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Personal loan rates dropped last week. Qualified borrowers can still pick up a decent interest rate, providing the opportunity to finance a project, purchase or unexpected bills.
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 14.27% from November 4 to November 9. According to Credible.com, that’s a 0.52% drop from the previous week. The average rate on a five-year personal loan rose 0.22% last week to 19.45% from 19.23%.
However, the actual rate you receive depends on your creditworthiness and what’s available through your preferred lender. Well-qualified borrowers may be able to find rates significantly lower than the average.
These rates are accurate as of November 11, 2024.
Related: Best Personal Loans
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.
After you prequalify, the lender can provide you with a snapshot of your loan options. This snapshot generally includes loan rates, terms and limits. To find the best loan for your situation, consider prequalifying at multiple lenders and comparing the terms.
You aren’t guaranteed approval if you prequalify. Lenders still require that you submit a formal application and additional documentation. After submitting your formal application, lenders typically run a hard credit check, which can ding your credit score by one to five points.
Related: 5 Personal Loan Requirements To Know Before Applying
Calculate Your Personal Loan Payments
To see if it fits into 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 with a personal loan calculator. You’ll need your loan rate, term and amount.
For example, let’s say you get a $5,000 personal loan with a term of five years at a fixed interest rate of 19.45%. You’d pay about $131 monthly and roughly $2,857 in interest over the life of the loan, according to the Forbes Advisor personal loan calculator. Overall, you’d pay $7,857 in total, which includes both principal and interest.
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.