With a personal loan, you can borrow money to consolidate high-interest debt, finance a large purchase or cover emergency expenses. Loan terms are usually less than five years, and amounts typically range from $1,000 to $100,000.

The Federal Reserve has held interest rates near zero amid the COVID-19 crisis, which can reduce the cost of a personal loan – if you can get one. Borrowers will likely face stricter lending standards as lenders try to protect against the coronavirus downturn.

Still, if you have strong credit and steady income, finding the best personal loan for your needs at a low interest rate could save you thousands.

Here’s what you need to know about choosing a personal lender and getting approved.

When you shop around for the best personal loan rate, you can save. Compare personal loan offers with national average personal loan trends to know whether you’ve found a competitive interest rate.

You could pay a higher interest rate or a lower one, depending on your credit score.

*Rate as of Dec. 4, 2020

Select your desired loan amount and your loan purpose, your credit score range, and your state to see estimated loan terms and where personal loan interest rates start.

Americans are grappling with a lot of uncertainty over jobs, finances and health risks as the COVID-19 pandemic endures.

Many who have lost jobs or wages because of the health crisis are struggling to pay for essentials, including food and shelter. But a U.S. News survey about the pandemic’s toll on finances revealed that consumers may have overlooked options such as personal loans, deferred credit card payments and fee waivers, which could ease financial pressures.

These are the key survey findings:

More than half of consumers surveyed said they have serious financial concerns related to the coronavirus.

Nearly half of consumers surveyed have experienced changes at work since the U.S. coronavirus outbreak began.

Paying for essentials, reducing debt and building savings are coronavirus stimulus check priorities.

Most consumers affected by the COVID-19 pandemic aren’t asking for government assistance.

Many consumers with credit card debt plan to skate by with minimum payments as the coronavirus pandemic continues.

Most consumers don’t plan to take personal loans to help with coronavirus financial challenges, and those who turn to these loans may use them for everyday expenses.

A competitive interest rate is the most important factor for many people when choosing a personal loan company.

Most Americans have not considered personal loan alternatives, but lower-cost options get priority for those who have.

More than 80% of consumers surveyed said they haven’t looked at popular alternatives.

A personal loan is a lump sum you can borrow from a bank, a credit union or an online lender and repay over a fixed amount of time, unlike a credit card or line of credit. Borrowers pay back loans of up to $100,000 in fixed installments, usually over two to five years.

Personal loans are typically unsecured, which means they are supported by your creditworthiness rather than collateral. Collateral is an asset, such as a car or house, a lender may require for certain types of loans and use to recoup its losses if you default.

You can get a personal loan from different types of lenders, including traditional brick-and-mortar banks and online lenders. They serve borrowers with varying credit scores, income levels and other requirements.

There are smart ways to use personal loans, although these loans won’t work for everyone.

Paying off high-interest debt, such as a credit card with a 24% annual percentage rate, can be difficult and lengthy because the higher your rate, the higher your payments.

A credit card typically has a higher interest rate than a personal loan. If you qualify for a personal loan with a low interest rate, you can pay off your debt faster and spend less on interest.

Personal loans also can be used as home improvement loans, but you may find better options. Consider a home equity loan that taps the equity built up in your home. Home equity lines usually have lower rates than personal loans.

For some expenses, saving is better than taking out a personal loan. If you’re struggling to save for an expense such as a wedding or vacation, postponing until you can pay in cash is best.

Personal loans are available everywhere from brick-and-mortar banks and credit unions to online lenders. Review the pros and cons of each type of lender.

A bank or credit union could offer personal service, especially if a location is nearby. But online lenders sometimes offer more convenience, especially if you prefer to apply, close and manage your personal loan online.

Strive to obtain preapprovals from a variety of lenders so you can compare rates, terms and other factors for different types of personal loans.

Because each lender has distinct terms and conditions, you will need to know what you want in a personal loan before you start comparison shopping.

“Consumers can choose the best personal loan by doing their research, shopping around between multiple lenders, reading the fine print and only selecting a loan that they know they can afford to repay,” says Jared Kaplan, CEO of OppLoans, an online lender for bad credit loans.

An easy place to begin is to check that a lender is licensed in your state. Make sure each lender can offer personal loans where you live.

Then you can compare these other key factors to help you choose the right lender.

Lenders often set minimum credit score requirements and other qualifying factors that borrowers need to meet for personal loan approval.

Some lenders require that you work a certain number of months before you’re eligible for a personal loan. If you’re furloughed or unemployed, the lender may ask you for documentation that indicates when you’ll return to work, such as your furlough letter or a pending job offer.

If you don’t have a long employment record or high income, make sure your credit score is strong. You’ll find that some lenders are more lenient than others: LendingPoint considers borrowers with FICO scores as low as 585, while SoFi requires a FICO score of at least 680 for a personal loan.

Lenders also care about your debt-to-income ratio, which is the percentage of your monthly income that goes toward paying your debt. They like to see a low DTI, usually 40% or less.

Each lender may have a minimum annual income requirement for borrowers to qualify for a personal loan as well. It could be as low as $12,000, which is Upstart’s minimum annual income requirement.

Borrowers with higher incomes tend to be better applicants because they have more money for repaying their loans. Still, a big income can’t fix a poor credit score or high debt-to-income ratio.

If you don’t meet credit or income standards, a co-signer could help you qualify for a personal loan. Sometimes a co-signer can help you obtain more competitive rates than you could on your own.

Personal loans can have two types of interest rates: fixed or variable. Most personal loans come with a fixed interest rate, which stays the same for the duration of a loan.

A variable rate changes over the life of the loan, depending on prevailing interest rates.

Some borrowers don’t want the uncertainty of a variable-rate loan and prefer to stick with a fixed-rate loan.

Each lender sets its own terms, such as loan amounts, term lengths and use restrictions.

Minimum and maximum loan amounts. Every lender has a minimum and maximum loan amount. If you’re looking for a small personal loan of less than $2,000, you’ll need to find a lender offering that amount.

If you need a larger loan, SoFi will lend up to $100,000 and Payoff will lend up to $35,000. If you need to borrow $45,000, tailor your search to lenders that offer that amount or more. Don’t expect a personal exception if you need to borrow more than a lender’s maximum.

Minimum and maximum term lengths. Lenders also have minimum and maximum term lengths. You’ll typically have two to five years to pay off your personal loan, but some lenders, such as Earnest, offer term lengths of up to seven years.

The longer your loan period is, the lower your payments will be, but you will pay more in interest. If you can afford a higher monthly payment, go with the shorter loan period to save on interest.

Loan use restrictions. Some lenders have restrictions on how you can use your loan. These vary by lender.

Payoff, which specializes in debt consolidation loans, allows you to apply personal loans only toward credit card debt. And Earnest does not permit borrowers to use funds for business expenses.

Don’t lie about how you’re going to use the money. Lying on your loan application can be deemed loan fraud and result in extra charges.

Disbursement times. Lenders also have their own time frames for how quickly you’ll receive your personal loan funds.

Some lenders offer fast funding. For example, RocketLoans can initiate a transfer on the same day you’re approved.

Others may send funds as soon as the next business day after approval. Usually, funds are distributed within a few business days, and most lenders will disburse them electronically.

One of the most important aspects to compare before choosing the best personal loan is the fees each lender charges. Fees can significantly increase the cost of a personal loan.

Lenders commonly charge origination fees to cover the costs of processing your loan. Fees are between 1% and 6% of the loan amount.

Fees can significantly increase the cost of a personal loan. For example, a 3% origination fee on a $25,000 loan tacks on an extra $750.

Because most lenders enforce late fees, always pay your loan on time. Some lenders waive late fees, including Marcus by Goldman Sachs and U.S. Bank, but you should still expect interest to accrue if you pay late.

Autopay, which automatically deducts payments from your bank account, can help you avoid late payments and late fees, as well as damage to your credit score. But you’ll need to make sure you have enough in the account to cover your payments.

If you don’t, most lenders will charge a minimal fee for returned payments. It’s sometimes called an unsuccessful payment fee.

Though rare, prepayment penalties may apply when you repay your loan ahead of schedule.

Choices vary by lender, so make sure your lender has options that work best for you.

Most lenders offer flexible payment options, including autopay, check by mail or online, and even a chance to change your payment date.

Some lenders, such as Upgrade and SoFi, provide an autopay discount, which can reduce your rate if you enroll.

Before you move forward with a lender, be sure to read personal loan reviews so you know what to expect – or when to avoid a lender.

Kaplan recommends researching lenders on the Better Business Bureau website to check for negative marks or complaints. This can help you avoid an unscrupulous lender or one that may be difficult to work with.

You can also research lenders using the Consumer Financial Protection Bureau’s Consumer Complaint Database. This national database collects complaints against financial companies and can give you an idea of common sticking points for a particular lender.

Some lenders offer loans with additional features that make them a better fit for certain borrowers.

Try to compare loan rates from at least two personal lenders before you apply for a loan. Consider interest rates, credit requirements, loan amounts, repayment terms and other factors to choose the best personal loan for your financial situation.

Read full reviews of each lender at U.S. News to help you comparison shop. Take a look at this example comparing these two personal loan companies:

Discover
Personal loan interest rate: 6.99% to 24.99%
Minimum FICO score: 660
Loan amounts: $2,500 to $35,000
Term length: 36 to 84 months
Best feature: charges minimal fees

Sofi
Personal loan interest rate: 5.99% to 18.64%
Minimum FICO score: 680
Loan amounts: $5,000 to $100,000
Term length: 24 to 84 months
Best feature: accepts co-borrowers

When you’re comparing personal loan options, think about what works best for your needs. For example, if you need a large personal loan and have good credit, SoFi could offer a lower rate and larger loan amount than Discover. But if you need a smaller loan and have fair credit, Discover may be a better choice.

Of course, you shouldn’t choose a personal loan company based on interest rate alone. You’ll need to get rate quotes to estimate your personal loan rate because it depends on your credit and other factors.

In the long run, a personal loan can help improve your credit, especially if you’re using a debt consolidation loan to refinance credit card debt. The short-term cost may be a few dings to your credit score when you apply for the loan.

Only you will see a soft credit inquiry – mostly used for a preapproval or rate check – on your credit report, and it won’t lower your credit score. A hard credit inquiry can lower your credit score, especially if you have a lot of inquiries within a short span of time, but the effect is usually minimal and temporary.

If you are approved for a personal loan, the new loan can drop the average age of your credit history. Although the length of your credit history accounts for only 15% of your FICO credit score, it is still an important factor for lenders and can affect your chances of getting a loan.

Payment history is the most important factor in your FICO score at 35%, which means that you must pay your personal loan on time. If you stop making payments on a personal loan, you risk defaulting on the loan and damaging your credit.

“If you’re taking out an unsecured personal loan, you don’t have to risk losing your home or your car, but that doesn’t mean they’re risk-free,” Kaplan says. “Failing to pay the loan back, also known as defaulting, could do some pretty serious damage to your FICO score. That will make it harder and more expensive to borrow money in the future.”

Making sure that your monthly payment fits in your budget will help you pay on time. Get an idea of how much you can afford before you look at loans.

“A loan with a longer repayment term might cost a little more overall, but that longer term will also lower the monthly payment amount,” Kaplan points out. “And if those payments are a much better fit for a person’s budget, then that loan is probably the best one for them.”

A 36-month personal loan, for instance, will allow you to pay off your loan faster and with less interest than a 48-month loan. But the latter could give you more wiggle room in your monthly budget.

Personal loan APR ranges are typically from about 6% to 36%, depending on creditworthiness and other factors. Generally, the higher your credit score, the better your personal loan interest rate.

Also, the higher your credit score, the greater choice of personal loans you’ll have with favorable terms. Companies want to work with people who have good or excellent credit scores and are more likely to offer personal loans with better terms to these consumers.

“Realistically, you probably need a credit score of 680 to 700 or higher” to qualify for a personal loan, says Joseph A. Carbone Jr., certified financial planner and founder of financial planning firm Focus Planning Group. “If you are in a range of 620 to 680, you might need a co-signer to secure the line.”

But your credit score is not the only factor that determines either approval for a personal loan or where interest rates start. Companies will request information about your job, your minimum annual income, how stable your income is, your savings and more. Your answers can determine your eligibility.

There are several steps to apply for a personal loan.

1. Get preapproved rates. Make sure the lenders you’re requesting rates from will obtain them using a soft credit inquiry. When you request a rate quote, you’ll provide your personal information, such as address, income and Social Security number, on the lender’s secure website. You’ll indicate the amount you want to borrow, the reason for borrowing and the repayment term length you prefer.

Once you give these details, you’ll be informed of rates and how to formally apply for the loan.

2. Compare offers from different lenders to find the best personal loan interest rate.

3. Choose your top one or two lenders and then apply formally, which will trigger a hard credit inquiry on your credit report. Know that even with good credit, you won’t be guaranteed approval or a particular interest rate. Good luck!