Do you have a personal loan? Find out how your interest rate compares with what your fellow Americans are paying. Image source: Getty Images.
According to Experian data, 10.8% of adults in the U.S. have personal loans. If you’re one of them, it's helpful to know if the rate you’re paying is on par with what your peers pay.
Fortunately, Experian has data on average loan balances and loan rates. We’ve got the info you need right here to see how your loan fares -- as well as some advice on what to do if your current rate is higher.
How does your personal loan rate compare to the average?
According to Experian,
- the average personal loan balance is $15,143,
- the average monthly payment is $353, and
- the average annual percentage rate (APR) is 9.37%.
APR is a broader measure of loan costs than the interest alone. It also takes fees into account, making it a more accurate measure of cost.
If your personal loan rate is below 9.37%, congrats! You’ve beaten the average and you’re paying less to borrow. But if it’s higher, you’re paying a higher borrowing cost than your fellow Americans. There could be lots of reasons for that, such as:
- Your credit score. If you don't have a great credit score, you’ll be charged more for a loan.
- Your loan amount. If you borrowed more than your peers, lenders may charge you a higher rate. Larger loans carry a greater risk of loss if you default on the loan.
- Your loan term. If you’ve stretched out your repayment over a long time, lenders may charge you more money. There’s a greater chance interest rates will change and that you’ll default over a long timeline.
You may also be paying more than average because you borrowed at a time when rates were higher or because your lender isn’t a very good one.
What should you do if your loan is at a high rate?
If your loan rate is higher than the national average, you should consider why. If you have good credit and your balance is reasonably low, you may want to look into refinancing your personal loan.
Refinancing involves taking out a new loan to pay back the current loan balance. If you get a new loan at a lower rate, you could drop your monthly payments. As long as you don’t make your repayment timeline much longer, you'll save money. More of your monthly payment could go to principal with a loan at a lower rate. That makes becoming debt-free easier and faster.
Many lenders allow you to shop for personal loans online -- often without a hard credit check that could damage your credit score. Is your rate higher than it should be? Shop around for a new personal loan. If you can drop your APR without incurring a lot of fees and costs, it’s often worth doing.
Now you know how your personal loan rate compares to the average
By comparing your own loan info with the national average, you get a clear idea of whether your loan rate is reasonable. And how to take action if you’re paying too much.
Hopefully, if you decide to refinance, you can get a loan at that average APR of 9.37% -- or even beat the average and get a lower rate so your loan is more affordable than those of your fellow borrowers.
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