Personal loan interest rates drop: 5-year rates nearly 1% lower than same time last year

Our goal here at Credible Operations, Inc., NMLS Number 1681276, hereinafter referred to as “credible”, is to give you the tools and confidence you need to improve your finances. Although we promote products from our partner lenders who reward us for our services, all opinions are our own.

The latest trends in personal loan interest rates from the Credible marketplace, updated weekly. (iStock)

Borrowers with good credit who sought personal loans in the past seven days received lower interest rates on 3-year fixed rate loans and 5-year fixed rate loans compared to the previous seven days.

For borrowers with a credit score of 720 or greater who selected a lender through the Credible Marketplace between January 3rd and January 10th:

  • The interest rates on 3-year fixed-rate loans averaged 11.07%, up from 11.27% in the seven days before and from 10.92% a year ago.
  • The interest rates on 5-year fixed-rate loans averaged 13.65%, down from 13.70% in the last seven days and 14.38% a year ago.

Personal loans have become a popular way to consolidate and pay off credit card debt and other loans. They can also be used to cover unexpected expenses like medical bills, do a major purchase, or fund home improvement projects.

Personal loan interest rates have decreased over the past week for both 3-year and 5-year fixed-term loans. While those declines were minor – 0.20% on 3-year rates and 0.05% on 5-year rates – personal loan rates have been falling since the start of the new year. Borrowers can already save interest over the term of their loan with a 3-year or 5-year personal loan with a fixed interest rate.

Whether a personal loan is right for you often depends on several factors, including what interest rate you may qualify for. Comparing multiple lenders and their interest rates can help ensure you get the best possible personal loan for your needs.

It’s always a good idea to compare on sites like Credible to understand how much you qualify for and choose the best option for you.

Here are the latest trends in personal loan interest rates from the Credible marketplace, updated weekly.

Weekly personal loan interest rate trends

The graph above shows the average prequalified interest rates for borrowers with a credit score of 720 or higher who used the Credible marketplace to select a lender.

For the month of December 2021:

  • The 3-year personal loan interest rates averaged 11.29%, down from 11.32% in November.
  • The interest rates on 5-year personal loans averaged 14.12%, down from 14.25% in November.

The interest rates on personal loans vary significantly depending on creditworthiness and loan duration. If you want to know what type of personal loan rates you can qualify for, you can use an online tool like Credible to compare the options of different personal lenders. Checking your rates doesn’t affect your creditworthiness.

In December, the average prequalified rate selected by borrowers was:

  • 8.92% for borrowers with a credit score of 780 or higher who opt for a 3 year loan
  • 29.04% for borrowers with a credit score below 600 who opt for a 5 year loan

All of the lenders on the Credible marketplace offer fixed rate loans at competitive rates. Because lenders use different methods to evaluate borrowers, it is a good idea to obtain personal loan rates from multiple lenders so that you can compare your options.

Current personal loan rates by creditworthiness

Depending on factors such as your creditworthiness, the type of personal loan you are looking for, and the loan term, the interest rate can vary.

As the table above shows, good credit can mean a lower interest rate, and interest rates tend to be higher on fixed-rate loans with longer repayment periods.

This is how you get a lower interest rate

Many factors affect the interest rate a lender can offer you on a personal loan. However, there are some steps you can take to increase your chances of getting a lower interest rate. Here are some tactics you can try.

Increase creditworthiness

Generally, people with higher credit scores qualify for lower interest rates. Steps that can help you improve your credit score over time include:

  • Pay bills on time. Payment history is the most important factor in your creditworthiness. Pay all your bills on time when they are due.
  • Check your credit report. Take a look at your credit report to make sure there are no errors. If you find mistakes, dispute them with the Schufa.
  • Lower your credit utilization. Paying off credit card debt can improve this important credit rating.
  • Avoid opening new credit accounts. Only apply for and open credit accounts that you actually need. Too many tough inquiries about your credit report in a short amount of time can lower your credit score.

Choose a shorter repayment term

The repayment periods for personal loans can range from one to several years. In general, shorter terms come with lower interest rates because the lender’s money is at risk for a shorter period of time.

If your financial situation permits, you can get a lower interest rate with a shorter term. Remember that the shorter term is not just for the benefit of the lender – if you choose a shorter term, you will pay less interest over the life of the loan.

Get a co-signer

Perhaps you know the concept of a co-signer when you have a student loan. If your credit isn’t good enough to qualify for the best personal loan interest rates, finding a co-signer with good credit can help you get a lower interest rate.

Remember, if you default on the loan, your co-signer will be on the hook to repay it. And signing a loan could also have an impact on their credit score.

Compare the rates from different lenders

Before applying for a personal loan, it is a good idea to shop around and compare quotes from various lenders in order to get the lowest interest rates. Online lenders usually offer the most competitive interest rates – and can pay off your loan faster than a brick and mortar company.

But don’t worry, comparing prices and conditions doesn’t have to be a time-consuming process.

Credibility makes it easy. Just enter how much you want to borrow and you can compare multiple lenders to choose the one that makes the most sense for you.

About believable

Credible is a multi-lender marketplace that enables consumers to discover financial products that are best suited to their particular circumstances. Credible’s integration with leading lenders and credit bureaus enables consumers to quickly compare accurate, personalized credit options – without compromising their personal information or compromising their creditworthiness. The Credible marketplace offers an incomparable customer experience, which is reflected in over 4,500 positive Trustpilot reviews and a TrustScore of 4.7 / 5.

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