July 5, 2022—Rates Drop – Forbes Advisor
Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.
Personal loan rates fell last week. Qualified borrowers can still benefit from a relatively low interest rate, giving them the flexibility to finance a project, purchase or unexpected bills.
From June 27 to July 1, the average fixed interest rate on a three-year personal loan was 11.19% for borrowers with a credit score of 720 or higher who prequalified in the personal loan market of Credible.com. That’s down 0.21% from the previous week, according to Credible.com. The average five-year personal loan rate fell last week from 12.87% to 13.58%.
The most qualified borrowers generally benefit from the best rates. In fact, qualified borrowers can benefit from a rate that is significantly lower than the average. The rate you receive depends on a number of factors, including your creditworthiness and the loans available from your chosen lender.
Related: Best Personal Loans
How to benefit from more favorable interest 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.
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 get a $5,000 personal loan with a term of five years at a fixed interest rate of 13.58%. You’d pay about $115 a month and about $1,915 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. Overall, you would pay $6,915 in total, 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.