April 4, 2022 – Rates Drop Again – Forbes Advisor
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Personal loan rates fell last week. This means that if you’re looking for a personal loan, whether to finance a project or a major purchase, you can get a decent interest rate, as long as you’re a qualified borrower.
For borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace, the average interest rate on a three-year personal loan was 10.33% from March 28 to April 1st. According to Credible.com, that’s a 0.10% drop from the previous week. The average five-year personal loan rate fell 0.45% last week to 12.55% from 13.00%.
However, the actual rate you receive depends on your creditworthiness and what is available from your preferred lender. Well-qualified borrowers may be able to find rates well below average.
Related: Best Personal Loans
Compare personal loan rates
If you want to get the best rate, be sure to research lenders that offer a prequalification process for personal loans. While many lenders post their rates online, this only gives you a range of what they offer, not an exact rate based on the qualifications you meet. However, when you prequalify for a personal loan, a lender will perform a soft credit check to prescreen you, which has no impact on your credit score.
Lenders typically provide you with a list of options after you prequalify, which includes loan rates, terms, and limits. You can find the best loan for your situation by prequalifying with several lenders and comparing loan offers.
You are not guaranteed to be approved if you prequalify. Lenders always require you to submit a formal application and additional documents. After you submit your formal application, lenders typically perform a rigorous credit check, which can lower your credit score by one to five points.
Related: 5 personal loan requirements to know before applying
Estimate your personal loan repayments
You can estimate your monthly payment and the amount of interest you will pay once you know the interest rate, term and amount of your personal loan.
For example, suppose you have a personal loan with a loan amount of $5,000, a fixed interest rate of 10.33%, and a term of 36 months. The Forbes Advisor Personal Loan Calculator indicates that your monthly payment would be around $162 and you would pay around $836 in interest over the life of the loan. Overall, you owe $5,836, which includes both principal and interest.
Personal loan rate by credit score
Here are the estimated average interest rates for personal loans based on VantageScore risk levels, according to Experian. Please note that interest rates are determined and set by the lenders. The prices provided are estimates.
How to get the best rates
Your credit is an important factor in the rates you receive. According to Rod Griffin, senior director of education and consumer advocacy at Experian, “checking your credit report and scores three to six months before applying for a personal loan” is a good idea. This gives you enough time to make the necessary corrections.
A credit score of 720 or better will generally get you the best deal. If you’re not quite in this credit score range, consider taking steps to improve your credit score. Pay off your existing debts to reduce your credit utilization ratio, remove errors from your credit report and pay your bills in advance or on time.