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Personal loan rates decreased last week. If you’re interested in finance a vehicle or home remodeling project, or temporarily need to improve your cash flow, you can grab a reasonable rate, so long as you’re able to meet the qualification requirements.
From January 29 to February 3, the average fixed rate on a three-year personal loan was 14.85% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace. The rate was 15.36% the previous week, according to Credible.com. The average rate on a five-year personal loan fell 0.20% last week to 22.32% from 22.52%.
The most qualified borrowers generally receive the best rates. In fact, well-qualified borrowers may receive a rate that’s significantly lower than average. The rate you receive depends on numerous factors, including your creditworthiness and the loans available through your chosen lender.
Related: Best Personal Loans
Your credit is a big factor in the rates you receive. According to Rod Griffin, senior director of consumer education and advocacy at Experian, “checking your credit report and scores three to six months before you apply for a personal loan” is a good idea. This gives you enough time to make any necessary fixes.
A credit score of 720 or better will typically get you the best terms. If you’re not quite in that credit score range, consider taking action to improve your credit score. Pay down existing debt to lower your credit utilization ratio, remove errors from your credit report and pay your bills early or on time.
Once you have an idea of your personal loan interest rate, you can calculate your monthly payments. You will need to enter your loan’s interest rate, amount and term. This will help you determine how much you’ll owe monthly and how much you’ll pay in interest over the life of your loan.
Let’s say you get a three-year, $5,000 personal loan at a fixed rate of 14.85%. You’d pay around $173 monthly and about $1,227 in interest over the life of the loan, according to the Forbes Advisor personal loan calculator. You’d pay $6,227 in total over those three years, which includes both principal and interest