Personal loan rates are so high because the Federal Reserve has increased its target interest rate 11 times since early 2022 in response to high inflation. The interest rates on personal loans tend to go up when the Fed raises its rate.
Personal loan rates also tend to be higher than interest rates for secured loans like mortgages and auto loans because most personal loans are not backed by collateral. For example, the average personal loan rate is around 5-8% higher than the average mortgage rate.
Average Personal Loan Rate by Year, 2003 – 2023
Year
Average Personal Loan Rate by Year
2023
11.87%
2022
9.87%
2021
9.38%
2020
9.51%
2019
10.32%
2018
10.32%
2017
10.13%
2016
9.69%
2015
9.75%
2014
10.23%
2013
10.20%
2012
10.71%
2011
10.88%
2010
10.87%
2009
11.10%
2008
11.37%
2007
12.38%
2006
12.41%
2005
12.06%
2004
11.89%
2003
11.96%
This data reflects the annual average finance rate on 24-month personal loans from commercial banks, according to the U.S. Board of Governors of the Federal Reserve System.
As you can see, personal loan rates haven’t always been as high as they are now. If you don’t want to wait for rates to subside in general, there are still some things you can do to minimize the cost of a loan.
Tips to Getting a Lower Personal Loan Interest Rate
Compare rates. Compare rates. Take advantage of WalletHub’s rate comparison tool to shop around for the best rates.
You can use WalletHub’s prequalification tool to estimate your chances of getting approved and the loan rates you might be offered, which can help you pick the lender with the best terms for you.
Adjust your loan term and amount. A shorter repayment plan or lower loan amount may help you get a lower interest rate.
Get a co-signer or co-borrower. If your co-signer or co-borrower has a better credit score, they may be able to help you qualify for a lower interest rate.
Raise your credit score. Lowering your debt-to-income ratio, keeping your credit accounts in good standing, and practicing other smart strategies can help give you the best shot at qualifying for lower rates.
This answer was first published on 01/12/24 and it was last updated on 04/08/24. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
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Writer. Personal loan rates are so high because the Federal Reserve has increased its target interest rate 11 times since early 2022 in response to high inflation. The interest rates on personal loans tend to go up when the Fed raises its rate.
Personal loans are typically unsecured, which means there's no collateral to back the loan. Your credit score plays a significant role in determining your personal loan interest rate, and a poor credit score can result in a higher interest rate.
As in most other types of borrowing, private student loan rates began to trend upward in March 2022 after the Federal Reserve approved its first rate hike in three years. Since then, the Fed has continued to slowly increase rates in an effort to tamp down inflation.
When inflation is high, the government raises rates to deter borrowers from taking loans in an effort to reduce spending. The current price of goods might skyrocket by the time the borrower pays it back. This will reduce the lender's purchasing power. When the demand for credit is high, so are interest rates.
A good personal loan interest rate depends on your credit score: 740 and above: Below 8% (look for loans for excellent credit) 670 to 739: Around 14% (look for loans for good credit) 580 to 669: Around 18% (look for loans for fair credit)
Loan amount: The more you borrow, the more risk the lender takes in the event that you default. As a result, higher loan amounts may have higher interest rates. Repayment term: Longer loan repayment terms typically come with higher interest rates because of interest rate risk.
Lower personal loan rates may be on the horizon in 2024 after the Fed made progress curbing inflation at the end of 2023. That progress came after four more Federal Reserve rate hikes in 2023.
All lenders have different parameters for minimum income, which helps them manage their risk and ensure repayment. If the applicant's income is low, lenders usually levy a higher rate to offset the risk.
The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. Here's where mortgage interest rates are headed for the rest of the year and how that will impact the housing market as a whole.
The strength of the US economy was already putting pressure on the Fed to cut less quickly. A higher interest rate helps to stop strong demand straining supply chains and making prices rise too fast.
The lowest personal loan rates start around 7% and go to borrowers with strong credit histories, high incomes and low existing debt. Compare interest rates on personal loans.
A 24.99% APR is a decent personal loan rate for people with fair credit. Applicants with a credit score of 580+ could qualify for a personal loan with a 24.99% APR if they choose the right lender and have enough income to afford the loan.
APRs can vary based on a variety of factors, including your loan amount, loan term, credit score, annual income and debt-to-income (DTI) ratio. APRs for personal loans can range from around 8 percent to 36 percent. According to a Bankrate study, the average APR for a personal loan is 12.20 percent as of May 15, 2024.
No, 35% is not a good personal loan rate. An APR of 35% is a lot higher than the national average personal loan rate, and even people with bad credit can find lower rates by comparing personal loan offers and getting pre-qualified before applying.
Factors that increase your APR may include federal rate increases or a drop in your credit score. By identifying changes to your APR and understanding the actions that led to your increased rate, you can take steps that may help reduce your interest charges in the future.
Introduction: My name is Stevie Stamm, I am a colorful, sparkling, splendid, vast, open, hilarious, tender person who loves writing and wants to share my knowledge and understanding with you.
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