Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but this does not affect the opinions or ratings of our editors.
Personal loan rates jumped last week. However, it is still possible for highly qualified borrowers to obtain a reasonable rate of interest on a personal loan. If you want to finance a major purchase or project, now is a good time to shop around for a loan.
For borrowers with a credit score of 720 or higher who prequalified in Credible.com’s personal loan market, the average interest rate on a three-year personal loan was 11.61% from 4th to 8th. October. According to Credible.com, it’s 0.36. % increase over the previous week. The average rate on a five-year personal loan fell 0.63% last week to 14.23% from 14.86%.
However, the actual rate you receive depends on your creditworthiness and what is available from your preferred lender. Well-qualified borrowers may be able to find rates that are significantly below average.
Related: Best personal loans October 2021
Average interest rates for personal loans by credit score
Here are the estimated average interest rates for personal loans based on VantageScore risk levels, according to Experian. Please note that interest rates are determined and set by the lenders. The prices provided are estimates.
Compare personal loan rates
Once you actively start looking for a loan, it’s a good idea to pre-qualify. Prequalifying can provide you with a more accurate view of the rate you will receive from a particular lender, as they will prequalify you by performing a smooth credit check (which does not affect your credit score).
After your prequalification, the lender can provide you with an overview of your loan options. This snapshot usually includes loan rates, terms, and limits. To find the best loan for your situation, consider prequalifying with multiple lenders and comparing terms.
However, prequalification does not guarantee approval. Once you find an offer you like, you will still need to submit a formal request and provide additional documents to the lender. When you apply, a lender will usually perform a rigorous credit check, which will vary your credit score between one and five points.
Related: 5 personal loan conditions to know before applying
Get the best rates
Two quick ways to help you qualify for lower rates include paying off existing debt to help lower your DTI and improve your credit score. The interest rate that you receive on a personal loan is based on a number of factors. This includes your overall creditworthiness, credit score, income, and debt-to-income ratio (DTI).
Although the qualification requirements differ from lender to lender, a minimum credit score of 720 will usually give you the best deal. If your score drops below this marker and you are looking for the lowest possible rate, there are steps you can take to improve your score. Try strategies like lowering your credit usage rate, removing errors from your credit report, and paying your bills early or on time.
Calculate monthly payments for a personal loan
To see if this fits your budget, it’s important to estimate how much you’ll pay monthly and how much you’ll pay in interest over the life of the loan. One of the easiest ways to do this is to use a personal loan calculator. You will need the rate, term, and amount of your loan.
For example, let’s say you get a $ 5,000 personal loan with a five-year term at a fixed interest rate of 14.23%. You would pay about $ 117 per month and about $ 2,016 in interest over the life of the loan, according to the Forbes Advisor personal loan calculator. All in all, you would pay $ 7,016 in total, which includes both principal and interest.