According to Bankrate, the average interest rate on a personal loan is 12.38 percent as of August 14, 2024. The interest rate you qualify for will vary depending on factors such as your credit score, the type of lender you apply to, and even where you live.
A quick look at personal loan interest rate trends can help you understand if now is a good time to apply for a personal loan, and taking the time to compare lenders first can help you get a competitive interest rate.
Average personal loan interest rates by credit score
If you have a good or excellent credit score, your annual percentage rate (APR) will be two to three times lower than if you have a fair or poor credit score. Interest rates with a good credit score are usually at or below the national average. If you have a fair or poor credit score, your APR may be comparable to credit card interest rates.
This table shows the average interest borrowers pay per credit score, based on research from Bankrate.
| Credit score | Average Loan Interest Rate |
|---|---|
| 720-850 | 10.73%-12.50% |
| 690-719 | 13.50%-15.50% |
| 630-689 | 17.80%-19.90% |
| 300-629 | 28.50%-32.00% |
Bankrate Insights
This table reflects average interest rates – you may qualify for a much lower interest rate (less than 8% with some lenders) depending on your credit score, loan amount and the repayment term you choose.
What is a good interest rate for a personal loan?
A good interest rate for a personal loan is one that is lower than the market average interest rate. But the right interest rate for you depends on your credit score. For example, if you have a good credit score, an interest rate below 11 percent would be considered good, while 12.5 percent would be less competitive.
To improve your chances of getting a good interest rate, pay your credit card accounts on time, keep credit card usage to a minimum, and avoid opening too many new accounts. Always check out interest rates with at least three different lenders to get the best terms.
Average Personal Loan Interest Rates by Lender Type
Local banks and credit unions tend to offer special interest rates and fee discounts to their customers and members. However, online lenders that specialize in personal loans often offer the lowest interest rates for excellent credit.
To find the best deal, compare the services of your bank or credit union with online lenders you’re familiar with, and get pre-qualified with several lenders if possible.
Average interest rate for personal loans from online lenders
| Online Money Lenders | Loan interest rate |
|---|---|
| achieve | 8.99%-35.99% |
| Avant | 9.95%-35.99% |
| Best Egg | 7.99%-35.99% |
| Happy Money | 11.72%-17.99% |
| Lending Club | 8.98%-35.99% |
| Lending Points | 7.99%-35.99% |
| Light Stream | 7.49%-25.49%* for automatic payments |
| OneMain Financial | 18.00%-35.99% |
| Thrive | 8.99%-35.99% |
| Sophie | 8.99%-29.49% for automatic payments |
| Upgrade | 9.99%-35.99% for automatic payments |
| Upstart | 7.80%-35.99% |
Average interest rate for personal loans from banks
| bank | Loan interest rate |
|---|---|
| City | 11.49%-20.49% |
| M&T Bank | 8.74%-15.19% |
| TD Bank | 8.99%-23.99% |
| Santander Bank | 7.99%-24.99% |
| Bank of America | For automatic payments, 8.74%-24.99% |
| Wells Fargo | 7.49%-23.24% for automatic payments |
| America | 10.34%-18.51% |
Average interest rate for personal loans from credit unions
| Credit union | Loan interest rate |
|---|---|
| Penn Federal Credit Union | 7.99%-17.99% |
| Municipal Credit Union | 7.99%-17.99% |
| Navy Federal Credit Union | 8.99%-18.00% |
Other Factors That Affect Personal Loan Interest Rates
The interest rate on a personal loan depends on your credit score. Lenders consider other details to gauge your creditworthiness, and therefore the features you may be eligible for. Some of the factors that are evaluated include:
- Your income. Some lenders offer discounted interest rates for high-income earners. To qualify for the highest personal loan amounts, you’ll need to have a significantly higher income than the average person.
- Your debt-to-income ratio (DTI). Lenders measure what percentage of your current income goes towards debt payments each month, and a lower DTI ratio could mean a lower APR.
- The term of the loan. A shorter term usually means a lower interest rate. However, a shorter term means higher monthly costs, so check your budget to make sure the payments are affordable.
- Your loan amount. Some lenders offer lower interest rates for larger loan amounts, and vice versa, meaning you may have to pay higher interest rates for smaller loan amounts.
- Your banking relationships. Banks and credit unions may offer discounts if you have a checking account with them.
- where you live. You may have to pay a higher interest rate depending on the state you live in. For example, the average interest rate for a personal loan in Rhode Island is about 4 percentage points higher than the average interest rate for a personal loan in Florida, according to recent S&P Global data.
- Your work history. Since personal loans are unsecured, lenders will take a closer look at your employment history to ensure that your job is stable and you have a regular income.
When applying for a personal loan, you will need to submit the following documents:
- Photo ID.
- Employment Contact Information
- Proof of income such as pay stubs or bank statements.
- Proof of address.
Why personal loan interest rates vary from lender to lender
Personal loan companies set interest rates based on the type of borrower they lend to, and online lenders that cater to higher-income, better-credit borrowers often have much lower interest rates.
Banks and credit unions may offer lower interest rates to existing customers, especially if they have large balances in their checking, savings or other deposit accounts. This means that even if you have fair or bad credit, you should shop around for a lower interest rate.
Interest rates from bad credit lenders can vary widely, and you may be approved based on other factors such as how long you’ve worked and the type of job you do. Lenders that offer terms shorter than the 24-month standard may still offer their lowest interest rates if you qualify for higher monthly payments.
How are average personal loan interest rates trending?
The average interest rate on a personal loan has been rising steadily since March 2022, when the Federal Reserve announced the first of several rate hikes aimed at taming inflation. Despite overall interest rates being expected to fall in 2024, the average interest rate on a personal loan has been rising steadily throughout the first and second quarters of this year.
Unfortunately, even if the Fed cuts rates by the end of the year, a weakening economy could cause interest rates to rise: Personal loans are closely tied to consumer health, and a weak economy could lead to job losses or cuts in work hours, which could cause personal loan lenders to raise interest rates.
Conclusion
When considering a personal loan, start by checking the average interest rates. Your credit score, the type of lender you choose, and even where you live will affect the rate you ultimately receive. Always compare interest rates from multiple lenders and take steps to improve your credit score to get the best possible rate.
