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Average Personal Loan Interest Rate

Average Personal Loan Interest Rate
Kim Franke-Folstad
Kim Franke-FolstadUpdated January 2, 2024
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
The average interest rate on a 24-month personal loan is 12.17% as of the third quarter of 2023, according to Federal Reserve data. Some lenders may offer personal loan rates ranging from 7.99% to 35.99% in 2024. Applicants with good credit scores typically can expect to qualify for loans with lower personal loan interest rates than applicants with bad credit.Several factors may influence the rate you’re offered, including your income, the lender’s underwriting standards, the loan amount, and the length of the loan term. Below we highlight factors that may influence your loan offers and annual percentage rate (APR).

What Is a Personal Loan?

Personal loans may be used for debt consolidation, to pay a big medical or dental bill, or to make a large purchase, in addition to other uses. Generally how personal loans are used is up to you, but lenders may impose restrictions against unlawful transactions.Borrowers receive the personal loan in a lump sum of money to be repaid over a predetermined length of time, usually at a fixed interest rate. Most personal loans are unsecured personal loans, but applicants may find they can qualify for a lower interest rate, or other more favorable loan terms, if they secure the loan with some type of collateral.Recommended: How Do Personal Loans Work?

What Is an Interest Rate Vs an APR?

When comparing loan offers, it can be useful to know both the interest rate and the APR to get a comprehensive understanding of what you’re going to pay.Below we highlight the difference between APR vs. interest rate on personal loans:

Interest Rate

The interest rate is the percentage of the loan amount (or principal) the lender charges the borrower to use its money. Personal loans may have a fixed interest rate or variable interest rate.Lenders may also determine whether the loan uses a simple interest formula or another formula for calculating interest charges.Recommended: What the Rule of 78 Is & How to Calculate It

APR

APR, which is also expressed as a percentage, is the total annual cost of the loan — the interest plus other charges, including various fees — over the life of the loan.If you have a no-fee loan, the APR and interest rate will be the same. Depending on the costs attached to the loan, there could be a difference of a few percentage points between the interest rate and the APR.Recommended: Is Personal Loan Interest Tax Deductible?

What Is the Average Personal Loan Interest Rate?

The average interest rate on a 24-month personal loan is 12.17% as of the third quarter of 2023, according to the Federal Reserve.Many factors can go into determining an applicant’s interest rate, so most lenders post a range of rates on their websites. To get a more specific rate, you’ll likely have to go through the lender’s prequalification process.One of the most important pieces of information lenders use in determining personal loan rates is an applicant’s credit score. The most creditworthy applicants may receive a lender’s best interest rate, whereas the least creditworthy borrowers may receive 35.99% APR loan offers.Each lender may determine its own interest rates, as highlighted in the following table that’s updated weekly, every Monday:
LenderLoan amountsAPR rangeMaximum term
Avant$2,000 to $35,0009.95% to 35.99%36 months
Best Egg$2,000 to $50,0006.99% to 35.99%36 months
Achieve (formerly FreedomPlus)$15,000 to $50,0008.99% to 29.99%36 months
LendingClub$1,000 to $50,000 7.9% to 35.99% 36 months
OneMain Financial$1,500 to $20,00018% to 35.99%36 months
Prosper$2,000 to $50,0008.99% to 35.99%36 months
Universal Credit$1,000 to $50,00011.69% to 35.99%36 months
Upgrade$1,000 to $50,0007.99% to 35.99%36 months

What Is a Good Interest Rate for a Personal Loan?

A good interest rate on a personal loan is better than the national average. As mentioned earlier, data show the average interest rate on a 24-month personal loan is 12.17% as of the third quarter of 2023.If you need personal loan funding, you may shop around and compare personal loan rates to find the right loan for you.

What Impacts Interest Rates for Personal Loans?

Lenders look at a number of variables when determining what personal loan rate to offer an applicant. Here are some of the things they typically consider:

Credit Score

There’s one thing you can count on when you shop for a loan: A higher credit score usually will get you a lower interest rate.If your FICO® Score is 740 or above, which is categorized as very good (or exceptional if it’s over 800), you’ll likely qualify for the most competitive interest rates lenders are currently offering. If, on the other hand, your score is below 580, which is categorized as poor, you may have trouble qualifying for an affordable rate.Lenders may offer personal loans for bad credit, but the APR may be as high as 35.99%.Recommended: Subprime Personal Loans Defined and Explained

Debt-to-Income Ratio

Lenders also look at an applicant’s debt-to-income ratio (DTI) to help assess the amount of risk they’re taking when offering a loan. You can calculate your DTI by dividing your monthly debt payments by your gross monthly income. If the number is high (above 36%) the lender may see you as a high lending risk and decide to charge a higher interest rate — even if your credit score is good.

Employment

Stable employment is another factor lenders may review when deciding on an interest rate. If you are self-employed or have gaps in your employment history, lenders may see you as more of a risk than an applicant with a steady job — and that means you could end up paying a higher interest rate.

Income

You also can expect lenders to take your income into consideration when determining rates. Some lenders set income minimums for personal loan applicants. But if an applicant’s low income is paired with a very low DTI, a lender may be willing to make an exception and extend a loan.

Loan Amount

Because larger loans pose a greater repayment risk to the lender, they may come with higher interest rates than smaller loans. Recommended: Guide to Getting a $30,000 Personal Loan

Loan Length

Depending on the lender, a personal loan with a short repayment term may have a lower interest rate than a loan with a longer repayment term. A longer loan term may also affect the overall cost of the loan, as the borrower will be paying interest for a longer time. 

Collateral

If a borrower backs a loan with a collateral asset — a car, jewelry, real estate, or other owned asset of value — and then defaults, the lender can seize that property to help repay the money owed. Because this type of secured loan poses less risk to the lender, the lender may offer the applicant a lower interest rate than it would have without the collateral. 

Benchmark Rates

When a benchmark rate, such as the Secured Overnight Financing Rate (SOFR), is affected by inflation or other changes in the economy, it can affect the rates a lender offers. So if you’re preparing to apply for a personal loan, you may want to monitor market rates and the Federal Reserve’s monetary policy to get a sense of the current rate environment.

Tips to Try to Reduce Your Interest Rate

There are a few steps applicants can take to help lower the interest rate they are offered — or already paying, in the case of current borrowers — on a personal loan:

Consider a Cosigner

If you can find a willing friend or family member who has better credit than you do, asking that person to be a cosigner on personal loan applications could help you qualify for a better interest rate. Just be sure any potential cosigners are aware that if you default on the loan, they could be held responsible for repayment, and any late or missed payments could impact their credit score.

Refinance an Old Loan or Negotiate a Lower Rate

If you already have a personal loan, you might be able to lower your costs by refinancing to a better interest rate. You may refinance a personal loan by taking out a new loan to pay off your older loan. This may be right for you if you can qualify for better rates with another lender.Negotiating for a lower rate with your current lender may also be an option. If you can show your current lender that you’ve prequalified for a lower rate with other lenders, you might get a better deal without switching lenders.

Look for a No-Fee Loan

Some lenders may charge a personal loan origination fee. You may look for no-fee personal loans when shopping around for funding.

What to Look for When Comparing Personal Loan Offers

Though finding a low APR may be your primary goal when you begin evaluating personal loans, it’s not the only factor to consider. Here are a few things to watch for as you review various loan offers:

APR

Because the APR represents the loan’s interest rate and basic fees, it can serve as a good measure of the total cost of borrowing. 

Fees

Along with the fees included in the APR, such as application, processing, and origination fees, it also can be useful to know if and how much a lender charges for late payments, or if a loan has a prepayment penalty.

Loan Length

If you can afford the monthly payment, a shorter loan term may come with a lower interest rate — and it can reduce the overall cost of the loan. 

Monthly Payment

Along with the interest rate and APR, it can be helpful to see the actual dollar amount you can expect to pay each month. That way you can budget better and be sure you can realistically afford the payments.

Potential Discounts

Some lenders may offer discounted interest rates to current customers, so it’s worth checking the financial institutions where you have accounts. Lenders may also offer a rate reduction to borrowers who use autopay. 

Interest Rates for Personal Loan Alternatives

What is a good interest rate? Below we highlight the average interest rate for personal loan alternatives:
  • Credit cards. The average interest rate on a credit card assessed interest is 22.77% as of the third quarter of 2023, according to Federal Reserve data.
  • Payday loans. The APR on a payday loan vs. personal loan can range from 261% to 782% depending on lender fees.
  • Overdrafting. Financial institutions may charge overdraft fees as high as $36 per occurrence whenever they finance a transaction that leaves a customer with a negative bank account balance — rivaling payday loan fees.
  • Friends and family loans. Some of your relatives and friends may offer you interest-free or low-interest loans.

The Takeaway

Loan rates can vary significantly based on the applicant’s credit score, income, and other factors. You may compare loan rates to find the right loan terms for you.If you need help finding personal loan options, Lantern by SoFi can help. Just fill out a simple form and view loan offers in our marketplace.Compare personal loan rates and apply in minutes.

Frequently Asked Questions

What is an average personal loan interest rate?
Why is my APR so high with good credit?
What credit score do you need for a good APR?
Photo credit: iStock/cagkansayin
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About the Author

Kim Franke-Folstad

Kim Franke-Folstad

Kim Franke-Folstad is an award-winning journalist with 30 years of experience writing and editing for newspapers, magazines and websites. Her work for SoFi covers a range of topics related to personal finance, including budgeting, saving, borrowing, and investing.
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