February 22, 2022 — Rates are on the rise – Forbes Advisor
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Personal loan rates jumped last week. However, if you are looking for a personal loan to finance a project, the purchase of a vehicle, unexpected bills or to improve your cash flow, it is possible to obtain a decent rate.
From February 14 to February 18, the average fixed interest rate on a three-year personal loan was 10.45% for borrowers with a credit score of 720 or higher who prequalified in the personal loan market of Credible.com. That’s up 0.15% from the previous week, according to Credible.com. The average five-year personal loan rate fell last week from 13.17% to 12.62%.
Remember that well-qualified borrowers may receive significantly lower than average rates. The rate you will receive depends on several factors, such as your creditworthiness and the loan you choose.
Related: Best Personal Loans
Get the best rates
Two quick ways to help you qualify for better rates is to pay down your existing debt to help lower your DTI and improve your credit score. The interest rate you receive on a personal loan is based on a number of factors. This includes your overall creditworthiness, credit score, income, and debt-to-income ratio (DTI).
Although qualification requirements differ from lender to lender, a minimum credit score of 720 will generally get you the best deal. If your score falls below this marker and you’re looking for the lowest possible rate, you can take steps to improve your score. Try strategies such as reducing your credit utilization rate, removing errors from your credit report, and paying your bills early or on time.
Calculate your personal loan payments
Once you have an idea of your personal loan interest rate, you can calculate your monthly payments. You will need to enter the interest rate, amount and term of your loan. This will help you determine how much you will owe monthly and how much interest you will pay over the life of your loan.
Let’s say you get a $5,000 three-year personal loan at a fixed rate of 10.45%. You’d pay about $162 a month and about $846 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. You would pay $5,846 in total over those three years, which includes both principal and interest.
Average Personal Loan Interest Rates 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.