Personal loan rates this week fall for 3-year loans, while 5-year terms increase

Borrowers with good credit search personal loan over the last seven days pre-qualified for lower rates on 3-year loans and higher rates on 5-year loans compared to fixed-rate loans for the previous seven days.

For borrowers with credit scores of 720 or higher who used the trusted marketplace to choose a lender between June 24 and June 30:

• Rates for 3-year fixed-rate loans averaged 15.46%, up from 15.69% seven days ago and up from 14.93% a year ago.
• Rates for 5-year fixed-rate loans averaged 19.88%, up from 19.66% in the previous seven days and up from 17.57% a year ago.

Personal loans have become a popular way to consolidate debt and pay off credit card debt and other loans. They can also be used to cover unexpected and urgent expenses such as medical bills, to take care of a large purchase or finance home improvement projects.

Average personal loan interest rates

Average personal loan interest rates have decreased over the past seven days for 3-year loans and increased for 5-year loans. While 3-year loan rates fell by 0.23 percentage points, 5-year loan rates increased by 0.22 percentage points. Interest rates for 3- and 5-year terms remain higher than they were last year, increasing by 0.53 percentage points for 3-year terms and by 2.31 percentage points for 5-year terms.

However, borrowers can benefit from interest savings with a 3- or 5-year personal loan, as both loan terms offer lower interest rates on average than higher-cost borrowing options such as credit cards.

But whether a personal loan is right for you depends on many factors, including what you qualify for, which is largely based on your credit score. Comparing multiple lenders and their rates helps ensure you get the best personal loan for your needs.

Before applying for a personal loan, use a personal loan marketplace like Credible to comparison shop.

Weekly Personal Loan Rate Trends

Here are the latest trends in personal loan interest rates from Credible Market, updated weekly.

The chart above shows the average pre-qualified rates for borrowers with credit scores of 720 or higher who used the trusted marketplace to choose a lender.

For the month of June 2024:

• Rates for 3-year personal loans averaged 23.02%, up from 22.35% in May.
• Rates for 5-year personal loans averaged 24.81%, up from 24.52% in May.

Personal loan rates vary significantly according to credit score and loan term. If you’re curious about what kind of personal loan rates you might qualify for, you can use an online tool like Credible to compare options from different private lenders.

All reliable market lenders offer fixed rate loans at competitive rates. Because lenders use different methods to evaluate borrowers, it’s a good idea to request personal loan rates from multiple lenders so you can compare your options.

Current personal loan rates by credit score

In June, the average pre-qualified rate chosen by borrowers was:

• 13.18% for borrowers with credit scores of 780 or higher who choose a 3-year loan
• 32.55% for borrowers with credit scores below 600 choosing a 5-year loan

Depending on factors such as your credit score, the type of personal loan you are applying for and the loan repayment term, the interest rate may vary.

As shown in the chart above, a good credit score can mean a lower interest rate, and rates tend to be higher for loans with fixed interest rates and longer repayment terms.

Where are interest rates headed?

A lot happened this week in the world of interest rates.

The Bureau of Labor Statistics (BLS) reported on Wednesday that inflation slowed in May, raising hopes for multiple interest rate cuts in 2024. Later that day, the Fed ended its June meeting, signaling a cut to end of the year keeping rates stable. So far, we forecast a cut of 25 basis points (0.25 percentage points) this year and a cut of 100 basis points (1 percentage point) in 2025.

Currently at 5.25% to 5.50%, the federal funds rate is the highest it has been since 2001. Sticking inflation and low unemployment had made any cuts seem unlikely as of a week ago. But the news may bring relief to borrowers burdened with high interest costs and those considering taking out a loan. However, demand for personal loans has increased and all signs point to this trend continuing, while debt levels and delinquency rates have also increased. This could indicate that more consumers will struggle to get approved for low or no rates – even if we see rates cut.

How to get a lower interest rate

Many factors affect the interest rate a lender can offer you on a personal loan. But you can take some steps to increase your chances of getting a lower interest rate. Here are some tactics to try.

Increase credit score

Generally, people with higher credit scores qualify for lower interest rates. Steps that can help you improve your credit score over time include:

• Pay bills on time: Payment history is the most important factor in your credit score. Pay all your bills on time for the amount due.
• Check your credit report: Look at your credit report to make sure there are no errors on it. If you find errors, dispute them with the credit bureau.
• Lower your credit utilization ratio: Paying off credit card debt can improve this important credit score factor.
• Avoid opening new credit accounts: Apply and open only the credit accounts you need. Too many hard inquiries on your credit report in a short time can lower your credit score.

Choose a shorter loan term

Personal loan repayment terms can vary from one to several years. In general, shorter terms come with lower interest rates, since the lender’s money is at risk for a shorter period of time.

If your financial situation allows, applying for a shorter term can help you score a lower interest rate. Keep in mind that a shorter term doesn’t just benefit the lender – by choosing a shorter repayment term, you’ll pay less interest over the life of the loan.

Get a courier

You may be familiar with the concept of a consignor if you have student loans. If your credit isn’t good enough to qualify for the best personal loan interest rates, finding a co-financer with good credit can help you secure a lower interest rate.

Just remember, if you default on the loan, your lender will be ready to pay it off. And co-signing for a loan can also affect their credit score.

Compare rates from different lenders

Before applying for a personal loan, it’s a good idea to shop around and compare offers from several different lenders to get the lowest rates. Online lenders usually offer the most competitive rates – and can be faster to grant your loan than a brick-and-mortar establishment.

But don’t worry, comparing rates and terms doesn’t have to be a time-consuming process.

Reliable makes it easy. Just enter how much you want to borrow and you’ll be able to compare multiple lenders to choose the one that makes the most sense for you.

About Credible

Credible is a multi-lender marketplace that empowers consumers to discover financial products that are best suited to their unique circumstances. Credible’s integrations with major lenders and credit bureaus allow consumers to quickly compare accurate and personalized loan options – without putting their personal information at risk or affecting their credit score. Credible Marketplace offers an unmatched customer experience, as reflected by over 6,500 positive Trustpilot reviews and a TrustScore of 4.7/5.