Rates on personal loans dropped last week. This means if you’re in the market for a personal loan, whether to finance a project or major purchase, you can grab a worthwhile interest rate, so long as you’re a qualified borrower.
© Getty Today’s Personal Loan Rates: December 27, 2022—Rates Move Down
From December 19 to December 24, the average fixed interest rate on a three-year personal loan was 13.01% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace. That’s down 0.30% from the previous week, according to Credible.com. The average rate on a five-year personal loan rose last week from 17.16% to 17.33%.
Remember, well-qualified borrowers may receive rates significantly lower than average. The rate you’ll actually receive depends on various factors, like your creditworthiness and the loan you choose.
Related: Best Personal Loans
Average Personal Loan Interest Rates by Credit Score
The rates below are average estimated personal loan interest rates according to VantageScore risk tiers, according to Experian. Though the rates below can serve as a general guideline, note that interest rates are ultimately set and determined by lenders.
How to Compare Personal Loan Rates
If you’re out to get the best rate, be sure to look for lenders who offer a personal loan prequalification process. 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 run a soft credit check to prescreen you, which has no impact on your credit score.
Lenders generally provide you with a list of options after you prequalify that includes loan rates, terms and limits. You can find the best loan for your circumstances by prequalifying at multiple lenders and comparing loan offers.
Prequalification doesn’t imply approval for a loan. You’ll still need to submit a formal application and additional documentation to get the loan you want. Typically, lenders run a hard credit check when you’re officially applying for a loan. Hard credit checks can ding your score by one to five points.
How to Get the Best Rates
Your credit is a big factor in the rates you receive. According to Rod Griffin, senior director of consumer education and advocacy at Experian, ‘checking your credit report and scores three to six months before you apply for a personal loan” is a good idea. This gives you enough time to make any necessary fixes.
A credit score of 720 or better will typically get you the best terms. If you’re not quite in that credit score range, consider taking action to improve your credit score. Pay down existing debt to lower your credit utilization ratio, remove errors from your credit report and pay your bills early or on time.
How to Calculate Your Personal Loan Payments
You can estimate your monthly payment and how much you’ll pay in interest once you know your personal loan interest rate, term and amount.
Let’s say you get a three-year, $5,000 personal loan at a fixed rate of 13.01%. You’d pay about $168 monthly and about $1,066 in interest over the life of the loan, according to the Forbes Advisor personal loan calculator. You’d pay $6,066 in total over those three years, which includes both principal and interest.
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