Key Takeaways
The current average interest rate for a personal loan is 12.35%. People with good or excellent credit may qualify for a lower-than-average interest rate, while people with average or poor credit may find their interest rate is significantly higher. Different lenders have standards for the type of personal loan business they want to attract, which may affect the interest rate you're offered. Before applying for a personal loan, it's important to compare interest rates from different lenders to ensure you get the best rate for your financial situation.
According to Bankrate, the average interest rate on a personal loan is 12.35 percent as of June 26, 2024. However, the rate you qualify for will vary depending on a variety of factors, including your credit score, the type of lender you apply to, and even where you live.
A glimpse into the trends in personal loan interest rates can help you understand if now is a good time to apply for a personal loan.
Average personal loan interest rates by credit score
If you have a good or excellent credit score, your annual percentage rate (APR) may be two to three times lower than the APR for a fair or poor credit score. Good credit rates are usually on par with or below the national average. With a fair or poor credit score, your rate may be comparable to credit card interest rates.
This table shows the average interest borrowers pay per credit score, based on research from Bankrate.
Credit Score Average Loan Rate 720-850 10.73%-12.50% 690-719 13.50%-15.50% 630-689 17.80%-19.90% 300-629 28.50%-32.00%
Bankrate Insights
This table reflects average interest rates – you may qualify for much lower rates (less than 8% with some lenders) depending on your credit score, loan amount and the repayment term you choose.
Average Personal Loan Interest Rates by Lender Type
Local bank and credit union branches tend to offer special interest rates and fee discounts to their customers and members. However, online lenders that specialize in personal loans often offer lower prime credit rates. To find the best deal, compare the services of your bank or credit union with online lenders you're familiar with, and get pre-qualified if possible.
The APRs listed for each lender are accurate as of 05/13/2024.
Average interest rate for personal loans from online lenders
Online Lender Loan Rates Achieve 8.99%-35.99% Avant 9.95%-35.99% Best Egg 8.99%-35.99% Happy Money 11.72%-17.99% LendingClub 8.98%-35.99% LendingPoint 7.99%-35.99% LightStream 7.49%-25.49% With AutoPay OneMain Financial 18.00%-35.99% Prosper 8.99%-35.99% SoFi 8.99%-29.49% With AutoPay Upgrade 8.49%-35.99% With AutoPay Upstart 7.80%-35.99%
Average interest rate for personal loans from banks
Bank Loan Interest Rates Citi 10.49%-19.49% M&T Bank 7.24%-15.69% TD Bank 8.99%-23.99% Santander Bank 7.99%-24.99% US Bank 8.74%-24.99% Auto-Pay Available Wells Fargo 7.49%-23.24% Auto-Pay Available
Average interest rate for personal loans from credit unions
Credit Union Loan Rates PenFed Credit Union 7.99%-17.99% Municipal Credit Union 7.99%-17.99% Navy Federal Credit Union 8.99%-18.00% USAA 10.34%-18.51%
Other Factors That Affect Personal Loan Interest Rates
The interest rate on a personal loan depends on your credit score. Lenders consider other details to gauge your creditworthiness and, in turn, determine the features you may be eligible for. Some of the factors that are evaluated include:
Income. Some lenders offer discounted interest rates for high incomes. To borrow the highest amount of personal loans, you need to have a significantly higher income than the average person. Debt-to-income ratio (DTI). Lenders measure how much of your current income goes towards debt each month. A lower DTI ratio could mean a lower APR. Loan term. Typically, the shorter the term, the lower the interest rate. However, a shorter term means higher monthly costs, so check your budget to make sure your payments are affordable. Loan amount. Some lenders offer lower interest rates for larger loan amounts. The opposite is also true, and you may have to pay a higher interest rate for a smaller amount. Relationship with your bank. Banks and credit unions may offer discounts if you also have a checking account with them. Location of residence. Depending on the state you live in, you may have to pay a higher interest rate. For example, the average interest rate for a personal loan in Rhode Island is about 4% higher than the average interest rate for a personal loan in Florida, according to recent S&P Global data. Employment history. Since personal loans are unsecured, lenders will take a closer look at your employment history to ensure that your job is stable and you have a regular income.
When applying for a personal loan, you will need to submit the following documents:
Photo ID. Employment contact information. Proof of income such as a pay stub or bank statement. Proof of address.
Why personal loan interest rates vary from lender to lender
Personal loan companies set interest rates based on the type of borrower they lend to, and online lenders that cater to higher-income, better-credit borrowers often have much lower interest rates.
Banks and credit unions may offer lower interest rates to existing customers, especially if you have large balances in your checking, savings or other deposit accounts. This means that even if you have fair or bad credit, you should shop around for a lower interest rate.
Interest rates from bad credit lenders can vary widely, and you may be approved based on other factors such as how long you've worked and the type of job you do. Lenders that offer terms shorter than the 24-month standard may still offer their lowest interest rates if you qualify for higher monthly payments.
How are average personal loan interest rates trending?
The average interest rate on a personal loan has been rising steadily since March 2022, when the Federal Reserve announced the first of several rate hikes aimed at taming inflation. Despite overall interest rates being expected to fall in 2024, the average interest rate on a personal loan has been rising steadily through most of the first and second quarters of this year.
Unfortunately, even if the Fed cuts rates by the end of the year, a weakening economy could cause interest rates to rise: Personal loans are closely tied to consumer health, and a weak economy could lead to job losses or cuts in work hours, which could cause personal loan lenders to raise interest rates.
What is a good interest rate for a personal loan?
A good interest rate for a personal loan is generally on the low end of the range, currently starting at about 7 percent. For example, if you have excellent credit, an interest rate below 11 percent would be considered good, while 12.5 percent would be less competitive.
To improve your chances of getting a good interest rate, make your credit card payments on time, minimize your credit card usage, and avoid opening too many new accounts at once. Always get pre-qualified with at least three different lenders to get the best terms.
Conclusion
When considering a personal loan, check the average interest rates first. Your credit score, the type of lender you choose, and even where you live will affect the rate you ultimately receive. Always compare interest rates from multiple lenders and take steps to improve your credit score to get the best possible rate.