Are Personal Loans Variable or Fixed Rate?

Personal loans can help you pay for various expenses, from unexpected medical bills to surprise home repairs. These loans often have lower rates than credit cards, making them a better choice for many. 

Unlike credit cards, most personal loans have fixed rates. This means your rate is set for the duration of your loan term, and your payment amounts won’t fluctuate over time. Some lenders might also offer variable-rate options. 

Here’s how personal loan rates work, what to know about variable and fixed loans, and how to get the best possible personal loan rates. 

Do personal loans have fixed or variable rates?

Personal loans are a type of installment loan, meaning you get a lump sum from your lender and repay it with fixed monthly payments over a set term. By contrast, with revolving credit, you can pay off your balance monthly and tap into your credit line as often as you’d like. 

Certain installment loans, such as auto or home loans, are secured by collateral. This collateral protects the lender, which can take it if you fail to make your monthly loan payments. However, most personal loans are unsecured, meaning no collateral is required. For this reason, lenders often require that borrowers have good or excellent credit to qualify. 

Personal loans generally have fixed rates in the U.S., but certain international lenders might offer variable-rate options. For instance, TD Bank in Canada has fixed- and variable-rate personal loans, and St. George Bank in Australia offers both types. You often need to be a citizen or meet residency requirements to qualify for a personal loan from an international lender. 

If you live in the U.S. and are seeking variable-rate financing, a personal line of credit could be a solid alternative to a personal loan. Like most personal loans, these credit lines are unsecured, and you can borrow up to a set limit. But unlike personal loans, personal lines of credit are revolving and often have variable rates. A personal line of credit could be suitable for someone needing more flexible financing to borrow against and repay over time. Check out the best personal lines of credit. 

What’s the difference between a fixed and variable rate? 

With a fixed-rate loan, you’ll have a set interest rate and predictable payments. This is typically not the case with variable-rate financing. 

Fixed-rate financing comes with interest rates that don’t change. Variable-rate financing has rates that fluctuate. Variable rates go up or down based on market conditions and federal policy changes. For instance, if the Federal Reserve increases its federal funds rate, the rate at which credit unions and banks can lend or borrow their reserves, lenders often respond by increasing rates on loans or lines of credit.

Because rates change with variable-rate financing, so do your monthly payments. The amount you pay each month will increase or decrease along with rates. Lenders should state upfront how much and how often your rate can change with variable-rate financing.

Financing type	Rate information	Predictable payments?
Fixed-rate loan	Remains the same over time May be higher than initial variable rate	✅
Variable-rate loan	Changes over time Initial variable rate may be lower than fixed rate	❌

How does a fixed-rate personal loan work?

If you qualify for a fixed-rate personal loan, you’ll receive a lump sum from your lender. You’ll then make fixed monthly principal-and-interest payments for the life of your loan. Because your payment amount doesn’t change, budgeting for this monthly cost is easier. 

Fixed-rate personal loans tend to come with higher rates than what you might get initially with variable-rate financing. 

How does a variable-rate personal loan work?

As we mentioned, variable-rate personal loans are uncommon in the U.S. These loans are also disbursed as a lump sum, and monthly payments are required, as with a fixed-rate personal loan. 

The major difference is that your rate will increase or decrease over time. This could work in your favor when rates decline, but it will work against you when they go up. Variable-rate loans also tend to have lower initial rates than their fixed-rate counterparts.

If you’re interested in variable-rate products, see our guide to variable-rate lines of credit.

Personal loan rates from 5 lenders

If you’re looking to borrow, here are five lenders offering personal loans. 

Lender	Rates (APR)	Fixed or variable?
Best Egg	11.72% – 17.99%	🔒 Fixed
Happy Money	8.99% – 35.99%	🔒 Fixed
LightStream	7.49% – 25.99%	🔒 Fixed
Upgrade	8.49% – 35.99%	🔒 Fixed
Upstart	7.80% – 35.99%	🔒 Fixed

How to get the best personal loan rate 

As the table above shows, personal loan rates vary by lender. So if you’re considering a personal loan, it’s essential to shop around to find the best possible rate and terms for your situation. Lenders will also take the following factors into account when determining whether you qualify for a personal loan:

1. Credit score and reports
2. Annual income
3. Debt-to-income ratio (DTI)

Credit score and reports

Prospective lenders consider your credit score and history when you apply for a personal loan. 

The best personal loan rates tend to be reserved for borrowers with excellent credit scores. 

You might qualify for a personal loan from certain lenders with fair or good credit, but your rate may be higher. Consider focusing on improving your credit before applying if you’d like to access the best possible rates.

Besides your credit score, your lender will look at your credit reports. High outstanding balances or missed or late payments on your accounts could be a red flag for prospective lenders. Lenders might consider you a higher lending risk because of these items, and they could result in a denial or a higher loan rate. 

Annual income

Lenders will also review your annual income when you apply for a personal loan, and you may need proof of income in the form of recent pay stubs or bank statements. 

Certain banks and credit unions might require an annual income above a certain amount to qualify for a personal loan, but not all do. If you’re unemployed or concerned your income could be a barrier to approval, ask your lender about its requirements.   

DTI

In addition to your annual income, lenders will also look at your current debt relative to how much you earn, or your DTI. This ratio helps them determine whether you can afford to take on new debt. Many lenders want to see a DTI below 40% for personal loan applicants. 

You can calculate your DTI by dividing your monthly gross income by your monthly debt. If you determine your debt levels are high, you may want to hold off on applying for a personal loan. Work on paying down your debt, and then consider borrowing when your monthly expenses are more manageable.