June 1, 2022—Rates Rise Slightly – Forbes Advisor
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Personal loan rates increased last week. But you can still get a reasonable rate, whether you’re looking to finance a home improvement project, a vehicle, unexpected bills, or just temporarily need to improve your cash flow.
From May 23 to May 27, the average fixed rate on a three-year personal loan was 11.25% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace . The rate was 11.09% the previous week, according to Credible.com. The average five-year personal loan rate rose 1.69% last week from 12.56% to 14.25%.
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 higher 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.
Calculate your personal loan payments
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 for $5,000 with a fixed interest rate of 11.25% and a term of 36 months. The Forbes Advisor Personal Loan Calculator says your monthly payment would be around $164 and you’d pay around $914 in interest over the life of the loan. Overall, you owe $5,914, 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.