Personal loans are one of the fastest-growing consumer debt products, with $323 billion in outstanding personal loan debt nationwide in the third quarter of 2020. Lenders in this space have seen a dramatic increase in originations and the size of personal loan balances over the last few years, and consumers are increasingly opting for unsecured loans from fintech lenders.
The reason for this surge is simple. The average personal loan rate can be as low as 10.3 percent for consumers with credit scores of 720 and above, whereas the average credit card, including those for people with excellent credit, comes with an APR of around 16 percent.
If you’re looking for an affordable way to borrow, find out the average interest rates on personal loans by lender and credit rating.
Average personal loan interest rates by credit score
Consumers with good or excellent credit may find average loan interest rates as low as 10.3 percent, whereas those with “average” or “poor” credit will pay a considerably higher average rate. The following chart outlines how much average interest consumers pay, by credit score, based on Bankrate research.
|Credit score||Average loan interest rate
Average loan rates by lender type
While local banks and credit unions with brick-and-mortar stores promise competitive personal loan products, online lenders often offer loans with lower starting interest rates for consumers with excellent credit. Consumers who want to find an affordable loan product to suit their needs should compare their bank or credit union’s offerings with any online lenders they may be familiar with.
Average personal loan rates by online lender
||Loan interest rates
|Earnest||Starting at 2.49%|
|LightStream||2.49%–19.99% (with autopay)|
|Marcus by Goldman Sachs||6.99%–19.99% (with autopay)|
|SoFi||4.99%–19.63% (with autopay)|
|Upgrade||5.94%–35.97% (with autopay)|
Average personal loan rates by banks
|Bank||Loan interest rates
|Citibank||7.99%–23.99% (with autopay)|
|Citizens Bank||7.99%–20.89% (with autopay)|
|Santander Bank||6.99%–24.99% with ePay|
|U.S. Bank||5.99%–18.49% (with autopay)|
|Wells Fargo||5.74%–19.99% (with autopay)|
Average personal loan rates by credit union
||Loan interest rates
|FORUM Credit Union||7.99%–21.00%|
|Members 1st Federal Credit Union||6.49%–8.99%|
|Navy Federal Credit Union||7.49%–18%|
|USAA||up to 18%|
Other factors that affect your personal loan rate
While your credit score plays a significant role in the average personal loan interest rate you can qualify for, lenders consider other details as they gauge your creditworthiness. These include:
- Your income, which is used to determine how much you can borrow.
- Your debt-to-income ratio, which helps lenders determine how much debt you already have when compared to your income.
- Your employment status, which helps lenders feel confident about your ability to repay your loan.
Some lenders set minimum standards for their personal loans, such as a minimum income amount or a minimum credit score. You may also be unable to get approved for a personal loan if you have a recent bankruptcy on your credit report, or if you have an open collections case. Before you apply for a personal loan, it can help to look over your lender’s FAQ pages to see if you will be able to qualify.
Documentation you can expect to provide when you apply for a personal loan can include photo identification, employer and income verification, like pay stubs and bank statements, and proof of your address.
What is considered a good interest rate on a personal loan?
A good interest rate on a personal loan can be different for everyone. Considering that the average borrower qualifies for average loan interest rates between 10 percent and 28 percent, any rate below that threshold should be considered “good.”
How to get a good personal loan rate
If your goal is qualifying for a good personal loan rate, or at least the best loan rate you can hope to achieve based on your credit score, income and other factors, there are plenty of steps you can take right now. Here is a rundown of everything you should do to secure a loan you can afford:
Work on improving your credit score
Since your credit score is a major factor that determines your personal loan interest rate, taking steps to boost your score can help you qualify for the lowest rates possible. While your credit score is based on several factors, simple steps you can take to improve your credit include paying all your bills early or on time and paying down debt to improve your credit utilization. Also refrain from opening or closing too many accounts in a short span of time.
Shop around and compare lenders
Make sure you compare average personal loan rates among multiple lenders, and even among online lenders and traditional banks or credit unions. Some lenders will let you check your rate without a hard inquiry on your credit report, so take advantage of these offers.
Check for fees
Remember that your loan interest rate isn’t the only personal loan expense to be aware of. You should also check for other fees like origination fees, which can tack on as much as 6 percent to your loan amount.
The bottom line
Average personal loan interest rates can vary depending on your credit score and other factors, but you do have some control. Make sure to keep your credit score in the best shape possible and work on paying off debt so you can lower your debt-to-income ratio. By taking care of your financial health and shopping around to compare typical loan interest rates, you’ll have a personal loan that suits your budget and goals within reach.