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Personal loan rates fell last week. This means that if you’re looking for a personal loan, whether to finance a project or a major purchase, you can get a decent interest rate, as long as you’re a qualified borrower.
From March 7 to March 11, the average fixed rate on a three-year personal loan was 10.44% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace. . The rate was 10.51% the previous week, according to Credible.com. The average five-year personal loan rate fell 0.42% last week to 12.63% from 13.05%.
The most qualified borrowers generally benefit from the best rates. In fact, qualified borrowers can benefit from a rate that is significantly lower than the average. The rate you receive depends on a variety of factors, including your creditworthiness and the loans available from your chosen lender.
Related: Best Personal Loans
How to Compare Personal Loan Rates
Start by researching lenders who offer a prequalification process for personal loans. Lenders offer a range of rates online, not an exact rate based on your specific qualifications. Prequalification provides a more accurate picture of the rate you will receive. During the prequalification process, lenders perform a soft credit check, which has no impact on your credit score.
Based on this information, the lender will give you an overview of the terms you may qualify for, including loan rates, terms and limits. You can prequalify with multiple lenders and compare terms to find the best loan for your specific situation.
You are not guaranteed to be approved if you prequalify. Lenders always require you to submit a formal application and additional documents. After you submit your formal application, lenders typically perform a rigorous credit check, which can lower your credit score by one to five points.
Related: 5 personal loan requirements to know before applying
Calculate your personal loan payments
You can estimate your monthly payment and the amount of interest you will pay once you know the interest rate, term and amount of your personal loan.
For example, suppose you get a $5,000 personal loan with a term of five years at a fixed interest rate of 12.63%. You’d pay about $113 a month and about $1,769 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. Overall, you would pay $6,769 in total, which includes both principal and interest.
Personal loan rate by credit score
Here are the estimated average interest rates for personal loans based on VantageScore risk levels, according to Experian. Please note that interest rates are determined and set by the lenders. The prices provided are estimates.
Get the best rates
The interest rate you receive on a personal loan is based on a number of factors. This includes your overall creditworthiness, credit score, income, and debt-to-income ratio (DTI). Two quick ways to help you qualify for better rates is to pay down your existing debt to help lower your DTI and improve your credit score.
Rod Griffin, senior director of education and consumer advocacy at Experian, recommends “checking your credit report and scores three to six months before applying for a personal loan” as this will give you plenty of time to bring the necessary improvements.
Although qualification requirements differ from lender to lender, a minimum credit score of 720 will generally get you the best deal. If your score falls below this marker and you’re looking for the lowest possible rate, you can take steps to improve your score. Try strategies such as reducing your credit utilization rate, removing errors from your credit report, and paying your bills early or on time.