Bad credit would cost Americans as much as $20 billion to borrow money this year

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The first step in building good credit is knowing your credit score.

If you have bad credit, your average interest on a personal loan has been sky-high in 2023.
Bad credit could mean paying more than three times as much on a $5,000 loan as someone with good credit.
If the 3.5 million Americans taking out loans had bad credit, that difference in interest rate would cost them a cumulative $20 billion.

You can get a personal loan with bad credit, but you will likely have fewer choices and pay much more to borrow than someone with an excellent credit score. The higher interest rate you will pay means you will spend more money paying back the loan.

According to Experian, the number of US personal loan accounts grew by 16% to 25.1 million in the year leading up to August 2022, which means there were around 3.5 million new accounts that year. That’s amid growing interest rates throughout 2022 and 2023.

Consumers with bad credit bear the brunt of costs associated with surging interest rates. In mid-March, the average high rate for a personal loan came in at 32.02%. The average low rate was 10.23%. A better credit score doesn’t automatically mean a better rate, but the two are usually correlated.

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A loan with bad credit could have 261% more interest

All FICO scores fall within a range of 300 and 850, with scores of 670 or higher considered “good” by FICO standards.

If a consumer with poor credit takes out …read more

Source:: Businessinsider

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