Borrowers with good credit seeking personal loans in the past week were prequalified at lower rates for 3-year loans and higher rates for 5-year loans compared to the rates offered during the preceding seven days.
The average interest rate for 3-year fixed-rate loans was 14.72%, a decrease from 14.96% the previous week but an increase from 11.63% compared to a year ago.
On the other hand, the average interest rate for 5-year fixed-rate loans was 20.18%, slightly up from 20.13% in the previous week and significantly higher than the rate of 15.51% a year ago.
Personal loans have gained popularity as a means to consolidate and repay credit card debt and other loans. Additionally, they serve various purposes such as covering unexpected expenses like medical bills, making significant purchases, or funding home improvement projects.
ersonal loan interest rates for 3-year loans have observed a decrease in the past seven days, dropping by 0.24 percentage points. Conversely, 5-year loans experienced a slight increase of 0.05 percentage points. Despite this, interest rates for both loan terms are notably higher compared to the same period last year. Nevertheless, borrowers can benefit from interest savings when opting for a 3- or 5-year personal loan presently, as both terms offer significantly lower interest rates compared to higher-cost borrowing options like credit cards.
Determining if a personal loan suits your needs often depends on various factors, primarily the interest rate you qualify for. Conducting a thorough comparison of multiple lenders and their rates is essential to ensure you secure the most advantageous personal loan tailored to your requirements.
Regularly exploring platforms like Credible for comparison shopping provides valuable insights into the loan amounts you qualify for and aids in making an informed choice.
The following data presents the most recent trends in personal loan interest rates from the Credible marketplace, updated on a weekly basis.The above chart illustrates the mean prequalified interest rates for individuals with a credit score of 720 or above, utilizing the Credible marketplace to choose a lender.
For the month of August 2023:
- The average interest rate for 3-year personal loans was 23.07%, reflecting a slight increase from July’s rate of 22.99%.
- 5-year personal loans carried an average interest rate of 24.32%, showing an increase from July’s rate of 23.45%. Interest rates on personal loans exhibit significant variation based on credit scores and loan terms. If you’re interested in understanding the personal loan rates available to you, you can utilize online tools like Credible to compare offerings from different private lenders. All lenders within the Credible marketplace provide fixed-rate loans at competitive terms. Given the distinct evaluation methods employed by lenders, it’s advisable to solicit personal loan rate quotes from multiple lenders to effectively evaluate your alternatives.
In August, borrowers selected the following average prequalified rates:
- 12.36% for borrowers with a credit score of 780 or higher opting for a 3-year loan.
- 30.28% for borrowers with a credit score below 600 opting for a 5-year loan.
The interest rate for a personal loan can vary depending on factors such as your credit score, the type of personal loan you’re seeking, and the repayment term of the loan. As illustrated in the chart above, a higher credit score often correlates with a lower interest rate. Additionally, loans with fixed interest rates and longer repayment terms tend to have higher rates.
Several factors influence the interest rate offered by a lender for a personal loan. However, there are steps you can take to increase your chances of securing a lower interest rate. Here are some effective strategies:
- Maintain a good credit score: Generally, individuals with higher credit scores qualify for lower interest rates. Improving your credit score over time involves:
- Paying bills promptly: Timely payments are crucial for a positive credit score. Ensure you pay all your bills in full and on time.
- Reviewing your credit report: Regularly check your credit report for inaccuracies. If you identify errors, dispute them with the credit bureau.
- Reducing credit utilization: Lowering your credit card debt can positively impact your credit score by improving the credit utilization ratio.
- Minimizing new credit accounts: Only open new credit accounts when necessary. Numerous hard inquiries on your credit report within a short period can lower your credit score.
Repayment terms for personal loans can vary, spanning from a single year to several years. Typically, shorter terms are accompanied by lower interest rates, as the lender’s capital is at risk for a shorter duration.
If your financial circumstances permit, opting for a shorter term may enable you to obtain a reduced interest rate. It’s essential to recognize that a shorter term doesn’t only benefit the lender; choosing this option means you’ll pay less interest over the loan’s lifespan.
You might already be acquainted with the idea of a cosigner, particularly if you have experience with student loans. Should your credit fall short of qualifying you for the most favorable personal loan interest rates, enlisting a cosigner with strong credit could assist in securing a lower rate.
However, it’s crucial to bear in mind that in the event of loan default, your cosigner becomes responsible for repayment. Additionally, cosigning for a loan can impact their credit score.
Prior to submitting your personal loan application, it is advisable to conduct thorough research and evaluate offers from various lenders to secure the most favorable rates. Online lenders often provide the most competitive rates and may expedite the loan disbursement process compared to traditional, physical institutions.
The task of comparing rates and terms need not be arduous. Credible streamlines this process, simplifying it for you. By entering your desired loan amount, you can efficiently compare multiple lenders and select the one that aligns best with your needs.