Average Personal Loan Interest Rates

The average personal loan rate on loans with a three-year term is 15.36%, according to Credible.com’s personal loan marketplace. Borrowers who pre-qualified for that rate had a credit score of 720 or higher.

Personal loans are becoming an increasingly popular financing option, and as of the third quarter of 2023, more than 23.2 million borrowers held an unsecured personal loan with an average balance of $11,692, according to TransUnion.

Although interest rates are high, they haven’t deterred many people from pursuing personal loans, which are commonly used to finance big purchases or consolidate high-interest debt. If you’re considering a personal loan, knowing the average interest rates can help you find a loan with competitive rates.

What Are Personal Loan Interest Rates?

Personal loans typically come with fixed interest rates that stay the same over the life of your loan. Because your interest rate won’t fluctuate, you can estimate your costs of borrowing based on your rate, loan amount and repayment term.

Let’s say, for example, that you take out a $10,000 personal loan at an 11% rate on a three-year term. By using a personal loan calculator, you can see that you’d make monthly payments of $327 and pay $1,786 in total interest charges.

Interest is the cost of borrowing money—the lower your rate, the lower your payments will be.

What Is the Average Interest Rate on a Personal Loan?

For borrowers with a credit score of 720 or higher who pre-qualified on Credible.com’s online marketplace, the average interest rate on a personal loan with a three-year term was 15.36% from January 22 to 27. On personal loans with a two-year term, the Federal Reserve reports, the average rate for a personal loan is 12.35%.

The rate you get largely depends on your credit score. Borrowers with good or excellent credit tend to qualify for lower rates, while those with weaker credit may get higher rates.

Here’s how the average loan interest rates have changed from last week:

Factors Affecting Personal Loan Interest Rates

One major factor that affects personal loan interest rates is economic conditions. Over the past year, the Federal Reserve hiked rates several times in an attempt to combat inflation. As a result, average personal loan interest rates are higher today than they were a few years previously.

Based on the broader interest rate landscape, lenders will determine your interest rate based on personal factors, which are under your control. These factors include:

• Credit score. Your credit score has a major impact on the interest rate you’re offered on a personal loan. If you have good or excellent credit, lenders will see you as a less risky candidate for a loan and will offer better interest rates as a result. Weak credit might result in a higher rate—or you may not qualify at all.
• Collateral. Most personal loans are unsecured, meaning you don’t have to pledge collateral to back the loan. However, opting for a secured loan could potentially get you a better interest rate, especially if you don’t have great credit. These loans are more risky, though: You’ll lose your collateral if you can’t repay the loan.
• Co-signer or co-borrower. Some lenders also let you apply with another borrower, which may be helpful if the other applicant has a better credit history than you. Adding a creditworthy co-signer or joint applicant can help you qualify for a personal loan or access better interest rates.
• Debt-to-income (DTI) ratio. Lenders also consider your DTI when evaluating your application for a loan. A DTI below 36% can help you qualify for a loan and potentially access better rates.
• Income. Your income plays a factor as well, since lenders want to ensure you have the means to pay back your loan. A low or inconsistent income appears more risky to the lender, so they may not offer you the best interest rates.
• Repayment term. Your rate can change depending on the term you select. A longer term may have a lower rate, while short-term loans could come with higher rates. However, you could end up paying more interest overall with a lengthy repayment term.
• Loan amount. The amount you ask to borrow could also impact your interest rate. Larger loan amounts can mean higher interest rates, making it even more important to not borrow more than you need and can repay.

How To Get a Personal Loan With a Low Interest Rate

Before taking out a personal loan, consider these tips to find the lowest possible interest rate:

• Shop around with multiple lenders. Rates and terms vary by lender, so compare offers from several banks, credit unions and online lenders to find the best personal loan for you. Many lenders give you the option of pre-qualifying for a loan, which enables you to check your rates without harming your credit score.
• Improve your credit score. If you don’t have an immediate need for a personal loan, take some steps to improve your credit before applying. Reducing your credit utilization and making on-time payments on your debts can help. If you find any mistakes on your credit report, dispute those errors with the credit bureaus.
• Reduce your DTI. Decreasing your debt-to-income ratio can also help you become a more competitive candidate for a personal loan. You can reduce your DTI by paying down your debts or increasing your income. Refinancing loans or modifying your monthly payments with an alternative repayment plan may also help lower your DTI.
• Consider applying for a secured or co-signed loan. If weak credit is burdening you with high interest rates, applying for a loan with collateral or a co-signer may help. Weigh the pros and cons of this approach to see if borrowing a secured or co-signed loan would be worth the potential interest savings.
• Compare interest rates on different repayment terms. Finally, take time to compare your loan offer on multiple repayment terms. Some lenders let you choose terms anywhere from one to seven years or longer. Look for a term that has a competitive interest rate and an affordable monthly payment.