February 14, 2022 – Rates Drop Again – Forbes Advisor
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Personal loan rates fell last week, giving qualified borrowers the chance to earn a decent interest rate and finance a project, purchase or even unexpected bills.
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 10.30% from Feb. February 11th. According to Credible.com, that’s 0.12% down from the previous week. The average five-year personal loan rate rose 0.55% last week to 13.17% from 12.62%.
Keep in mind that the rate you will receive depends on several factors, including your creditworthiness and the loans available from the lender you have chosen. The most creditworthy borrowers can benefit from rates that are significantly lower than the average.
Related: Best Personal Loans
Compare personal loan rates
Once you actively start looking for a loan, it’s a good idea to get prequalified. Pre-qualification can give you a more accurate idea of the rate you will receive from a particular lender, as they will pre-screen you by performing a soft credit check (which does not impact your credit score).
After your prequalification, the lender can provide you with an overview of your loan options. This snapshot typically includes loan rates, terms, and limits. To find the best loan for your situation, consider prequalifying with several lenders and comparing terms.
However, prequalification does not guarantee approval. Once you’ve found an offer you like, you’ll still need to submit a formal application and provide additional documentation to the lender. When you apply, a lender will usually perform a rigorous credit check, which will assess your credit score between one and five points.
Related: 5 personal loan requirements to know before applying
How to calculate your personal loan payments
To see if this fits your budget, it’s important to estimate how much you’ll pay on a monthly basis and how much you’ll pay in interest over the life of the loan. One of the easiest ways to do this is to use a personal loan calculator. You will need the rate, term and amount of your loan.
For example, suppose you get a $5,000 personal loan with a term of five years at a fixed interest rate of 13.17%. You’d pay about $114 a month and about $1,852 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. Overall, you would pay $6,852 in total, which includes both principal and interest.
Personal loan rate by credit score
The rates below are estimated average interest rates for personal loans based on VantageScore risk levels, according to Experian. Although the rates below can serve as a general guideline, note that interest rates are ultimately set and determined by the lenders.
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.