How to get a low interest loan in 7 steps
3. Understand your debt-to-income ratio
When you apply for a loan — or any credit product — lenders will look at your debt-to-income (DTI) ratio to determine whether you can afford your potential monthly payment. To calculate your DTI, add up your monthly debts that appear on your credit report — including credit cards, loans and other regular debts — and divide that by your pre-tax monthly income. Your DTI is the final number, expressed as a percentage.
In general, the higher your DTI, the higher your rates are likely to be and the lower your approval odds are. Most lenders look for maximum DTIs of 50%, but to get the lowest available rates, you’ll need a DTI below 36%.
Bankrate tip
To qualify for a personal loan, you’ll need to have a stable income. Salaried or full-time hourly earnings will be the easiest to document. If you are self-employed, receive variable commission income or are a seasonal worker, a low-interest personal loan may be tough to get.
4. Pick the shortest term you can afford
Lenders typically offer the lowest available rates for terms of three years or shorter. Plus, interest has less time to accrue on a short repayment term, lowering your total interest costs.
Use a personal loan calculator to make sure your budget can handle the higher payment that comes with a shorter repayment term. If the payment is too high, consider lowering the amount you plan to borrow.
5. Research lenders
Personal loan rates and terms may vary significantly among lenders. While borrowing from your current financial institution may be an easy option, you could be leaving money on the table — other lenders may be able to offer you a lower rate.
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Online lenders: Typically, they give you a fully digital experience with access to higher loan amounts than you might find at banks or credit unions.
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Local and national banks: Your local bank may be a good choice if you’re an established customer, and banks can be a good option if you prefer in-person customer service.
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Federal credit unions: If you’re eligible for membership, federal credit unions are known for offering some of the lowest loan rates on the market.
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Online marketplaces, like Bankrate: If you want to save time perusing the fine print on lender websites, you can apply on a marketplace platform like Bankrate and get offers from multiple lenders with a single application.
Narrow your list by reading personal loan lender reviews and test-driving a lender’s customer service by calling with questions.
Bankrate tip
Watch for origination fees, which can run as high as 12% of your loan amount. Any origination fees will be automatically deducted from the funds you borrow before you receive them.
6. Look for discounts
Interest rate discounts can be a great way to break a tie between two lenders you’re considering. You could shave 0.25 to 0.50 percentage points off your rate by enrolling in autopay, adding a qualified co-borrower or using the funds to consolidate debt.
Ask about other perks, like extended grace periods or the option to adjust your monthly due date. You won’t know if you have access to them unless you ask.
7. Apply for prequalification
Most lenders allow you to check your rates through prequalification before formally applying for a loan. This step won’t damage your credit, since it only requires a soft credit pull. While you won’t receive a formal loan offer, you can use prequalification to estimate the rate you may receive and eliminate lenders that aren’t a good fit.
Get prequalified with at least three lenders to get a clear idea of the rates you qualify for. If you use a marketplace site like Bankrate, you’ll typically receive three or more offers based on the information you provide.
The best low-interest personal loans of 2025
If you have a high credit score and stable income, you may qualify for one of the lowest personal loan rates on the market.
How personal loan interest rates work
Lenders evaluate several factors to determine whether you qualify for a low-interest personal loan, including your credit score, employment status and debt-to-income ratio.
Your credit score plays a significant role because it tells lenders how well you managed your loans and other financial products in the past. FICO Scores, which many lenders and creditors use to make lending decisions, range from 300 to 850. The lowest rates are generally reserved for borrowers with excellent credit scores of over 800, since the risk of defaulting on payments is lower.
You could still get approved with a lower credit score, but it may be more difficult. You can also expect a higher interest rate and more fees.
Bottom line
An excellent credit score, consistent income and a low debt-to-income ratio are key to securing a low-interest personal loan. But if your finances aren’t in the best shape, consider taking a step back to improve your credit score and lower your utilization rate before applying.
If you can’t wait and need the funds as soon as possible, you can also try applying with a cosigner or signing up for an autopay discount to get a better deal. Most importantly, shop for the best low-interest personal loan for your credit situation, prequalify when possible and compare your options before taking out a loan.
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