What Is a Good Interest Rate on a Personal Loan? (2024 Guide) (2024)

FAQs

What Is a Good Interest Rate on a Personal Loan? (2024 Guide)? ›

At this time, 10% is a good interest rate for a personal loan for a borrower with good credit. Anything below the national average personal loan interest rate, set by the Federal Reserve, is considered a good personal interest rate. Borrowers with poor credit scores will likely be offered a higher interest rate.

While there isn't a direct relationship between personal loan rates and the Fed's actions, they certainly tend to move in the same direction. If the federal funds rate falls in 2024, we may see lower rates on personal loans.

The interest rate on a personal loan can vary widely based on factors such as your credit score, income and debt-to-income ratio. If you're able to secure an interest rate of 10% or less, you can consider this as low. Lenders including ATB Financial in Alberta and the Bank of Montreal offer rates below 10%.

A good personal loan interest rate depends on your credit score: 740 and above: Below 8% (look for loans for excellent credit) 670 to 739: Around 14% (look for loans for good credit) 580 to 669: Around 18% (look for loans for fair credit)

Mortgage rate predictions 2024

The MBA's forecast suggests that 30-year mortgage rates will fall into the 6.4% to 6.7% range throughout the rest of 2024, and Fannie Mae is forecasting the same. NAR believes rates will average 7.1% this quarter and fall to 6.5% by the end of 2024.

Despite Fed members anticipating three rate cuts by the end of the year at the March 2024 meeting of the Federal Open Market Committee (FOMC) — suggesting at the time a target range of 4.50% to 4.75% — board members at the Fed's May meeting decided to hold rates steady.

Avoid loans with APRs higher than 10% (if possible)

"That is, effectively, borrowing money at a lower rate than you're able to make on that money."

Here is a list of our partners and here's how we make money. The lowest personal loan rates start around 7% and go to borrowers with strong credit histories, high incomes and low existing debt. Compare interest rates on. 35+ personal loans reviewed and rated by our team of experts.

Starting at 9.47 percent, Bandhan Bank offers the cheapest interest rate on personal loans of Rs 1 lakh that come with a repayment tenure of four years. The equated monthly installment (EMI) will be Rs 2,592. Private sector lender IndusInd Bank offers an interest rate starting from 10.49 percent on personal loans.

What is considered a high interest personal loan? ›

A high-interest loan has an annual percentage rate above 36%, the highest APR that most consumer advocates consider affordable.

What is considered a low interest rate for a personal loan? Top lenders like Upstart and LightStream have a starting annual percentage rate (APR) under 8 percent. Provided you have excellent credit and strong income, you may be able to qualify for a low-interest personal loan with an APR under 10 percent.

Payment history is weighed the most heavily in determining your credit score, along with your total outstanding debt. Generally, borrowers need a credit score of at least 610 to 640 to even qualify for a personal loan. To qualify for a lender's lowest interest rate, borrowers typically need a score of at least 800.

Personal loans are best for one-time, set expenses. Personal lines of credit are best for projects or purchases that require flexibility. Both options offer lower average rates than credit cards for borrowers with good credit. Repayment terms depend on how much you borrow and the length of your term.

While waiting to buy a home could mean a lower interest rate, there's no guarantee that rate drop will happen. If you have the budget to buy a home now, another option is to purchase today, but refinance later once rates drop further. The MBA projects a 5.5% rate by the end of 2025.

Trading Economics offers a more optimistic outlook, predicting a rise to 5% in 2023 before falling to 4.25% in 2024 and 3.25% in 2025. This forecast is supported by Morningstar's analysis, which projects rates between 3.75% and 4%.

You might get a better deal in 2024

While interest rates are up right now, things could start to change in 2024 if the Fed decides to cut rates. So next year might be a better time to put a personal loan in place. Let's say you're looking to borrow $10,000 and pay it back over a five-year period.

Personal loans are typically unsecured, which means there's no collateral to back the loan. Your credit score plays a significant role in determining your personal loan interest rate, and a poor credit score can result in a higher interest rate.