Personal loan interest rates plunge: Borrowers can save on 3-year and 5-year terms

5-year personal loan interest rates slip, 3-year rates edge up
Written by Publishing Team

Our goal here at Credible Operations, Inc. , NMLS Number 1681276, referred to as “Credibility” below, is to provide you with the tools and confidence you need to improve your financial position. Although we promote products from our lender partners who compensate us for our services, all opinions are our own.

The latest trends in interest rates on personal loans from Credible Market, updated weekly. (iStock)

Borrowers with good credit who sought personal loans within the past 7 days pre-qualified for lower rates for 3-year fixed-rate loans and 5-year fixed-rate loans compared to the previous seven days.

For borrowers with a credit score of 720 or above who used the Credibility Market to select a lender between December 30 and January 6:

  • Average interest rates on 3-year fixed-rate loans were 11.17%, down from 11.76% in the previous seven days and 11.37% a year ago.
  • Average interest rates on 5-year fixed-rate loans were 13.73%, down from 14.64% in the previous seven days and 14.53% a year ago.

Personal loans have become a popular way to consolidate and pay off credit card debt and other loans. They can also be used to cover unexpected expenses such as medical bills, take care of a large purchase or finance home improvement projects.

Interest rates on 3-year and 5-year personal loans have fallen over the past week. 5-year interest rates are down about 1%, while 3-year rates are down by more than half a percentage point. Personal loan interest rates continue to trend downward, despite daily fluctuations. Borrowers can benefit from significant savings if they close a 3-year or 5-year fixed rate personal loan at the present time.

Deciding whether a personal loan is right for you often depends on several factors, including the rate at which you can qualify for it. Comparing several lenders and their rates can help ensure that you get the best possible personal loan for your needs.

It is always a good idea to compare shopping on sites like Credible to understand your eligibility and choose the best option for you.

Here are the latest trends in personal loan interest rates from Credible Market, updated weekly.

Trends in weekly interest rates for personal loans

The chart above shows average prequalified rates for borrowers with credit scores of 720 or higher who used Credible Marketplace to choose a lender.

For December 2021:

  • Average interest rates on 3-year personal loans were 11.29%, down from 11.32% in November.
  • Average interest rates on 5-year personal loans were 14.12%, down from 14.25% in November.

Personal loan rates vary greatly depending on the credit score and term of the loan. If you’re interested in knowing what type of personal loan rates you may qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking your rates will not affect your credit score.

In December, the average pre-qualified rate chosen by borrowers was as follows:

  • 8.92% of borrowers with a credit score of 780 or higher choose a 3-year loan
  • 29.04% of borrowers with a credit score of less than 600 choose a 5-year loan

All the reliable lenders in the market offer fixed rate loans at competitive rates. Since lenders use different methods to rate borrowers, it is a good idea to request personal loan rates from multiple lenders so you can compare your options.

Current personal loan rates by credit score

Depending on factors such as your credit score, the type of personal loan you are looking for and the term of loan repayment, the interest rate can vary.

As shown in the chart above, a good credit score can mean a lower interest rate, and rates tend to be higher on loans with fixed interest rates and longer repayment terms.

How to get a lower interest rate

Many factors affect the interest rate that a lender may offer you on a personal loan. But you can take some steps to boost your chances of getting a lower interest rate. Here are some tactics to try.

Increase credit score

Generally, people with higher credit scores are eligible for lower interest rates. Steps that can help you improve your credit score over time include:

  • Pay bills on time. Payment history is the single most important factor in your credit score. Pay all your bills on time for the amount due.
  • Check your credit report. Look at your credit report to make sure there are no errors in it. If you find errors, bring them up with the credit bureau.
  • Lower your credit utilization ratio. Paying off credit card debt can improve this important credit rating factor.
  • Avoid opening new credit accounts. Apply only to get and open the credit accounts that you actually need. Having a lot of difficult inquiries about your credit report in a short period of time can lower your credit score.

Choose a shorter loan term

Repayment terms for a personal loan can vary from one year to several years. In general, shorter tenures come with lower interest rates, because the lender’s money is at risk for a shorter period of time.

If your financial situation allows, applying for a shorter period can help you get a lower interest rate. Keep in mind that a shorter term doesn’t just benefit the lender – by choosing a shorter repayment period, you’ll pay less interest over the life of the loan.

Get a cosigner

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 interest rates on personal loans, finding a cosigner with good credit can help you secure a lower interest rate.

Just remember, if you default on the loan, your activator will be in trouble to pay it off. Applying for a loan can also affect their credit score.

Compare rates from different lenders

Before applying for a personal loan, it is a good idea to shop and compare offers from several different lenders to get the lowest rates. Online lenders usually offer the most competitive rates – and paying off your loan can be faster than with a real one.

But don’t worry, comparing prices and terminology doesn’t have to be a time consuming process.

Credibility makes it easy. Just enter the amount you want to borrow and you will be able to compare several lenders to choose the most suitable one for you.

about credibility

Credible is a multi-lender marketplace that enables consumers to discover financial products best suited to their unique circumstances. Credible’s integration with major lenders and credit bureaus allows consumers to quickly compare personal and accurate loan options – without jeopardizing their personal information or affecting their credit score. Credible Marketplace provides an unparalleled customer experience, as evidenced by over 4,500 positive Trustpilot reviews and a TrustScore score of 4.7/5.

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