Average personal loan rate plummets to new record low, Fed reports

Two-year personal loan rates fell to 9.09% in the fourth quarter of 2021, the lowest rate since the Federal Reserve began collecting this data. (iStock)

If you’re thinking of taking out a personal loan to consolidate debt, pay for home improvement, or finance another big purchase, there’s no better time to do it. Because interest rates have fallen again to a new record low.

The average interest rate on a two-year personal loan fell to 9.09% in the fourth quarter of 2021, according to the Federal Reserve. This is the lowest personal loan rate since the Fed started collecting this consumer credit data.

The previous record was set in the third quarter of 2020, when personal loan interest rates averaged 9.26%. Fixed rates have since rallied between 9.65% and 9.39% before falling to the current average of 9.09%.

Two-Year Average Personal Loan Rate, Federal Reserve

Read on to learn more about personal loans, including how to get a low interest rate now. Credible’s online financial marketplace allows you to compare personal loan rates with multiple lenders at the same time.

PERSONAL LOAN MANUFACTURING FEES: ARE THEY WORTH THE COST?

How are personal loan interest rates determined?

Personal loans allow consumers to borrow a lump sum in cash that is repaid in fixed monthly installments over a period of time, usually a few years. Funding is quick, which means the loan can be deposited into your checking account in just one business day. Personal loans are usually unsecured, which means they don’t require collateral so you can use the funds however you want.

Because they are unsecured, personal lenders will determine your interest rate and eligibility based on creditworthiness. The interest rate you qualify for is determined by your creditworthiness and debt-to-income ratio (DTI), as well as other loan terms such as loan size and duration.

Borrowers with very good or excellent credit, defined by the FICO model as 740 or higher, qualify for the best personal loan rates available. Conversely, those with poor or fair creditworthiness will see higher personal loan interest rates when they qualify for loan approval.

When considering taking out a personal loan, it is important to check your credit history to see where you stand. Then visit Credible to view your valued personal loan offers for free without sacrificing your creditworthiness so you can determine if this financial product is right for you.

WHAT IS A GOOD ANNUAL PERCENTAGE (APR) ON A PERSONAL LOAN?

How to secure a low personal loan rate

Since personal loan interest rates are based on the creditworthiness of the borrower, it is important to build good credit in order to qualify for the lowest interest rates available. Here are a few tips to improve your credit score and get a low-interest personal loan:

  • Reduce credit card debt. One of the most important factors in your credit score is your credit utilization rate, which is the size of your credit card debt compared to your total available credit. Decreasing your credit load will have an immediate positive impact on your creditworthiness. This will also help lower your DTI rate, which is another factor that affects personal loan eligibility.
  • Become an authorized user. It can be beneficial to become an authorized user on someone else’s credit card to help build your on-time payment history. Just make sure that person is a trustworthy financial partner, e.g. B. a spouse or a parent.
  • Compare prices with multiple lenders. Because personal loan interest rates vary between lenders, it is important to shop around to make sure you are getting the lowest possible rate for your financial situation. Many personal lenders allow you to pre-qualify to see your estimated interest rate without compromising your creditworthiness.

You can see your pre-qualified offers from multiple personal lenders in minutes by filling out a single form on Credible. Search the online lender interest rates in the table below and visit Credible to start the application process.

SECURED LOANS: WHAT YOU NEED TO KNOW

Do you have a question about finance but don’t know who to contact? Send an email to the credible money expert at moneyexpert@credible.com and your question could be answered by Credible in our Money Expert section.

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