Personal loan rates are so high because the Federal Reserve has increased its target interest rate 11 times since early 2022 in response to high inflation. The interest rates on personal loans tend to go up when the Fed raises its rate.
Personal loan rates also tend to be higher than interest rates for secured loans like mortgages and auto loans because most personal loans are not backed by collateral. For example, the average personal loan rate is around 5-8% higher than the average mortgage rate.
Average Personal Loan Rate by Year, 2003 – 2023
| Year | Average Personal Loan Rate by Year |
| 2023 | 11.87% |
| 2022 | 9.87% |
| 2021 | 9.38% |
| 2020 | 9.51% |
| 2019 | 10.32% |
| 2018 | 10.32% |
| 2017 | 10.13% |
| 2016 | 9.69% |
| 2015 | 9.75% |
| 2014 | 10.23% |
| 2013 | 10.20% |
| 2012 | 10.71% |
| 2011 | 10.88% |
| 2010 | 10.87% |
| 2009 | 11.10% |
| 2008 | 11.37% |
| 2007 | 12.38% |
| 2006 | 12.41% |
| 2005 | 12.06% |
| 2004 | 11.89% |
| 2003 | 11.96% |
This data reflects the annual average finance rate on 24-month personal loans from commercial banks, according to the U.S. Board of Governors of the Federal Reserve System.
As you can see, personal loan rates haven’t always been as high as they are now. If you don’t want to wait for rates to subside in general, there are still some things you can do to minimize the cost of a loan.
Tips to Getting a Lower Personal Loan Interest Rate
- Compare rates. Compare rates. Take advantage of WalletHub’s rate comparison tool to shop around for the best rates.
- You can use WalletHub’s prequalification tool to estimate your chances of getting approved and the loan rates you might be offered, which can help you pick the lender with the best terms for you.
- Adjust your loan term and amount. A shorter repayment plan or lower loan amount may help you get a lower interest rate.
- Get a co-signer or co-borrower. If your co-signer or co-borrower has a better credit score, they may be able to help you qualify for a lower interest rate.
- Raise your credit score. Lowering your debt-to-income ratio, keeping your credit accounts in good standing, and practicing other smart strategies can help give you the best shot at qualifying for lower rates.
You can join WalletHub to check your credit score for free and get personalized recommendations about how to improve your credit.
This answer was first published on 01/12/24 and it was last updated on 04/08/24. 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
The federal interest rate set influences the prime interest rates lenders offer to new borrowers. The average personal loan interest rate was 10.28 percent at the beginning of 2022 and has risen steadily since. As the Fed introduced rate hikes throughout 2022 and 23, the average personal loan rate also increased.
Why is my personal loan interest rate so high? ›
Loan amount: The more you borrow, the more risk the lender takes in the event that you default. As a result, higher loan amounts may have higher interest rates. Repayment term: Longer loan repayment terms typically come with higher interest rates because of interest rate risk.
Why are private loan interest rates so high? ›
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.
How much would a $5000 loan cost per month? ›
Based on the OneMain personal loan calculator, a $5,000 loan with a 25% APR and a 60-month term length would be $147 per month. The loan terms you receive will depend on your credit profile, including credit history, income, debts and if you secure it with collateral like a car or truck.
Will personal loan rates go down in 2024? ›
Lower personal loan rates may be on the horizon in 2024 after the Fed made progress curbing inflation at the end of 2023. That progress came after four more Federal Reserve rate hikes in 2023.
Is 7% a good rate for a personal loan? ›
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.
Is 6% a good rate for a personal loan? ›
A good interest rate on a personal loan is generally on the low end of the range, which currently starts around 7 percent. For example, if you have excellent credit, a rate below 11 percent would be considered good, while 12.5 percent would be less competitive.
Why are Sallie Mae interest rates so high? ›
If you signed up for a Sallie Mae loan when you entered college, you may have a high interest rate because you were a college student with no credit history and no full-time income. If you now have a stable job and a good credit score, you may be eligible for a lower interest rate.
Why federal loans are better than private? ›
The interest rate is fixed and is often lower than private loans—and much lower than some credit card interest rates. View the current interest rates on federal student loans. The interest rate is fixed and may be lower than private loans—and much lower than some credit card interest rates.
Is 12% APR good for a personal loan? ›
In most circ*mstances, a 12% interest rate on a personal loan definitely qualifies as a good rate unless the borrower has nearly perfect credit. To guarantee that you will be able to qualify for an interest rate near 12%, you will need to have a good to excellent credit score of over 700 points.
The interest rate on a $5,000 loan from a major lender is usually around 7.8% to 35.99%. It's difficult to pinpoint the exact interest rate that you'll get for a $5,000 loan since lenders take many factors into account when calculating your interest rate, such as your credit score and income.
Which bank offers the cheapest personal loan? ›
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.
Are interest rates on personal loans high right now? ›
The best personal loan rates are currently from 6.99% to 35.99%. Compare interest rates on personal loans from online lenders, banks and credit unions. The lowest rates go to borrowers with strong credit histories, high incomes and low existing debt.
Why is my APR so high with good credit? ›
Factors that increase your APR may include federal rate increases or a drop in your credit score. By identifying changes to your APR and understanding the actions that led to your increased rate, you can take steps that may help reduce your interest charges in the future.
Are personal loan interest rates going up or down? ›
Here are the latest trends in personal loan interest rates from the Credible marketplace, updated weekly. During the week of May 6, 2024: Average personal loan rates* on 3-year loans were at 14.43%, down from 15.10% last week and up from 14.16% a year ago.
