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The latest interest rate trends for personal loans from Credible Marketplace, updated weekly. (iStock)
Borrowers with good credit research personal loans during the last seven days they prequalified for higher rates 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 Credible Marketplace to select a lender between July 29 and August 4:
- Rates on 3-year fixed-rate loans averaged 16.49%, up from 15.89% seven days earlier and 14.65% a year ago.
- Rates on 5-year fixed-rate loans averaged 20.41%, up from 19.72% the previous seven days and 17.87% 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 emergency expenses such as medical bills, to take care of a major purchase or finance home improvement projects.
Average interest rates on personal loans
Average personal loan interest rates have increased over the past seven days for 3- and 5-year loans. While 3-year loan rates increased by 0.60 percentage points, 5-year loan rates increased by 0.69 percentage points. Interest rates for 3- and 5-year terms remain higher than last year, up 1.84 percentage points for 3-year terms and 2.54 percentage points for 5-year terms .
However, borrowers can benefit from saving on interest with a 3- or 5-year personal loan, as both loan terms offer lower interest rates on average than higher-cost lending options such as credit cards.
But whether a personal loan is right for you depends on multiple factors, including the rate at which you qualify, which largely depends on your credit score. Comparing multiple lenders and their rates helps you get the best personal loan for your needs.
Before applying for a personal loan, use a personal loan marketplace like Credible to comparison shop.
Trend in weekly personal loan rates
Here are the latest personal loan interest rate trends from the Credible Marketplace, updated weekly.
The chart above shows average pre-qualified rates for borrowers with credit scores of 720 or higher who used Credible Marketplace to select a lender.
For the month of July 2024:
- Rates on 3-year personal loans averaged 23.60%, up from 23.02% in June.
- Rates on 5-year personal loans averaged 25.06%, up from 24.81% in June.
Personal loan rates vary greatly based on your credit score and loan term. If you’re curious about what type of personal loan rate you might be eligible for, you can use an online tool like Credible to compare options from different private lenders.
All credible lenders in the market offer fixed rate loans at competitive rates. Because lenders use different methods to evaluate borrowers, it’s a good idea to request personal loan rates from multiple lenders so you can compare 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 a credit score of 780 or higher who choose a 3-year loan
- 32.38% for borrowers with credit scores below 600 who choose a 5-year loan
Depending on factors such as your credit score, the type of personal loan you are seeking, and the loan repayment period, your interest rate may 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.
Where are interest rates going?
The Bureau of Labor Statistics (BLS) reported that inflation slowed in May, raising hopes of multiple interest rate cuts in 2024. When the Fed concluded its June meeting, signaled a cut by the end of the year while keeping rates stable. As of now, we expect a 25 basis point (0.25 percentage point) cut this year and a 100 basis point (1 percentage point) cut in 2025.
Currently sitting between 5.25% and 5.50%. Federal funds rate is the highest since 2001. Sticky inflation and low unemployment had made any cuts starting a week ago seem unlikely. But the news could offer relief to borrowers burdened by high interest costs and to those considering a loan. However, application for personal loans has increased and all signs point to this trend continuing, while debt levels and default rates they also increased. This could indicate that more consumers will have difficulty getting approved at low rates or not getting approved at all, even if we see rates drop.
How to get a lower interest rate
Many factors influence the interest rate a lender might 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 to try.
Increase your credit score
In general, people with higher credit scores are eligible for lower interest rates. Steps that can help you improve your credit score over time they include:
- Pay bills on time: Payment history is the most important factor in your credit score. Pay all bills on time for the amount due.
- Check your credit report: Check your credit report to make sure there are no errors. If you find errors, report them to the credit bureau.
- Reduce your credit utilization rate: Paying off credit card debt can improve this important credit score factor.
- Avoid opening new credit accounts: Apply for and open only the credit accounts you actually need. Too many hard inquiries on your credit report in a short amount of time could lower your credit score.
Choose a shorter loan term
Personal loan repayment terms can vary from one to several years. Generally, shorter terms result in lower interest rates, since the lender’s money is at risk for a shorter period of time.
If your financial situation allows it, requesting a shorter term could help you get a lower interest rate. Keep in mind that the shorter term doesn’t just benefit the lender: By choosing a shorter repayment term, 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 could help you get a lower interest rate.
Just remember, if you default on the loan, your cosigner will be forced to pay it back. And cosigning for a loan could 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 be quicker to disburse your loan than a brick-and-mortar institution.
But don’t worry, comparing rates and terms doesn’t have to be a time-consuming process.
Credible makes it easy. Simply enter the amount you want to borrow and you’ll be able to compare multiple lenders to choose the one that makes the most sense for you.
Speaking of believable
Credible is a multi-lender marketplace that allows consumers to discover the financial products best suited to their specific circumstances. Credible’s integrations with major lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options, without putting their personal information at risk or impacting their credit score. The Credible Marketplace offers an unrivaled customer experience, as highlighted by over 7,500 positive reviews on Trustpilot and a TrustScore of 4.8/5.