The latest trends in personal loan interest rates from the Credible marketplace, updated weekly. (iStock)
Borrowers with good credit personal loans during the previous seven days prequalified for rates that were lower for 3- and 5-year loans compared to fixed-rate loans from the previous seven days.
For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender between August 15 and 21:
- Interest rates on three-year fixed-rate loans averaged 15.85%, down from 15.99% the previous seven days and up from 15.37% a year ago.
- Interest rates on five-year fixed-rate loans averaged 21.61%, down from 22.07% the past seven days and up from 19.11% a year ago.
Personal loans have become a popular way to consolidate debt and pay off credit card debt and other loans. They can also be used to cover unexpected and urgent expenses, such as medical bills, arranging a major purchase, or… finance home improvement projects.
Average interest rates for personal loans
Average personal loan interest rates have fallen over the past seven days for 3- and 5-year loans. While the interest rate on three-year loans fell by 0.14 percentage points, the interest rate on five-year loans fell by 0.46 percentage points. Interest rates for 3- and 5-year terms remain higher than this time last year, with an increase of 0.48 percentage points for three-year terms and an increase of 2.50 percentage points for five-year terms.
Still, borrowers can benefit from interest savings with a 3- or 5-year personal loan, as both loan terms offer lower interest rates on average than more expensive borrowing options like credit cards.
But whether a personal loan is right for you depends on several factors, including the rate you can qualify for, which is largely based on your credit score. Comparing multiple lenders and their rates will ensure you get the best personal loan for your needs.
Before applying for a personal loan, you should use a personal loan marketplace like Credible comparison shop.
Weekly interest rate trends for personal loans
Here are the latest trends in personal loan interest rates from the Credible marketplace, updated weekly.
The chart above shows the average pre-qualified rates for borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender.
For the month of July 2024:
- Interest rates on three-year personal loans averaged 23.60%, up from 23.02% in June.
- Interest rates on 5-year personal loans averaged 25.06%, up from 24.81% in June.
Personal loan rates vary significantly depending on credit score and loan term. If you’re curious about the personal loan rates you qualify for, you can use an online tool like Credible to compare options from different private lenders.
All Credible lenders in the market offer fixed interest loans at competitive rates. Because lenders use different methods to evaluate borrowers, it’s a good idea to request personal loan rates from several lenders so you can compare your options.
Current personal loan rates based on credit score
In July, the average pre-qualified rate selected by borrowers was:
- 13.38% for borrowers with credit scores of 780 or higher who choose a 3-year loan
- 32.38% for borrowers with a credit score below 600 who choose a 5-year loan
Depending on factors such as your credit score, what type of personal loan you are looking for and the loan repayment term, the interest rate may differ.
As you can see from the chart above, a good credit score can mean a lower interest rate, and interest rates tend to be higher on fixed-rate loans with longer repayment terms.
Where are the interest rates going?
The Bureau of Labor Statistics (BLS) reported that inflation slowed in May, raising hopes for multiple rate cuts in 2024. When the Fed concluded its meeting in June, it announced one cut by the end of the year, while keeping rates stable. We currently expect a cut of 25 basis points (0.25 percentage points) this year, and a cut of 100 basis points (1 percentage point) in 2025.
With interest rates currently at 5.25% to 5.50%, the Federal Funds Rate is the highest since 2001. Stubborn inflation and low unemployment made any cuts seem unlikely since a week ago. But the news could provide relief for borrowers burdened by high interest costs and for those considering a loan. However, demand for personal loans has increased and all signs point to this trend continuing, while debt levels and default rates have also risen. This could indicate that more consumers will struggle to get approved at low rates or at all – even if we see rates drop.
How to get a lower interest rate
There are many factors that influence the interest rate that a lender can offer you on a personal loan. But you can take some steps to increase your chances of getting a lower interest rate. Here are some tactics you can try.
Increase credit score
In general, people with higher credit scores qualify for lower interest rates. Steps that can help you improve your credit score over time include:
- Pay bills on time: Payment history is the most important factor in your credit score. Pay all your invoices on time for the amount due.
- Check your credit report: Review your credit report to make sure there are no errors. If you find any errors, dispute them with the credit bureau.
- Lower your credit utilization ratio: Paying off credit card debt can improve this important credit score factor.
- Avoid opening new credit accounts: Only apply for and open credit accounts that you actually need. Too many hard inquiries on your credit report in a short period of time can lower your credit score.
Choose a shorter loan term
The repayment terms for personal loans can vary from one to several years. In general, shorter terms come with lower interest rates because the lender’s money is at risk for a shorter period of time.
If your financial situation allows it, you can get a lower interest rate by requesting a shorter term. Keep in mind that the shorter term does not only benefit the lender; By choosing a shorter repayment term, you pay less interest over the life of the loan.
Get a co-signer
You may be familiar with the concept of a cosigner if you have student loans. If your credit isn’t good enough to qualify for the best personal loan interest rates, finding a cosigner with good credit can help you get a lower interest rate.
Keep in mind that if you are unable to pay off the loan, your cosigner will have to repay the loan. And co-signing for a loan can also affect their credit score.
Compare rates from different lenders
Before applying for a personal loan, it’s a good idea to shop around and compare offers from different lenders to get the lowest rates. Online lenders typically offer the most competitive rates – and can disburse your loan faster than a brick-and-mortar branch.
But don’t worry, comparing rates and conditions doesn’t have to be a time-consuming process.
Credible makes it easy. Simply enter how much you want to borrow and you can compare multiple lenders to choose the one that makes the most sense for you.
About Credible
Credible is a multi-lender marketplace that enables consumers to discover financial products that best fit their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options – without compromising their personal information or impacting their credit score. The Credible marketplace offers an unparalleled customer experience, as evidenced by over 7,500 positive Trustpilot reviews and a TrustScore of 4.8/5.
