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Interest rates on personal loans fell last week, giving eligible borrowers the opportunity to get a relatively low interest rate and fund a project, purchase or even unexpected bills.
From November 22 to November 26, the average flat rate on a three-year personal loan was 11.69% for borrowers with a credit score of 720 or higher who pre-qualified on Credible.com’s personal loan marketplace. The rate was 11.72% the previous week, according to Credible.com. The average five-year personal loan interest rate rose 1.04% last week to 15.13% from 14.09%.
Keep in mind that the rate you’ll get depends on several factors, including your credit eligibility and the loans available through your chosen lender. More creditworthy borrowers may be able to get rates much lower than average.
Related: Best Personal Loans 2021
Personal loan rates by credit score
The rates below are the estimated average interest rates on personal loans according to VantageScore’s risk levels, according to Experian. Although the rates below can serve as a general guide, note that interest rates are set and ultimately determined by lenders.
Compare personal loan rates
When you start shopping for a loan, look for lenders that offer a prequalification process. Lenders offer a range of rates online, not an exact rate based on your specific qualifications. Pre-qualification provides a more accurate picture of the rate you will receive. During the pre-qualification process, lenders perform a soft credit check, which does not affect your credit score.
After you pre-qualify, the lender can give you a snapshot of your loan options. This overview generally includes loan rates, terms, and limits. To find the best loan for your situation, consider pre-qualification with several lenders and compare terms.
You cannot guarantee approval if you pre-qualify. Lenders still require you to submit a formal application and additional documents. After you submit your formal application, lenders typically run a tough credit check, which can lower your credit score by one to five points.
Related: 5 personal loan requirements you must know before applying
Get the best price
Two quick ways to help you get favorable rates are to pay off existing debt to help lower DTI and improve your credit score. Personal loan interest rates depend on a number of factors, including overall creditworthiness, credit score, income, and the debt-to-income ratio (DTI).
Although qualification requirements vary between lenders, a minimum credit score of 720 will usually provide you with the best terms. If your score is below this indicator, and you are looking for the lowest possible GPA, you can take action to improve your score. Try strategies like lowering your credit utilization ratio, removing errors from your credit report and paying your bills early or on time.
Calculate your personal loan payments
You can estimate your monthly payment and the amount of interest you will pay once you know the interest rate, duration and amount of the personal loan.
For example, let’s say you take out a personal loan of $5,000 for five years at a fixed interest rate of 15.13%. You’ll pay about $119 per month and interest of about $2,157 over the life of the loan, according to the Forbes Advisor personal loan calculator. Overall, you’ll pay $7,157 in total, which includes both principal and interest.