What Is a Good Interest Rate on a Personal Loan?

When you take out a personal loan, the amount you borrow and the rate that you pay will determine both how much your monthly payments are and how much the loan costs you in total over time.

The amount you borrow should be the lowest possible amount you need to accomplish your goals, whether that's paying off debt, renovating a home, or financing a big purchase. And as for the rate, you'll always want to try to get the lowest possible interest rate. A higher rate means borrowing is more expensive.

The big question you might have, though, is what exactly is a "good" rate and is your lender charging you a fair amount or not? Here's what you need to know.

This is a good rate on a personal loan

A good personal loan interest rate is not the same for everyone. That's because borrowers with great financial credentials can generally get better rates than those with a lower credit score.

But in general, if you are being offered a rate that is below the national average and you have an average credit score (around 714, according to Experian), then you are most likely getting a decent deal. As of November 2023, the national average personal loan rate was 12.35%, according to the Federal Reserve Bank of St. Louis.

Now, if you have great credit, then you can expect a good rate to be below this -- a good rate might be somewhere closer to 8%. And if you have poor credit, with a score in the low 500s, then you'd be lucky to get a rate that's around double the average. The table below shows what a $10,000 personal loan paid off over five years at each of these rates would look like, so you can get an idea of what these rates might mean for you.

You likely have access to your credit score via your bank or a credit card issuer, so check to see where you stand and to get an idea of what rates you might expect to pay.

You should also get quotes from at least three to five different personal loan lenders. If you are getting similar rates from all of them and one is charging less than the others (and doesn't have a lot of surprise fees or unfavorable terms like a prepayment penalty), then the lowest-price lender of the bunch is probably offering you a good rate.

How to get the best personal loan rates

If you want to make sure you're getting the best possible rate on a personal loan, there are a few steps you should take to make that happen:

• Shop around: As mentioned above, rates do vary by lender so you'll want to compare your options to make sure you get a good rate.
• Improve your credit: Pay off debts, keep your credit card balances well below 30% of available credit, and ask creditors to remove negative information as a gesture of good will if you've generally been a good customer.
• Borrow the lowest amount possible: A loan with a lower balance may come with a better rate.
• Choose a shorter repayment term: With a shorter timeline, a lender takes on less risk, so rates can be lower.
• Consider a cosigner: If you can't get the best rates on your own, having a cosigner who is better qualified may help.

If you take these steps, ideally you can land a good rate on a personal loan so your borrowing will be as affordable as possible.