Rates on personal loans jumped up last week. But you can still snag a reasonable rate, whether you’re looking to finance a home remodeling project, vehicle, unexpected bills or temporarily need to improve your cash flow.
From October 7 to October 12, the average fixed interest rate on a three-year personal loan was 15.88% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace. That’s up 0.66% from the previous week, according to Credible.com. The average rate on a five-year personal loan rose last week from 22.06% to 22.23%.
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 October 14, 2024.
How To Compare Personal Loan Rates
Start by looking for lenders that offer a prequalification process for personal loans. Lenders provide a range of rates online, not an exact rate based on your specific qualifications. Prequalifying provides a more accurate view of the rate you’ll receive. During the prequalification process, lenders run a soft credit check, which has no impact on your credit score.
Based on this information, the lender will give you a snapshot of the terms you could qualify for, including loan rates, terms and limits. You can prequalify at multiple lenders and compare the terms to find the best loan for your specific situation.
Prequalification doesn’t imply approval for a loan. You’ll still need to submit a formal application and additional documentation to get the loan you want. Typically, lenders run a hard credit check when you’re officially applying for a loan. Hard credit checks can ding your score by one to five points.
How To Receive More Favorable Interest Rates
Personal loan interest rates are based on a number of factors, including your overall creditworthiness, credit score, income and debt-to-income (DTI) ratio. Two quick ways to help you receive more favorable rates include paying down existing debt to help lower your DTI and improving your credit score.
Rod Griffin, senior director of consumer education and advocacy at Experian, recommends “checking your credit report and scores three to six months before you apply for a personal loan,” as this will give you enough time to make any necessary improvements.
While qualification requirements differ across lenders, a minimum credit score of 720 will typically yield you the best terms. If your score falls below this marker, and you’re on a quest for the lowest rate possible, you can take action to improve your score. Try strategies like lowering your credit utilization ratio, removing errors from your credit report and paying your bills early or on time.
How To Calculate Your Personal Loan Payments
You can estimate your monthly payment and how much you’ll pay in interest once you know your personal loan interest rate, term and amount.
For example, let’s say you have a personal loan with a $5,000 loan amount, 15.88% fixed interest rate and a term of 36 months. The Forbes Advisor personal loan calculator shows your monthly payment would be about $175 and you’d pay about $1,318 in interest over the life of the loan. Overall, you would owe $6,318, which includes both principal and interest.
Local News
Comments / 0