High Credit Score Borrowers Are Using Personal Loans to

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There are a lot of advantages to having a good credit score — you’ll have an easier time getting approved for that new apartment and you’ll often get the best rates on car and homeowners insurance, for example — but one of the biggest benefits is that it’s cheaper to borrow money when you need it.

Those with solid credit are typically offered the best interest rates and loan terms, which plays a role in why they end up taking on larger personal loan debts than their lower credit score counterparts.

In fact, according to a recent LendingTree study, even though the majority of personal loans taken out by high-score borrowers were for debt consolidation, these borrowers tended to spend the most on personal loans to finance home improvements and business-related expenses. Those borrowing for home improvements took out an average of $21,510 while those borrowing for business purposes took out an average of $22,778.

The study looked at closed personal loan data between April 2021 and March 2022, and defined a high credit score as being 720 and above.

Below, Select takes a closer look at just why home improvements and business expenses made up the largest loan amounts for borrowers with high credit scores.

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Why high-score borrowers spent the most on loans to finance home improvements and business expenses

One obvious reason why high-score borrowers spent the most to finance home improvements and business expenses may just be that remodeling a home or funding a business typically requires large amounts of capital, and therefore large loans.

But beyond just that fact, high-score borrowers spent the most on these loan purposes because they saw them as investments, which over time would help them build wealth.

“Having a greater financial margin for error allows high-score, high-income individuals to use debt as an investment,” says Matt Schulz, chief credit analyst at LendingTree, in a company statement. “So they can take on debt to improve their home and increase its value or to start a small business that can help generate more income for the family.”

This isn’t to say that those with lower credit scores choose not to use personal loans as an investment, rather they may not have the capacity to take on larger debt loads that entail larger monthly payments. The lower an individual’s credit score is, the less access they’ll have to large borrowing power since lenders view these borrowers as less likely to pay back their debts as someone with a high credit score.

Personal loan options for everyone

The good news — when it comes to taking out a personal loan, no matter the amount — is just about anyone can get one. There are lenders that cater to borrowers with high credit scores just as there are those who cater to borrowers with lower credit scores.

If you’re looking for the best personal loans for those with fair or good credit, consider Upstart, which allows borrowers to apply for up to $50,000 and has a minimum credit score requirement of 600. Upstart will make exceptions in certain cases and may approve applicants with no credit history. It also offers long loan terms ranging from 36 to 60 months to give you ample time to pay off your debt. Keep in mind that if you’re approved with a lower credit score, you may still be subject to paying a higher interest rate.

Upstart Personal Loans

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation, credit card refinancing, wedding, moving or medical

  • Loan amounts

  • Terms

  • Credit needed

    FICO or Vantage score of 600 (but will accept applicants whose credit history is so insufficient they don’t have a credit score)

  • Origination fee

    0% to 8% of the target amount

  • Early payoff penalty

  • Late fee

    The greater of 5% of monthly past due amount or $15

Higher-score borrowers on the hunt for the best personal loans for excellent credit should consider LightStream, which offers low-interest loans with flexible terms for borrowers with good credit or higher. Those with excellent credit can take advantage of some of the lowest interest rates, which range from 3.49% to 19.99% APR*, when they also sign up for autopay. Take note, however, that LightStream doesn’t offer loans for small business uses, in case this article’s topic has inspired you. You can, however, get a LightStream personal loan to take on projects such as remodeling your bathroom or kitchen.

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    3.49% to 19.99%* when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, wedding and others

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Other options for home renovation and small business financing

There are many ways to finance a home renovation or small business. Beyond personal loans, alternatives include saving up money in a high-yield savings account to pay in cash, taking out a revolving home equity line of credit, also called a HELOC — for funding home renovations, specifically — or using a credit card.

The best credit cards to help you pay for your next home remodel include the Chase Freedom Unlimited® for its introductory 0% APR on new purchases — you’ll get up to 15 months of no-interest financing on new purchases to cover the cost of your project (after, 16.49% to 25.24% variable APR). That way, you’ll have over a year to finance home repairs. Plus you’ll earn cash back on your purchases.

Chase Freedom Unlimited®

  • Rewards

    Enjoy 5% cash back on travel purchased through Chase Ultimate Rewards®, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 1.5% on all other purchases

  • Welcome bonus

    Earn an extra 1.5% on everything you buy (on up to $20,000 spent in the first year) – worth up to $300 cash back. That’s 6.5% on travel purchased through Chase Ultimate Rewards®, 4.5% on dining and drugstores, and 3% on all other purchases.

  • Annual fee

  • Intro APR

    0% for the first 15 months from account opening on purchases and balance transfers

  • Regular APR

  • Balance transfer fee

    Intro fee of either $5 or 3% of the amount of each transfer, whichever is greater, on transfers made within 60 days of account opening. After that, either $5 or 5% of the amount of each transfer, whichever is greater.

  • Foreign transaction fee

  • Credit needed

The best small business credit cards can help you finance business expenses while offering everything from rewards and interest-free financing on new purchases to luxurious travel perks, extended warranties, and insurance, among other business-related benefits.

With The Blue Business® Plus Credit Card from American Express, for example, cardholders can benefit from an introductory APR of zero interest for 12 months on purchases from the date of account opening (after, 14.74% to 22.74% variable APR, see rates and fees). This special financing period can provide you with an interest-free period of up to a year. You’ll also earn 2X Membership Rewards points on eligible purchases up to $50,000 a year (then 1x).

The Blue Business® Plus Credit Card from American Express

On the American Express secure site

  • Rewards

    Earn 2X Membership Rewards® points on everyday business purchases up to $50,000 per year, then 1X point per dollar

  • Welcome bonus

    Earn 15,000 Membership Reward Points® after you spend $3,000 in eligible purchases on the card within your first 3 months of card membership.

  • Annual fee

  • Intro APR

    0% for 12 months on purchases from date of account opening

  • Regular APR

    14.74% – 22.74% variable

  • Balance transfer fee

  • Foreign transaction fee

  • Credit needed

For rates and fees of The Blue Business® Plus Credit Card from American Express, click here.

*Your LightStream 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 3.99% APR with a term of three years would result in 36 monthly payments of $295.20.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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