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Personal loan interest rates fell last week, giving qualified borrowers an opportunity to get a relatively low interest rate and fund a project, purchase, or even unexpected bills.
From November 22-26, the average fixed interest rate on a three-year personal loan was 11.69% for borrowers with a credit score of 720 or higher who prequalified on the Credible.com personal loan marketplace. According to Credible.com, the rate last week was 11.72%. The average interest rate on a five-year personal loan rose 1.04% to 15.13% from 14.09% last week.
Keep in mind that the interest rate you get depends on several factors, including your credit rating and the credit available through your chosen lender. The borrowers with the highest credit ratings can receive rates well below average.
Related: The best personal loans 2021
Personal loan rates based on creditworthiness
The interest rates below are average estimated personal loan interest rates according to VantageScore risk levels, according to Experian. Although the interest rates below can serve as a general guide, note that interest rates are ultimately set and determined by the lenders.
Compare personal loan rates
When you start looking for a loan, look for lenders that offer a pre-qualification process. Lenders offer a range of interest rates online, not an exact rate based on your specific qualifications. Pre-qualification provides a more accurate picture of the rate you will receive. During the prequalification process, lenders perform a gentle credit check that does not affect your credit score.
After you prequalify, the lender can provide you with a snapshot of your loan options. This snapshot generally includes lending rates, terms and limits. To find the best loan for your situation, you should pre-qualify with several lenders and compare the terms.
You are not guaranteed admission if you pre-qualify. Lenders still require you to submit a formal application and additional documentation. After you submit your formal application, lenders typically run a tough credit check that can hurt your credit score by one to five points.
Related: 5 Personal Loan Requirements You Should Know Before Applying
Get the best prices
Two quick ways to help you get cheaper interest rates are to pay off existing debt to lower your DTI and improve your credit score. Personal loan interest rates are based on a number of factors, including your overall credit rating, credit history, income, and debt-to-income ratio (DTI).
While qualification requirements vary from lender to lender, generally a credit score of at least 720 will get you the best terms. If your score falls below this mark and you are looking for the lowest rate, there are steps you can take to improve your score. Try strategies such as For example, lowering your credit utilization ratio, removing errors from your credit report, and paying your bills early or on time.
Calculate your personal loan payments
You can estimate your monthly payment and interest rate once you know your personal loan interest rate, term, and amount.
For example, let’s say you get a five-year personal loan for $5,000 at a fixed rate of 15.13%. According to Forbes Advisor’s personal loan calculator, you would pay about $119 a month and about $2,157 in interest over the life of the loan. In total, you would pay a total of $7,157, which includes both principal and interest.