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Personal loan rates are gradually increasing. 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.
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 10.43% from March 21 through March 25. According to Credible.com, it’s a 0.20. % increase over previous week. The average five-year personal loan rate rose 0.25% last week to 13.00% from 12.75%.
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
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.
Compare personal loan rates
When you start shopping for a loan, look for lenders that offer a prequalification process. Lenders offer a range of rates online, not an exact rate based on your specific qualifications. Prequalification gives a more accurate idea of the rate you will receive. During the prequalification process, lenders perform a soft credit check, which has no impact on your credit score.
After you prequalify, 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.
Prequalification does not imply loan approval. You will still need to submit a formal application and additional documents to get the loan you want. Typically, lenders do a thorough credit check when you formally apply for a loan. Credit checks can lower your score by one to five points.
Related: 5 personal loan requirements to know before applying
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.
Estimate your personal loan repayments
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.
Let’s say you get a $5,000 personal loan for three years at a fixed rate of 10.43%. You’d pay about $162 a month and about $845 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. You would pay $5,845 in total over those three years, which includes both principal and interest.