Rates on personal loans dropped last week. So long as you’re a qualified borrower, you pick up a fair interest rate. For many, this means financing a major purchase or project is within reach.
From April 29 to May 4, the average fixed rate on a three-year personal loan was 15.10% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace. The rate was 15.66% the previous week, according to Credible.com. The average rate on a five-year personal loan fell 0.78% last week to 18.85% from 19.63%.
Keep in mind that the rate you’ll receive depends on several factors, including your creditworthiness and the loans available through your chosen lender. The most creditworthy borrowers may be able to receive rates significantly lower than average.
These rates are accurate as of May 6, 2024.
Related: Best Personal Loans
How To Compare Personal Loan Rates
If you’re out to get the best rate, be sure to look for lenders who offer a personal loan prequalification process. While many lenders post their rates online, this only gives you a range of what they offer, not an exact rate based on the qualifications you meet. However, when you prequalify for a personal loan, a lender will run a soft credit check to prescreen you, which has no impact on your credit score.
Based on this information, the lender will give you a snapshot of the terms you could qualify for, including loan rates, terms and limits. You can prequalify at multiple lenders and compare the terms to find the best loan for your specific situation.
However, prequalification doesn’t guarantee approval. Once you find an offer you like, you will still need to submit a formal application and provide additional documentation to the lender. When you apply, a lender will typically run a hard credit check, which will ding your credit score between one and five points.
Related: 5 Personal Loan Requirements To Know Before Applying
Estimate Your Personal Loan Payments
You can estimate your monthly payment and how much you’ll pay in interest once you know your personal loan interest rate, term and amount.
For example, let’s say you get a $5,000 personal loan with a term of five years at a fixed interest rate of 18.85%. You’d pay about $129 monthly and around $2,757 in interest over the life of the loan, according to the Forbes Advisor personal loan calculator. Overall, you’d pay $7,757 in total, which includes both principal and interest.
How To Receive More Favorable Interest Rates
Your credit is a big factor in the rates you receive. According to Rod Griffin, senior director of consumer education and advocacy at Experian, “checking your credit report and scores three to six months before you apply for a personal loan” is a good idea. This gives you enough time to make any necessary fixes.
A credit score of 720 or better will typically get you the best terms. If you’re not quite in that credit score range, consider taking action to improve your credit score. Pay down existing debt to lower your credit utilization ratio, remove errors from your credit report and pay your bills early or on time.
