Borrowers with strong credit who applied for personal loans in the last seven days were prequalified for lower rates for three and five-year loans than fixed-rate loans in the previous seven days. For customers with credit ratings of 720 or better who choose a lender through the Credible marketplace between May 30 and June 5:
- Rates for 3-year fixed-rate loans averaged 15.57%, down from 15.62% the week before but up from 14.14% a year ago.
- Rates for 5-year fixed-rate loans were 19.76%, down from 20.45% the previous seven days but up from 18.15% a year earlier.
Personal loans have grown in popularity as a means of consolidating debt and repaying credit card and other liabilities. They can also be used to pay unexpected and emergency expenses such as medical bills, make significant purchases, or support home repair projects.
Average Personal Loan Interest Rates
The average interest rate on a 3- and 5-year personal loan has dropped in the last seven days. While 3-year loan rates declined by only 0.05 percentage points, 5-year loan rates dropped by 0.69 percentage points. Interest rates for both durations are still higher than they were this time last year, up 1.43 percentage points for 3-year terms and 1.61 percentage points for 5-year terms.
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Borrowers can still save money on interest by taking out a 3- or 5-year personal loan, as both loan lengths have lower average interest rates than higher-cost borrowing options like credit cards.
However, whether a personal loan is good for you is determined by a variety of criteria, including the interest rate you can qualify for, which is heavily influenced by your credit score. Comparing different lenders’ rates ensures you obtain the best personal loan for your circumstances.
Before applying for a personal loan, utilize a personal loan marketplace like Credible to compare rates.
Weekly Rate Trends for Personal Loans
Here are the most recent trends in personal loan interest rates from the Credible marketplace, updated weekly. The chart above depicts average prequalified rates for applicants with credit scores of 720 or better who used the Credible marketplace to choose a lender.
For May 2024:
- Interest rates on three-year personal loans were 22.35%, down from 22.65% in April.
- Rates on 5-year personal loans averaged 24.52%, a decrease from 24.53% in April.
Rates for personal loans vary greatly depending on credit score and loan period. If you’re curious about the kind of personal loan rates you could qualify for, you can use an internet tool like Credible to examine possibilities from several private lenders.
All credible marketplace lenders provide fixed-rate loans at competitive rates. Because lenders employ different techniques to analyze applicants, it’s a good idea to get personal loan rates from several lenders so you can compare them.
Current Personal Loan Rates Based on Credit Scores
In May, borrowers picked an average prequalified rate of:
- 13.42% of consumers with credit scores of 780 or above choose a three-year loan.
- 32.07% of customers with credit scores less than 600 choose a 5-year loan.
- The interest rate may vary depending on your credit score, the sort of personal loan you request, and the loan payback duration.
As seen in the table above, a good credit score might result in a reduced interest rate, whereas rates are often higher on loans with set interest rates and longer repayment durations.
How to Get a Lower Interest Rate
Many factors determine the interest rate that a lender may offer you for a personal loan. However, you can take certain efforts to increase your chances of receiving a reduced interest rate. Here are some tactics to consider.
Increase Your Credit Score
People with higher credit scores typically qualify for reduced interest rates. Here are some steps you may do to gradually increase your credit score:
- Pay your bills on time: Payment history is the most essential component in determining your credit score. Pay all of your bills on time for the amount due.
- Check your credit report. Check your credit report for mistakes. If you uncover any mistakes, file a dispute with the credit bureau.
- Reduce your credit utilization ratio: Paying off credit card debt can help this essential credit-scoring element.
- Avoid opening new credit accounts: Only apply for and open credit accounts that you really need. Too many hard queries on your credit report in a short period of time may reduce your credit score.
Select a Shorter Loan Term
Personal loan repayment durations range from one to several years. Shorter durations typically result in lower interest rates because the lender’s money is at risk for a shorter length of time.
If your financial condition allows, applying for a shorter term may help you get a cheaper interest rate. Remember that choosing a shorter repayment term benefits you as well as the lender; you will pay less interest over the life of the loan.
Find a Cosigner
If you have student loans, you may have heard of the term “cosigner.” If your credit is not excellent enough to qualify for the best personal loan interest rates, having a cosigner with good credit may help you get a reduced interest rate.
Remember that if you default on the loan, your cosigner will be responsible for repaying it. Additionally, cosigning for a loan could have an impact on their credit score.
Compare Rates From Various LendersV
Before applying for a personal loan, compare offers from many lenders to find the best rates. Online lenders often offer the most reasonable rates and can issue your loan faster than a physical location.
But don’t worry; comparing rates and terms doesn’t have to be time-consuming.
Credible makes it simple. Simply enter the amount you wish to borrow, and you’ll be able to compare multiple lenders to find the best fit for you.
Summary
In summary, personal loan interest rates for consumers with good credit have fallen somewhat over the last week, with 3-year loan rates averaging 15.57% and 5-year loan rates at 19.76%. Although interest rates are higher than last year, personal loans remain a feasible choice for debt consolidation and major purchases. To get the best rates, boost your credit score, opt for shorter terms, or utilize a cosigner.