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Personal loan rates increased last week. Yet, it is still possible for highly qualified borrowers to get a reasonable interest rate on a personal loan. If you are interested in financing a major purchase or project, now is a good time to shop around for a loan.
From August 22-27, the average fixed interest rate on a three-year personal loan was 21.90% for borrowers with a credit score of 720 or higher who prequalified in Credible’s personal loan marketplace .com. That’s up 4.12% from the previous week, according to Credible.com. The average five-year personal loan rate fell last week from 16.64% to 20.10%.
Keep in mind that the rate you will receive depends on several factors, including your creditworthiness and the loans available from the lender you have chosen. The most creditworthy borrowers can benefit from rates that are significantly lower than the average.
Related: Best Personal Loans
How to get the best rates
Your credit is an important factor in the rates you receive. According to Rod Griffin, senior director of education and consumer advocacy at Experian, “checking your credit report and scores three to six months before applying for a personal loan” is a good idea. This gives you enough time to make the necessary corrections.
A credit score of 720 or better will generally get you the best deal. If you’re not quite in this credit score range, consider taking steps to improve your credit score. Pay off your existing debts to reduce your credit utilization ratio, remove errors from your credit report and pay your bills in advance or on time.
Estimate your personal loan repayments
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.
Let’s say you get a $5,000 personal loan for three years at a fixed rate of 21.90%. You’d pay about $191 a month and about $1,865 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. You would pay $6,865 in total over those three years, which includes both principal and interest.
Average Personal Loan Interest Rates by Credit Score
The rates below are estimated average interest rates for personal loans based on VantageScore risk levels, according to Experian. Although the rates below can serve as a general guideline, note that interest rates are ultimately set and determined by the lenders.