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Good news for borrowers. Last week, personal loan rates fell slightly. As long as you are a qualified borrower, you benefit from a relatively low interest rate. For many, this means financing a major purchase or project is at hand.
From April 25 to April 29, the average fixed rate on a three-year personal loan was 10.69% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace . The rate was 10.86% the previous week, according to Credible.com. The average five-year personal loan rate rose 0.05% last week to 13.42% from 13.37%.
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 benefit from more favorable interest rates
Two quick ways to help you qualify for better rates is to pay down your existing debt to help lower your DTI and improve your credit score. Personal loan interest rates are based on a number of factors, including your overall creditworthiness, credit score, income, and debt-to-income ratio (DTI).
Although qualification requirements differ from lender to lender, a minimum credit score of 720 will generally get you the best deal. If your score falls below this marker and you’re looking for the lowest possible rate, you can take steps to improve your score. Try strategies such as reducing your credit utilization rate, removing errors from your credit report, and paying your bills early or on time.
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.
Let’s say you get a $5,000 personal loan for three years at a fixed rate of 10.69%. You’d pay about $163 a month and about $867 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. You would pay $5,867 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.