet paper have all been caught shrinking in recent months.

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