What is the Interest Rate on Personal Loans?
Generally, a good personal loan interest rate is one that’s lower than the national average. The interest rates offered will fluctuate over time.
As of July 2022, the average interest rate for a personal loan currently stands around 13.5% for a 5-year loan, according to Forbes.
There are various factors that will determine personal loan interest rates. This includes the repayment term, your credit score, and debt-to-income ratio.
In general, personal loan interest rates can vary dramatically based on your credit score, income, and loan terms. As of July 2022, online lenders showed rates anywhere from 4-36%. Therefore, it’s important to compare loan rates before applying for a loan.
Personal loans use the term APR, or annual percentage rate, to refer to the cost of the loan in addition to the principal balance. One of the biggest factors in determining your APR is your credit score.
With a high credit score, you’ll have better chances of getting lower interest rates.
Interest rates on personal loans are significantly lower than interest rates on credit cards. Currently, rates on credit cards average more than 17% and this may rise if interest rates continue to go higher. This explains why personal loans are often used to consolidate debt.
Unsecured debt that doesn’t require collateral will almost always charge higher personal loan interest rates. This is the reason personal loan interest rates might be higher than a mortgage or car loan.
💡 Tip: Use our personal loan interest rate calculator here.