5-year fixed personal loan interest rates fall as 3-year rates rise
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Borrowers with good credit seeking personal loans in the past seven days have prequalified for slightly lower 5-year rates and slightly higher 3-year rates compared to fixed-rate loans from the previous seven days.
For borrowers with a credit score of 720 or higher and who have used the Credible Marketplace to select a lender between November 8, 2021 and November 15, 2021:
- 3-year fixed-rate loan rates averaged 11.03%, down from 10.94% the previous seven days and up from 11.23% a year ago. Over the past year, 3-year personal loan rates hit a low during the week of September 20, 2021, when they averaged 10.70%.
- 5-year fixed-rate loan rates averaged 13.78%, down from 14.28% the previous seven days and 14.57% a year ago. 5-year personal loan rates hit a 12.62% low in the past 12 months during the week of May 3, 2021.
Personal loans have become a popular way to consolidate and pay off credit card debt and other loans. They can also be used to cover unforeseen expenses like medical bills, deal with a major purchase, or finance home improvement projects.
5-year fixed personal loan rates have fallen 0.50% since last week, falling back into the 13% range. Meanwhile, 3-year rates have risen slightly and haven’t been higher since the week of October 11, 2021, when they averaged 11.47%. Despite the hike, 3-year rates are only 0.33% off their lowest level last year. Borrowers can enjoy significant interest savings with either term now.
Whether a personal loan is right for you often depends on several factors, including what rate you may qualify for. Comparing several lenders and their rates could help you get the best possible personal loan for your needs.
It’s always a good idea to shop around on sites like Credible to understand how much you qualify for and choose the best option for you.
Here are the latest trends in personal loan interest rates from the Credible Marketplace, updated monthly.
Trends in weekly personal loan rates
The chart above shows the average prequalified rates for borrowers with a credit score of 720 or higher who have used the Credible Marketplace to select a lender.
For the month of October 2021:
- 3-year personal loan rates averaged 11.33%, up from 11.27% in September and 11.16% a year ago.
- 5-year personal loan rates averaged 13.85%, up from 14.84% in September and up from 13.72% a year ago.
Personal loan rates vary widely depending on the credit rating and the length of the loan. If you are curious about what type of personal loan rate you might qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking your rates will not affect your credit score.
In October, the average prequalified rate used by borrowers was:
- 8.92% for borrowers with a credit score of 780 or better choosing a 3-year loan
- 29.04% for borrowers with a credit score of less than 600 choosing a 5-year loan
All the lenders in the Credible market offer fixed rate loans at competitive rates. Since lenders use different methods to assess borrowers, it is a good idea to apply for personal loan rates from multiple lenders so that you can compare your options.
Current rates for personal loans by credit score
Depending on factors such as your credit rating, the type of personal loan you are looking for, and the loan repayment term, the interest rate may differ.
As the table above shows, a good credit rating can mean a lower interest rate, and the rates tend to be higher on loans with fixed interest rates and longer repayment terms.
How to get a lower interest rate
There are many factors that influence the interest rate a lender might offer you on a personal loan. But there are steps you can take to increase your chances of getting a lower interest rate. Here are some tactics to try.
Increase credit score
Generally, people with a higher credit score are eligible for lower interest rates. Steps that can help you improve your credit score over time include:
- Pay your bills on time. Payment history is the most important factor in your credit score. Pay all of your bills on time for the amount owed.
- Check your credit report. Examine your credit report to make sure there are no errors. If you find any errors, dispute them with the credit bureau.
- Reduce your credit utilization rate. Paying off credit card debt can improve this important credit scoring factor.
- Avoid opening new credit accounts. Only ask for and open the credit accounts that you really need. Too many inquiries about your credit report in a short period of time could lower your credit score.
Choose a shorter loan term
The repayment terms for personal loans can vary from one to several years. In general, shorter terms come with lower interest rates because the lender’s money is at risk for a shorter period.
If your financial situation allows it, applying for a shorter term could help you get a lower interest rate. Keep in mind that the shorter term doesn’t just benefit the lender: choosing a shorter repayment term will pay less interest over the life of the loan.
Get a co-signer
You may be familiar with the concept of co-signer if you have student loans. If your credit isn’t good enough to qualify for the best interest rates on personal loans, finding a co-signer with good credit could help you get a lower interest rate.
Remember that if you do not repay the loan, your co-signer will be responsible for repaying it. And co-signing for a loan could also affect their credit score.
Compare rates from different lenders
Before applying for a personal loan, it is a good idea to shop around and compare the offers of several different lenders to get the lowest rates. Online lenders generally offer the most competitive rates and can disburse your loan faster than a physical establishment.
But don’t worry, comparing rates and terms doesn’t have to be a tedious process.
Credible makes it easy. Just enter the amount you want to borrow and you can compare multiple lenders to choose the one that’s right for you.
Credible is a multi-lender marketplace that allows consumers to discover the financial products 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. The Credible Marketplace offers an unparalleled customer experience as evidenced by more than 4,500 positive reviews on Trustpilot and a 4.7 / 5 Octoberscore.