What’s a Good Rate for a Personal Loan?

If your car were to break down tomorrow, how would you cover the repairs? Or what if you found an amazing summer camp for your kids, but the cost was just out of reach?

That’s where personal loans come in. Unlike mortgages or student loans, personal loans don’t have one specific purpose, making them useful for one-off expenses or debt consolidation.

However, before you rush to the nearest lender, knowing how to evaluate a personal loan is important. What’s a good interest rate, and how can you get the best rate possible? Read on to find out.

What is a good interest rate for a personal loan?

Interest rates can increase how much you pay for a loan over time. The higher your interest rate, the more you’ll owe on any unpaid principal.

But interest rates aren’t the sole determinant of your loan’s total borrowing cost. Several factors play a role, including:

Term	What it is	How it affects your loan
Fixed rate	An interest rate that stays the same every month	Monthly payments are stable, so total amount paid is predictable
Variable rate	An interest rate that can go up or down	Monthly payments can change, causing you to pay more or less interest than with a fixed rate
Loan term	How long you have to repay your loan	Longer loan terms generally result in lower monthly payments but more interest
Origination fee	Fee paid to your lender for  processing and disbursing your loan	Could increase the total amount borrowed if added to the loan or reduce funds you receive if taken out of the loan
Borrowing cost	How much you pay over the life of the loan, including principal, interest and fees	Increases with long loan terms and high interest rates and fees decrease with shorter loan terms and lower interest rates and fees
APR	Annual borrowing cost of your loan, expressed as a percentage	Higher APRs indicate a more expensive loan

Distinguishing interest rates and APR can be tricky, but it’s not as difficult as it seems. Your APR includes your interest rate, plus any fees required to get the loan. Think of it like this: Your interest rate and fees are scoops of ice cream. Your APR is the whole sundae.

Your interest rate and APR are determined partly by your credit score and partly by something called the prime rate. 

Lenders use the prime rate, in addition to your credit score and history, as a benchmark to set your rate. The prime rate fluctuates based on market conditions, but in March 2024, the prime rate was 8.50%.

Like the prime rate, your credit score can change, too. But it’ll always fall into one of the below ranges:

Credit rating	Credit range
Poor	300 – 580
Fair	580 – 669
Good	670 – 739
Very good	740 – 799
Exceptional	800 – 850

What constitutes a “good” interest rate for you depends in part on your credit rating. That’s why checking your credit score and report is crucial before applying for a personal loan. Here’s how to do that:

1. Check your credit card app, online account, or monthly statement. Many credit card companies provide your credit score at no charge. If you’re not sure if yours does or where to find your score, reach out to your card issuer for assistance.
2. Subscribe to a credit score reporting service. FICO and each of the three major credit bureaus offer tiered subscriptions that give you varying degrees of detail about your credit health.
3. Work with a credit or housing counselor. Not only can credit and housing counselors help you find your credit score, but they can walk you through recommended improvements to bring that score up. Look for nonprofit credit counseling for free or reduced-cost credit help.
4. Pull your full credit reports. You can check each of your three credit reports—one from each bureau—once a week for free.

As you review your credit profile, look for ways to increase your score. Can you pay down credit card balances? Can you dispute incorrect information, like a late payment, that you can prove you paid on time? Taking those steps before you apply will help you qualify for the best rates.

Knowing how personal loans work and how to prepare your credit is only half the battle. You also need to know what rates to expect—and whether the rate you’re offered is good enough.

What is a good rate for a personal loan with good credit?

Good or excellent credit scores tend to fall between 670 to 850, depending on which credit scoring model a lender uses.

If your score is in that window, you’re looking at an average APR between 11.30% and 15.60%. A good rate, then, is anything that keeps you in or below that range.

Keep in mind this range is a ballpark and not a guarantee. A high credit score isn’t a promise of a low rate. Lenders could still see you as a risky borrower if:

• Your income is too low compared to your loan amount. If you make $40,000 per year but want to borrow $50,000 for a personal loan, don’t be surprised if lenders raise their eyebrows—and your interest rate.
• Your DTI ratio is too high compared to your anticipated payments. If you’re already spending a large portion of your take-home pay on debt obligations, lenders may wonder how much money you’ll have left to pay back your loan.
• Your employment history is rocky. Changing jobs every few months or going long periods without consistent income can be a red flag to lenders.
• You’ve made late payments. You can still have decent credit with one or two late payments, but lenders will take note. They might increase your interest rate if they think you’re at risk of defaulting.
• You’ve recently taken on new debt. If you just bought a house or opened a new credit card and now want a personal loan to go with it, lenders will wonder why you’re taking on so much debt so soon. Don’t be surprised if you get a higher interest rate as a result.

Interest rates tend to increase with perceived risk, so if any of the above apply, you may not qualify for as low a rate as you’d like. Still, that doesn’t mean you have to settle for sky-high rates. 

One way to get a lower rate is by applying for personal loans optimized for borrowers with good credit. You can view our complete list of good-credit personal loan lenders or get started with these recommendations:

Lender	Our rating
SoFi	5/5
LightStream	4.8/5
Happy Money	4.8/5

Note that the lowest possible rate is different with each lender. Rates on that end of the spectrum are often reserved for the most well-qualified borrowers. You can prioritize lenders with lower starting APRs, but your rate could be anywhere in that lender’s reported range.

For example, imagine you want a $10,000 loan with a 36-month repayment period. Lender A offers you a 10% interest rate, while Lender B offers a 13% interest rate. Here’s how that difference could affect your payments and borrowing cost:

Sure, that extra three percentage points only changed your monthly payment by $14. But your overall borrowing cost increased by $514. In other words, Lender B’s higher interest rate costs you the equivalent of an extra monthly payment—and then some.

If you have good credit and aren’t qualifying for as low of a rate as you expect, ask the lender how it can improve the rate or keep shopping until you find a rate you are comfortable with.

Jim McCarthy

CFP®

What is a good APR for a personal loan with bad credit?

If you have bad credit—a 580 credit score or below—you may not qualify for a lender’s starting, or lowest, rate. The same rings true for fair-credit borrowers with scores between 580 and 669.

Average APRs for borrowers in these credit categories are between 22.30% and 25.20%. That’s much higher than the APRs for good credit scores, but you always have a chance at a better-than-average rate.

Despite having bad or fair credit, you might be able to lock in a lower interest rate if:

• Your payment history is impeccable. The most important factor for lenders is getting repaid. Your credit report may have a few blemishes, but if past-due payments aren’t one of them, you might luck out with a low rate.
• You have a high income. Perhaps you’re earning much more now than before. Lenders may see those extra zeroes in your salary as an indication you’re more dependable than your credit score lets on.
• Derogatory marks are several years old or paid off. In general, late payments, charge-offs, and collections accounts stay on your credit report for seven years. As you get closer to year seven, they bear less weight, especially if your accounts are current or you have satisfied any outstanding debt obligations. 

Even if you get a lower interest rate, your APR could still be high because borrowers with bad or fair credit tend to pay more in personal loan fees. 

Just like with interest rates, lenders often raise fees for riskier borrowers. That accounts for the increased likelihood that the loan won’t be repaid.

If those higher rates and fees don’t dissuade you, these are some of the best lenders for borrowers with bad credit, as well as a few personal loans for fair credit:

Lender	Our rating	Rates (APR)
Upgrade	4.9/5	8.49% – 35.99%
LendingPoint	4.9/5	7.99% – 35.99%
Upstart	4.8/5	7.80% – 35.99%
Achieve	4.8/5	7.99% – 35.99%

As you check out each lender, remember that you’re evaluating its loan terms like the lender is evaluating your credit. 

Adjusting our previous example to what you may see if you have bad credit, Lender A can give you a $10,000 loan with 36-month terms and a 27% interest rate. Lender B, on the other hand, offers you a 30% interest rate. How might those costs differ?

Lender B’s rate would cost you an additional $17 each month, and you’d pay an extra $586 in interest by the end of your loan term. 

Is interest rate the most important factor in getting the lowest-cost personal loan?

When it comes to getting a personal loan with the lowest price tag, the length of your loan term is just as important as your interest rate. Longer loan terms may result in lower monthly payments, but you’ll pay far more in the long run.

Imagine you’re offered a personal loan with a 27% interest rate. You can choose a 36-month or 48-month term. Here’s how each repayment period would affect your finances:

Opting for the longer, 48-month term means paying $65 less each month—but it would cost you $1,759 more overall. 

In our example, the interest rate stayed the same between each hypothetical repayment period. However, in real life, choosing the 48-month term would likely result in a higher APR. 

To lenders, a longer loan term means more time for you to default. Your interest rate wouldn’t skyrocket with a longer repayment period, but a small increase isn’t unheard of. Here’s how the longer loan term with a higher APR would affect you:

Notice how the gap between your monthly payments closes and the difference between the total loan costs widens. Now, the 48-month term means you’re paying about $54 less each month, but it comes with a $2,308 premium.

How to get the best APR available on a personal loan

To get the best APR available, use the full prequalification process. Prequalifying lets you check your rates without any commitment or impact on your credit. You can then compare loan offers from multiple lenders to ensure you get the lowest rate.

Several of our top-rated personal loan lenders, including SoFi and Upstart, let you start with a soft credit check. Use our payment calculator to find the borrowing cost of each loan offer, and if you decide to apply, you’ll have added peace of mind knowing you did your due diligence.

Besides getting prequalified, you may be able to find the lowest possible rate in other ways. Particularly for fair-to-bad credit borrowers, these three strategies could save you hundreds or thousands over the life of your loan:

• Take advantage of rate discounts. Many lenders offer autopay and direct deposit discounts that can shave a small percentage off your rate.
• Put up collateral. If you have assets , such as a car, house, or boat, you can use those to apply for a secured personal loan and even get a better rate in the process.
• Apply with a cosigner or co-applicant. You don’t need the best credit to get a low rate—as long as you know someone who does. Not many companies allow cosigners, but LightStream and Upgrade will let you apply for a personal loan with a co-applicant.

If none of these is an option—or if you’re willing to hold out to maximize savings—it might be worth waiting until your credit improves to apply for a personal loan. 

How long it’ll take to see a measurable difference depends on your credit health. For instance, paying down credit card balances could drive up your score in months. Bouncing back from a charge-off, however, could take a few years. 

Depending on why you need a personal loan, waiting several years may not be feasible. 

In that case, your best bet is to take the action you can to improve your credit between now and when you need the loan. Even if your credit score isn’t perfect by then, your actions will ideally pay off with a better interest rate.

A good rule of thumb is to prequalify with three to five lenders to find the best deal, as long as they are soft credit checks.

Jim McCarthy

CFP®

Alternatives to personal loans

If you won’t qualify for a personal loan and can’t wait until you do, there’s still hope. You may have better luck applying for a credit card, or if you own your home, you could look into a home equity line of credit (HELOC).

Both alternatives give you fast access to the funds you need, just like a personal loan. Unlike a personal loan, however, you can pay down and re-borrow those funds as needed. Explore your options, and know personal loans are just the tip of the financing iceberg.