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Good news for borrowers. Last week, personal loan rates fell slightly. 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.
For borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace, the average interest rate on a three-year personal loan was 10.85% from May 9 through May 13. According to Credible.com, it’s a 0.17. % decrease compared to the previous week. The average five-year personal loan rate rose 0.37% last week to 13.18% from 12.81%.
Remember that qualified borrowers can benefit from significantly lower than average rates. The rate you will receive depends on various factors, such as your creditworthiness and the loan you choose.
Related: Best Personal Loans
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.
How to calculate your personal loan payments
To see if this fits your budget, it’s important to estimate how much you’ll pay on a monthly basis and how much you’ll pay in interest over the life of the loan. One of the easiest ways to do this is to use a personal loan calculator. You will need the rate, term and amount of your loan.
For example, suppose you have a personal loan for $5,000 with a fixed interest rate of 10.85% and a term of 36 months. The Forbes Advisor personal loan calculator says your monthly payment would be around $163 and you’d pay around $880 in interest over the life of the loan. Overall, you owe $5,880, which includes both principal and interest.
Average Personal Loan Interest Rates 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.