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When you take out a personal loan, you have to pay interest. As a result, it's in your best interest to get the best personal loan interest rate possible. At this point, you might be wondering "What is a good interest rate for a personal loan?" Or at least, "What is the average personal loan rate?"
Generally, the rate you'll receive will vary depending on your credit score, income, amount borrowed, and loan repayment term. Still, there are some industry averages you can use to compare personal loans.
Here's how to find out whether the loan interest rate you're offered is a good interest rate.
Experian put the average personal loan annual percentage rate (APR) at 9.41% in 2019, while the New York Federal Reserve puts the average personal loan interest rate at 9.34% for the third quarter of 2020 on a 24-month loan.
But your financial history influences the rate you're approved for, so might get approved for loans above or below the average interest rate. How do you know if the interest rate you're offered is good for you?
A good personal loan interest rate depends on your credit score:
For a guide to finding the right loan for your credit score, check out our page on credit scores and personal loans.
Get the best rates and terms to fit your needs. Here are a few loans we'd like to highlight, including our award winners.
Your own personal situation when you apply for a loan, the details of the loan you're applying for, and the lender you've chosen will all affect the interest rates you're offered. Some of the key factors that can impact your loan rate include:
You can use the loan calculator below to see how different interest rates affect your monthly payment.
When looking for a good interest rate for a debt consolidation loan, an additional question to ask is "Is this a lower rate than the rate on my credit cards?" In general, personal loan interest rates are lower than credit card interest rates -- but it's always good to double-check any specific loans you're considering.
Comparing the personal loan interest rate you're being offered with the average loan rate is the first step to get an idea of where you stand.
But since rates can vary wildly depending on your credit profile, the best thing to do is to compare rates from at least three lenders. Ideally, look at a mix of different kinds of lenders to get the full picture. Check with your local credit union or bank in addition to an online lender or two (or three). By doing this comparison, you can see whether the rates are all similar or if any stand out as particularly high or particularly low. Just be sure to check all the costs and fees associated with each loan, like the origination fee or prepayment penalty.
When comparing loan rates to see if a personal loan is offering a good rate or not, compare the APRs to get the whole picture. The APR tells you the full cost of a loan, including the interest rate and fees. Also, be careful to compare loans with the same term (compare 5-year loans to other 5-year loans) and interest rate type (compare fixed-rate loans to other fixed-rate loans).
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Some lenders offer loans at rates lower than 6%. If you're looking for a loan with a lower interest rate, you can find some of the top-rated low-interest loans on our list of the best low-interest personal loans.
If you're only being offered personal loans at very high rates -- above the national average rates -- you need to consider why.
Your priority should be to find out if there's something in your borrower profile that is a red flag for lenders, such as a low credit score or insufficient income. If that's the problem, you either need to improve your credit or earn more income -- or get a cosigner to vouch for you. If you have bad credit, for example, you can get a much better rate if the cosigner has a high credit score.
You can also get a lower rate by putting up collateral, like a bank account or vehicle. A loan with collateral is called a secured loan (a loan without collateral is called an unsecured loan). Secured loans often have lower interest rates, but be careful: the lender can take your collateral if you miss a monthly payment.
If you're a well-qualified borrower and aren't being offered a loan at a good rate, you may simply need to shop around to see if another personal loan lender can offer a competitive rate. You can also consider borrowing for a shorter period of time or borrowing a bit less money so you present less of a risk.
What is a good interest rate for a personal loan? It's the lowest rate you can get with your credit score and financial situation. The lower the rate you pay to borrow, the more you can save on your loan. If you're a reasonably well-qualified borrower, always be sure to compare rates from different lenders and look for rates at or below the average. That way you won't pay more than necessary to for your personal loan.
Looking for a personal loan but don’t know where to start? Our favorites offer quick approval and rock-bottom interest rates. Check out our list to find the best loan for you.
Here are some other questions we've answered:
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
Please note that this calculator is not personalized financial advice and should not be considered or used as such. Nor are we promising that by use of this calculator, will you be able to save more money, preserve wealth, or otherwise.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
Please note that this calculator is not personalized financial advice and should not be considered or used as such. Nor are we promising that by use of this calculator, will you be able to save more money, preserve wealth, or otherwise.
*Upstart Loan Disclaimer
The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of 21.97% and 36 monthly payments of $35 per $1,000 borrowed. For example, the total cost of a $10,000 loan would be $12,646 including a $626 origination fee. APR is calculated based on 3-year rates offered in the last 1 month. There is no down payment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application.
Citi Personal Loan disclaimer:
**Rates as of 05-31-2024. Your APR may be as low as 11.49% or as high as 20.49% for the term of your loan. The lowest rate quoted assumes excellent credit and a loan term of 24 or 36 months. Your APR will depend on a variety of factors including your creditworthiness, term of loan, and existing relationship with Citi. For example, if you borrow $10,000 for 36 months at 15.99% APR, to repay your loan you will have to make 36 monthly payments of approximately $351.52.
There is a 0.5% APR discount if you enroll in automatic payments at loan origination. Additionally, existing Citigold and Citi Priority customers will receive a 0.25% discount to the interest rate. If you are in default, your APR may increase by 2.00%. No down payment is required. Rates subject to change without notice.
You must be at least 18 years of age (21 years of age in Puerto Rico). Co-applicants are not permitted. Loan proceeds cannot be used for post-secondary educational or business purposes.
If you apply online, you must agree to receive the loan note and all other account disclosures provided at loan origination in an electronic format and provide your signature electronically.
Credit cards issued by Citibank, N.A. or its affiliates, as well as Checking Plus and Ready Credit accounts, are not eligible for debt consolidation, and Citibank will not issue payoff checks for these accounts. If you are unsure of the issuer on the account, please visit https://www.citi.com/affiliatesproducts for a list of Citi products and affiliates.
*SoFi Personal Loan Disclaimer
Fixed rates from 8.99% APR to 29.99% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 02/06/2024 and are subject to change without notice. The average of SoFi Personal Loans funded in 2022 was around $30K. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors.
Loan amounts range from $5,000–$100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-7%, which will be deducted from any loan proceeds you receive.
Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.
Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.
Impact to credit score: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.