With interest rates on personal loans at historic lows, here’s how to get a good rate


Personal loans can be used to pay for anything from unexpected expenses to wedding expenses, with funding as fast as the next business day. (iStock)

Personal loans offer fast, lump-sum financing that you repay in fixed monthly installments over a set period of time. If you’re considering borrowing a personal loan to pay off high-interest credit card debt or finance a home improvement project, there’s never been a better time to lock in favorable terms.

The average interest rate on a two-year personal loan fell to an all-time low of 9.09% in the fourth quarter of 2021, according to the Federal Reserve. The previous record was set in the third quarter of 2020, when personal loan rates averaged 9.26%.

Average two-year personal loan rate, Federal Reserve


Personal loan interest rates are based on a number of factors, Iincluding the borrower’s credit history and loan term and amount. Just because the average rate is at an all-time high doesn’t mean all applicants will necessarily qualify for these competitive rates. Fortunately, there are several ways to improve your chances of getting a good interest rate on a personal loan.

Keep reading to learn more about how personal loan interest rates are determined, as well as how you can lock in a low rate on a personal loan. You can also visit Credible to compare rates from multiple personal lenders for free without affecting your credit score.


How to get a low interest rate on a personal loan

Personal lenders determine an applicant’s eligibility and interest rate based on a number of factors, including creditworthiness and debt-to-income ratio. Borrowers with good credit will qualify for the best personal loan rates, while those with bad credit may see unfavorable repayment terms – if they can qualify at all.

If you are considering borrowing a personal loan, you should aim to have a very good or excellent credit score, which is defined by the FICO scoring model as 740 or higher. The higher your credit score, the more likely you are to get the lowest possible interest rate on a personal loan.

Personal loan applicants should also aim to have a debt-to-income ratio (DTI) of 40% or less, according to Credible. You can calculate your DTI ratio by dividing the monthly debt payments you owe by your gross monthly income.

Since personal lenders have their own eligibility criteria, it is important to shop around with several online lenders. Most lenders allow you to be prequalified to see your estimated interest rate with a soft credit inquiry, which won’t affect your credit score.

You can compare personal loan interest rates from multiple lenders at once on Credible’s online marketplace. This way, you can find the best deal possible for your financial situation.


Can you borrow a personal loan with bad credit?

Applicants with good credit will qualify for the best personal loan deals, but it may be possible to qualify for a personal loan if you have bad credit. Here are a few things to keep in mind:

  • Your total costs will likely be higher. Some financial institutions and credit unions cater to borrowers with fair credit, although they are usually to offer reduce maximum loan amounts and apply higher interest rates. This results in a personal loan with higher monthly payments and more expensive to repay.
  • Secured personal loans can improve your eligibility. Personal loans are traditionally unsecured loans, which means they do not require you to provide collateral. But it may be easier to qualify for a personal loan secured by something you own, like your car. Keep in mind that the lender may seize your collateral if you fail to repay the loan.
  • A co-signer can make you a better candidate. Having a co-signer with a strong credit profile, such as a trusted friend or relative, can help you qualify for a lower interest rate than if you apply yourself. Since a co-signer is also responsible for repaying the loan, be sure to make timely payments to avoid damaging both of your credit ratings.

You can browse the current personal loan interest rates in the table below and visit Credible to see the offers tailored to your needs. To learn more about personal loans, contact a knowledgeable loan officer at Credible.


Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.


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