The average overall interest rate for personal loans now sits at 21.44%, a slight uptick from last week’s rate of 21.09%. Personal loans are a versatile financial tool, useful for expenses ranging from home renovations to weddings, dental work, or even income taxes.
However, debt consolidation remains the most popular reason people take out personal loans, with lenders like Happy Money and Reach Financial specializing in this category.
Best Personal Loan Interest Rates
Borrowers with excellent credit scores typically secure the lowest personal loan interest rates, while those with bad credit face significantly higher rates. A good interest rate is generally in the single digits, as lower rates minimize the total cost of borrowing. Among the 27 lenders analyzed, here are the three best APRs currently available:
- American Express Personal Loan: 5.91%
- Reach Financial Personal Loan: 5.99%
- LightStream Personal Loan: 6.94%
Current Personal Loan Rate Trends
We’ve compiled data from 27 personal loan products to provide a clear picture of interest rate trends:
| Rate Type | This Week’s Rate | Last Week’s Rate |
|---|---|---|
| Average Overall Rate | 21.44% | 21.09% |
| Average Low Rate | 11.60% | 11.60% |
| Average High Rate | 31.62% | 31.40% |
| Highest Rate | 99.99% | 99.99% |
| Lowest Rate | 5.91% | 5.91% |
The lowest rate available is offered by American Express Personal Loan at 5.91%, while the highest rate, from NetCredit Personal Loans, reaches a staggering 99.99%. However, the rate you qualify for depends on your credit score and financial profile.
Personal Loan Rates by Credit Score
Borrowers’ credit scores play a major role in determining their interest rates. Here’s how rates break down by credit category this week:
| Credit Score Range | Average APR This Week | Average APR Last Week | Minimum APR | Maximum APR |
|---|---|---|---|---|
| Excellent (720+) | 20.53% | 17.58% | 7.99% | 275.85% |
| Good (660–719) | 40.96% | 51.69% | 8.55% | 325.00% |
| Fair (620–659) | 95.71% | 94.54% | 17.95% | 428.78% |
| Poor (<620) | 182.18% | 175.87% | 33.10% | 441.11% |
Why Do People Take Out Personal Loans?
Data from 149 borrowers shows that 40.94% of loans are used for debt consolidation, making it the most popular purpose by far. Other reasons include:
- Household expenses: 12.08%
- Home improvement: 8.05%
- Auto purchases: 6.04%
- Medical and dental expenses: 1.34%
- Vacations: 1.34%
Debt Consolidation Loan Rates
Debt consolidation loans have an average overall rate of 18.41%, with low rates starting at 9.66%. Borrowers with excellent credit can qualify for the best rates, such as Reach Financial’s minimum APR of 5.99%.
| Credit Score Range | Average APR for Debt Consolidation |
|---|---|
| Excellent (720+) | 15.66% |
| Good (660–719) | 16.48% |
| Fair (620–659) | 18.13% |
Factors That Affect Personal Loan Rates
Several factors determine the interest rate you’ll qualify for:
- Credit Score: Borrowers with higher scores receive better rates.
- Loan Term: Longer terms may mean lower monthly payments, but higher total interest costs.
- Lender Type: Rates vary by lender; for instance, Reach Financial offers rates as low as 5.99%, while PenFed Credit Union starts at 8.99%.
- Economic Climate: Changes in Federal Reserve policies can influence personal loan rates.
Tips for Getting the Best Rates
Here are some actionable tips to secure the lowest possible personal loan rate:
- Shop Around: Compare quotes from multiple lenders to find the most competitive rate.
- Consider Shorter Loan Terms: While monthly payments might increase, the total interest paid will likely be less.
- Join a Credit Union: These institutions often provide favorable rates to members.
- Improve Your Credit Score: Waiting to apply until you have a better credit score can make a significant difference.
Personal loan interest rates remain high, with the average at 21.44%, but borrowers with excellent credit can still secure rates in the single digits. Whether you’re consolidating debt, making home improvements, or covering medical expenses, understanding how rates are calculated and shopping around can save you money in the long run.