The average personal loan interest rates may vary by lender, credit rating, length of the loan and the loan amount. Currently, personal loans are one of the fastest-growing consumer debt products. There, has been some dramatic increase in originators as well as the size of personal loan balances over the last few years.
The common cause of this is because, the average personal loan rate can be as low as 10.3% for consumers with credit scores of 720 upwards, while on the other hand, the average credit card, including those for people with excellent credit, comes with an APR of about 17%.
Factors that can Affect your Average Personal Loan Interest Rates
We have already established, that your credit score is a major determining factor when it comes to the average personal loan interest you can qualify for. On the other hand, lenders also consider other details when trying to ascertain your creditworthiness. These details include:
Your income: This, is used to determine how much you can borrow.
Your debt-to-income ratio: This factor, enables lenders to determine how much debt you already have as compared to your income.
Your employment status: It helps lenders feel confident about your ability to repay your loan.
Other factors lenders also use, include setting minimum standards for their personal loans, like minimum income amount or a minimum credit score. You may also be ineligible for a personal loan, if you have a recent bankruptcy on your credit report, or if you have an open collection case.
What is a Good Interest Rate on a Personal Loan?
There is no one-size-fits-all when it comes to the average rates on personal loans, it can be quite different for everyone. Be it as it may, the average borrower qualifies for average loan interest rates between 10% and 28%, and any rate below that threshold is said to be good.
How to Get an Average Personal Loan Interest Rates
Even though average loan rates can vary based on your credit score, there are ways you can control these factors, to ensure it stays at an average scale. To get qualified for a good personal loan rate, either through your credit score, income as well as other factors, here are some steps you can take to actualize that:
Improve your credit score: By this, we mean that you should take deliberate steps to boost your score to help you get qualified for the lowest rates possible. Ensure, that you pay all your bills on time, pay down debts to improve your credit utilization, and desist from opening or closing too many accounts in a short space of time.
Compare lenders: Shop around and take out time to compare average personal loan rates among multiple lenders, as well as among online lenders and traditional banks or credit unions. Some lenders will even allow you to check your rate without a hard inquiry on your credit report.
Check for fees: It is important, that you check for other fees like origination fees, which may take up as much as 6% of your loan amount.
Average Personal Loan Interest Rates by Credit Score
Credit Score – Average Personal Loan APRs
- 720-850 (Excellent) – 10.3% – 12.5%
- 680-719 (Good) – 13.5% – 15.5%
- 640-679 (Average) – 17.8% – 19.9%
- 300-639 (Poor) – 28.5% – 32.0%
Individuals with average – poor credit APRs on personal loans will generally be between 18% and 36%. Those with a credit score of less than 580 or no credit history, may encounter difficulties qualifying for a conventional personal loan altogether.
On a final note, it is still possible to have the average personal loan interest rate you want if you can take the steps mentioned above, to adjust things that will wave a red flag before lenders. We have outlined these simple steps above from which you can benefit from.