Average Interest Rate for Personal Loan, What Are the Average Personal Loan Interest Rates by Credit Score?

Average Interest Rate for Personal Loan

In simple terms, personal loans have become quite popular because people use them to combine debts and get lower interest rates compared to credit cards. The average interest rate for a personal loan is around 11.48% as of December 2023. However, the rate you might get can be different based on your own financial situation.

These interest rates change over time, kind of like how the weather changes. Even though the Federal Reserve doesn't directly control personal loan rates, if they make some changes, it can affect the economy and, in turn, the interest rates for personal loans might go up. So, it's like the average rate is around 11.48%, but yours could be a bit higher or lower depending on what's going on with your money and the economy.

What Are the Average Personal Loan Interest Rates by Credit Score?

If you have good or excellent credit, you might get a personal loan with a lower interest rate, like around 13.5%. But if your credit is just average or not so great, the average interest rate can be much higher. So, the better your credit score, the lower the average interest rate you might get on a personal loan. But if your credit score is not so great, the rates can be higher. Here's a simple breakdown:

What are the factors Affecting Personal Loan Interest Rate?

Getting a personal loan involves more than just choosing a lender. The interest rate you'll pay depends on various factors. Let's break down these factors in simple terms to help you understand what influences the interest rate on a personal loan.

Credit Score

• Your credit score is a big deal. The better your score, the lower the interest rate you might qualify for.

Loan Amount and Term

• How much you're borrowing and how long you'll take to pay it back can affect the interest rate. Bigger loans or longer terms might mean higher rates.

Income and Debt

• Lenders look at your income and how much debt you already have. If you earn well and don't have too much debt, you might get a lower rate.

Lender Type

• Different lenders have different rates. Banks, credit unions, and online lenders may offer varying interest rates based on their policies.

Automatic Payments

• Some lenders might give you a discount if you set up automatic payments (autopay) from your account.

Market Conditions

• The overall economic situation can play a role. If things change in the economy, it might impact the interest rates for personal loans.

What are the Average Interest Rates by Lender Type?

Local banks and credit unions operating physical branches assure competitive personal loan offerings, while online lenders frequently present loans with lower initial interest rates, especially for individuals with excellent credit. Those seeking an affordable loan tailored to their needs should assess the options provided by their bank or credit union and compare them with those offered by online lenders they are acquainted with.