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Personal Loan Interest Rates 

Considering interest rates represent a notable component of loan costs, engaging in a comparative analysis of lenders is crucial to pinpoint the most favorable personal loan rates. In the blog, Beem explains what constitutes good or bad interest rates.
Personal Loan Interest Rates 
Personal Loan Interest Rates 
Personal loans have experienced a surge in popularity in recent weeks. Consumers are increasingly turning to personal loans for efficient debt consolidation. Therefore, it is important to understand various aspects pertaining to personal loan interest rates. Let's explore!
In this article

What Are Current Personal Loan Rates?

Personal loan interest rates presently span from approximately 5% to 36%, contingent on various factors such as the lender, the creditworthiness of the borrower, and additional considerations. While interest rates represent a notable component of loan costs, engaging in a comparative analysis of lenders is crucial to pinpoint the most favorable personal loan rates. Beem helps you find the best loan offers available for you. 

In the past decade, personal loans have experienced a surge in popularity. Consumers are increasingly turning to personal loans for efficient debt consolidation. These loans also provide lower interest rates than credit cards. A study by Bankrate conducted on September 20, 2023, revealed that the average interest rate for personal loans was 11.31 percent. This data highlights personal loans’ continued relevance and appeal in the financial landscape. However, it’s essential to recognize that the rate you obtain may deviate, either higher or lower, depending on your financial situation.

In contrast to rates observed in the past year or two, personal loan rates are currently elevated. Although they exhibit less volatility than mortgage rates, broader economic shifts have propelled these rates upwards and compelled lenders to adopt stricter underwriting criteria. Factors contributing to this increase in personal loan rates include persistent upticks in the Federal Funds rate and concerns about an impending recession.

Average Personal Loan Interest Rates by Credit Score

Lender selection, borrower qualifications, and loan attributes all contribute to the variability in interest rates. However, the borrower’s credit score is the most reliable predictor of these rates. Individuals possessing a strong credit history, categorized as either good or excellent, may encounter average loan interest rates as low as 13.5 percent. In contrast, individuals with average or poor credit can expect substantially higher average interest rates. Bankrate’s research provides an informative chart illustrating the average interest rates consumers pay based on their credit scores.

Credit scoreAverage loan interest rate
720–85010.73%-12.50%
690–71913.50%-15.50%
630–68917.80%-19.90%
300–62917.80%-19.90%

Excellent Credit

According to aggregate, anonymized data, in August, borrowers with excellent credit (720 or higher score) received rates from 12.28% to 16.79%. To get the lowest rates, ensure you have a high income and a long credit history proving you were punctual in making payments to other creditors. Excellent-credit borrowers can be rewarded by their lenders with extra perks, like rate discounts and zero fees.

Having an exceptional credit score, typically exceeding 720 on the FICO scale, positions you favorably to meet the requirements for the most attractive interest rates when seeking a personal loan. Moreover, if you maintain a substantial and consistent income, you can expect to receive competitive interest rate offers from various lenders.

Good Credit

Maintaining good credit, equivalent to a FICO score of at least 670, can enhance your eligibility for securing loans with favorable interest rates. If you combine a low debt-to-income ratio (DTI), a steady income, and good credit, you may be offered the most competitive interest rates if you seek loans.

If you fall within the good credit score range of 690 to 719, you may be liable to interest rates ranging from 14.76% to 19.38%. While a good credit score certainly aids in obtaining a low rate, the absolute lowest rates are typically reserved for individuals with minimal debt, substantial income, and a credit history showcasing accounts in good standing.

Fair Credit

Maintaining fair credit, falling within the range of 580 to 669 on the FICO scale, can present challenges in securing personal loans with favorable interest rates. While many lenders may extend loan offers, they often accompany these offers with elevated interest rates or associated fees. Enhancing your credit score can be a cost-saving strategy by potentially reducing the interest expenses when you opt for a loan.

In August, users with fair credit, falling within the score range of 630 to 689, were offered interest rates ranging from 16.43% to 21.72%, as indicated by anonymized marketplace data. If you find yourself in the fair credit category, one effective strategy for securing a lower interest rate is to include a co-signer or joint borrower with superior credit and a higher income. It significantly improves your prospects of obtaining a more favorable rate.

Bad Credit

When dealing with poor credit, denoted by a FICO score below 580, obtaining approval for most personal loans can prove challenging. If you secure a loan, the offered interest rates will probably be considerably high. In such circumstances, seeking out lenders who specialize in assisting borrowers with bad credit scores or employing alternative lending approaches is advisable.

In August, users with scores below 630, as per anonymized data, obtained pre-qualified rates ranging from 19.98% to 23.87%. For consumers with the lowest credit scores, it may be challenging to secure a personal loan with an interest rate below 36%, commonly regarded as the highest Annual Percentage Rate (APR) considered affordable by most consumer advocates. One can explore options such as requesting a lower loan amount, enlisting a co-signer, or securing the loan to enhance the likelihood of obtaining funding.

Also Know about: Personal Loan Interest Rates

Average Loan Rates by Lender Type

Local banks and credit unions that maintain physical branches may advertise competitive personal loan offerings. In contrast, online lenders frequently present loans with initial interest rates that are lower, particularly for consumers boasting excellent credit. Individuals seeking affordable loan options tailored to their requirements should thoroughly compare the offerings of their local bank or credit union and those of online lenders they may be acquainted with.

Please note that the rates provided are valid as of June 26, 2023. Verifying the latest details is advisable by contacting the lender for any updated information.

Personal Loan Interest Rates 

Average Personal Loan Rates by Online Lender

Online lenderLoan interest rates
Achieve7.99%-35.99%
Avant9.95%-35.99%
Best Egg8.99%-35.99%
EarnestVaries by lender
Happy Money11.52%-24.81%
LendingClub9.57%-35.99%
LendingPoint7.99%-35.99%
LightStream7.99%-25.49% with Autopay
OneMain Financial18.00%-35.99%
Prosper6.99%-35.99%
SoFi8.99%-25.81% with Autopay
Upgrade8.49%-35.99% with Autopay
Upstart4.60%-35.99%

Average Personal Loan Rates by Banks

Banks have a tougher eligibility criteria than online lenders. They offer competitive rates and discounts only for their existing customers. According to the most recent data from the Federal Reserve, The average rate charged by banks in May 2023 for a two-year loan was 11.48%.

BankLoan interest rates
Citi11.49%-19.49% APR
Santander Bank6.99%-24.99% with ePay
U.S. Bank8.24%-21.49% with autopay
Wells Fargo7.49%-23.24% with autopay

Average Personal Loan Rates by Credit Union

Credit unions often offer personal loans at more favorable rates compared to banks and online lenders, a benefit that can be especially pronounced for individuals with fair or poor credit. Furthermore, credit union loan officers often adopt a comprehensive approach when evaluating loan applications, considering various aspects of the applicant’s financial situation.

As of June 2023, the National Credit Union Administration (NCUA) reported that credit unions offered an average interest rate of 10.32% for fixed-rate, three-year loans. It is important to note that federal credit unions have established a maximum cap on personal loan Annual Percentage Rates (APRs) at 18%, ensuring borrowers are protected from excessively high interest rates.

However, it’s worth mentioning that you typically need to become a member to access a personal loan from a credit union, which may involve paying fees or meeting specific eligibility criteria.

Credit unionLoan interest rates
PenFed Credit Union7.74%-17.99% APR
Members 1st Federal Credit Union7.74%-17.99% APR
Navy Federal Credit Union7.49%-18.00%
USAA9.69%-18.51%

Other Factors that Affect Your Loan Rate

While your credit score undeniably wields substantial influence over the average interest rate you can secure for a personal loan, lenders consider various other factors when assessing your creditworthiness. These encompass:

  • Income Assessment: Your income plays a pivotal role in determining the maximum amount you can borrow.
  • Debt-to-Income Ratio Evaluation: Lenders utilize your debt-to-income ratio to gauge the proportion of your existing debt relative to your income.
  • Employment Status Consideration: Your employment status indicates your ability to repay the loan, instilling confidence in lenders.
  • Loan Term Impact: The loan duration can affect the interest rate; shorter-term personal loans often come with higher interest rates than longer-term alternatives.

Some lenders impose specific loan prerequisites, such as setting minimum income thresholds or demanding a credit score. Additionally, recent bankruptcy records on your credit report or ongoing collections cases can impede loan approval. Before applying for a personal loan, consulting your lender’s FAQ pages can help determine your eligibility.

When initiating a personal loan application, it is typical for lenders to ask applicants to provide various documents. These may encompass photo identification, proof of employment and income (such as pay stubs and bank statements), and documentation verifying the applicant’s address. These requirements help lenders assess the applicant’s eligibility and ensure a smooth and secure loan application process.

What is Considered a Good Interest Rate on a Personal Loan?

The definition of a favorable interest rate on a personal loan can vary depending on individual circumstances and preferences. Generally, a reasonable rate falls below the average interest rate for personal loans. Several considerations come into play when aiming to secure a favorable personal loan rate or the most competitive rate achievable based on your credit score, income, and related factors.

A good personal loan rate essentially translates to the lowest rate that you qualify for, a determination heavily influenced by your credit history and financial particulars. Given the considerable disparity in rates among borrowers, comparing your rate directly with another individual’s is not constructive. Instead, a more productive strategy entails seeking loan offers from various lenders to discover the most competitive rate and favorable terms that align with your needs.

Also Know about: What are negative interest rates

Conclusion 

The average interest rates for personal loans can be affected by multiple factors, with credit scores playing a significant role. It is essential to recognize that individuals have a degree of influence over their credit scores. Let Beem find the best personal loan offers for you. By actively working to maintain a strong credit score and reduce their debt-to-income ratio, they can enhance their financial well-being and improve their chances of securing a personal loan with favorable interest rates that align with their budget and financial objectives.

Additionally, conducting a thorough comparison of typical loan interest rates from various sources can assist individuals in finding a personal loan that best suits their needs.

FAQs

Q. Can I obtain a personal loan with bad credit?

Yes, it is possible to secure a personal loan with bad credit. However, qualifying can be more challenging, especially for competitive rates. Less creditworthy applicants may also face lower borrowing limits and higher interest rates. Some lenders specialize in personal loans for borrowers with bad credit, relying on alternative credit data for lending decisions.

Q. Is an interest rate of 10% considered good for a personal loan?

A personal loan APR of 10% is considered favorable, as it falls below the national average. It is typically in the range offered to borrowers with prime credit scores (Vantage Score between 661 and 780). Nevertheless, specific lenders provide personal loan rates starting as low as approximately 4% for eligible applicants and loan amounts.

Q. How much can I borrow with a personal loan?

The maximum personal loan amount you can borrow is determined by the lender’s offerings and your creditworthiness. Lenders generally offer a range of loan amounts, starting from a few hundred dollars and going up to $100,000 or more. Various factors, including your credit score, monthly income, existing debt obligations, and overall credit history influence the specific loan amount you qualify for. It is essential to carefully consider your financial needs and repayment capabilities when determining the appropriate loan amount.

Q. What constitutes a good interest rate for a personal loan?

A good interest rate for a personal loan is generally considered below the national average. As of September 1, 2023, an average personal loan rate of 11.31%. However, borrowers with excellent credit scores may qualify for even lower interest rates, making their loans more affordable. This highlights the importance of maintaining a solid credit score, as it can significantly impact a personal loan’s interest rate and overall cost.

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Author

Picture of Fatema Yusuf

Fatema Yusuf

A passionate writer, who loves to write about anything and everything. She usually writes about finance and investment options. She enjoys talking about personal development and loves to help people grow. she loves to cook for kids and upcycle old stuff to give them a new life.

Editor

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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