The type of loan that has the lowest interest rate is a mortgage, which usually charges 3% to 8%, depending on the overall economic climate and the borrower’s creditworthiness. Some other factors that influence your mortgage rate include your home’s location, your home’s price, your down payment and your loan term.
In general, a secured loan, like a mortgage, will have a lower interest rate than an unsecured loan, like a standard personal loan, because it is less risky for the lender. This is due to the collateral the borrower puts up to get the loan.
Typical Interest Rates by Loan Type
Note: The ranges in the table above reflect averages from the past 20+ years. Home equity loans reflect 2010-2019 data.
You can read more about these types of loans on WalletHub. Additionally, if you’re interested in a personal loan, you can estimate your potential rates with our free pre-qualification tool.
This answer was first published on 12/09/22. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
Explanation: The loan that is likely to have the lowest interest rate is the mortgage. A mortgage loan is a secured loan that is used to finance the purchase of a property. Because the loan is secured by the property itself, lenders generally offer lower interest rates compared to other types of loans.
Which type of loan has the lowest interest rate? ›
Secured loans typically offer some of the lowest interest rates due to the collateral provided by the property. The loan is secured by the home, gold, or any vehicle, which reduces the risk for the lender.
Which type of loan tends to have a lower interest rate? ›
Lenders take on less risk with secured loans since the borrower has more incentive to repay the loan. Because of this, average interest rates are typically much lower.
Which of the following loan types would have the lowest interest rate? ›
The mortgage loan will typically have the lowest interest rate.
What type of account has the lowest interest rate? ›
You'll typically find the lowest interest rates at brick-and-mortar banks. Big banks often offer something close to a 0.01% APY on their most basic savings accounts. There is sometimes an opportunity to earn at a better rate on higher balances, but even this higher tier rarely goes beyond 0.10% APY.
What is a low interest loan? ›
Key takeaways
A low-interest personal loan is any loan with an interest rate under the current market average. As of May 29, 2024, the average personal loan rate is 12.21 percent. To qualify, you will need excellent credit and good finances.
What has been the lowest interest rate? ›
2021: The lowest 30-year mortgage rates ever
And it kept falling to a new record low of just 2.65% in January 2021. The average mortgage rate for that year was 2.96%.
Which type of loan typically has a lower interest rate responses? ›
The Bottom Line
Generally speaking, secured loans will have lower interest rates than unsecured ones because of their lower perceived risk.
What is the cheapest type of loan? ›
Cheapest ways to borrow money
- Personal loan from a bank or credit union. Banks or credit unions typically offer the lowest annual percentage rates (APRs), which represent the total cost of borrowing, for personal loans. ...
- 0% APR credit card. ...
- Buy now, pay later. ...
- 401(k) loan. ...
- Personal line of credit. ...
- Home equity financing.
What type of home loan has the lowest interest rate? VA loans typically have the lowest interest rates. However, the VA program is only available to eligible service members and veterans. For non-VA buyers with strong credit, a conventional loan will typically offer the lowest rates.
The interest rate on federal student loans is fixed and usually lower than that on private loans—and much lower than that on a credit card.
What type of loan has no interest? ›
Subsidized Loans are loans for undergraduate students with financial need, as determined by your cost of attendance minus expected family contribution and other financial aid (such as grants or scholarships). Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods.
Which type of loan is best? ›
FAQs For Different Types of Loan
Generally, secured loans are cheaper than unsecured loans because they have lower interest rates and more extended repayment periods. However, secured loans also require collateral, which means you risk losing your assets if you default.
Which type of loan is likely to have the lowest interest rates in college? ›
What type of student loan has the lowest interest rate? Federal student loans tend to offer the lowest interest rates, and there's no credit check for most federal student loans.
What source of credit has the lowest interest rate? ›
Credit unions provide the cheapest source of loans as it is known in the community and aims to provide a not-for-profit rate to the borrowers.
Which type of accounts usually pays the lowest interest rates? ›
Regular savings accounts
Rates and minimum balance: Traditional banks have savings rates as low as 0.01% annual percentage yield.
Which type of loan has no interest? ›
Subsidized Loans are loans for undergraduate students with financial need, as determined by your cost of attendance minus expected family contribution and other financial aid (such as grants or scholarships). Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods.
What type of student loan typically has the lowest interest rate? ›
What type of student loan has the lowest interest rate? Federal student loans tend to offer the lowest interest rates, and there's no credit check for most federal student loans.
