Many people use personal loans to consolidate credit card debt because the rates tend to be lower. Average personal loan interest rates are around 11.5%, according to data from the Federal Reserve, compared to an average credit card interest rate of 20%. That’s a big difference and could result in significant savings.
Of course, you can use personal loans for much more than just consolidating debt. The rate you’ll get will vary depending on your credit score, and even current market conditions.
Here’s what you need to know about today’s average personal loan interest rates, and how to get the lowest rate possible:
Average personal loan interest rates range from about 6% to 36%. The banks, credit unions, and online lenders that offer personal loans set the rates, which are influenced by overall economic conditions. Rates are also determined by the lender you choose, your location, credit score, debt-to-income ratio, loan amount, and loan term.
Higher interest rates make a loan more expensive, which is why it’s so important to find the lowest rate you can when shopping for a personal loan. For example, if you borrow $10,000 with 9% interest for two years, you would pay about $964 in interest. If your rate was 18% instead, you would pay $1,982 in interest — almost twice as much. Try a personal loan calculator to see how different rates affect your monthly payment and overall loan cost.
Related: Learn more about getting a personal loan
Lenders offer their lowest personal loan interest rates to borrowers with good or exceptional credit scores. It shows the lender that you can be trusted to make your monthly payments on time. When you know the average personal loan interest rate for your credit score, you can work on finding competitive loan offers.
If your credit score is on the lower end, watch out for predatory lending practices. Some lenders will try to lure borrowers in with low advertised interest rates, then offer loans with astronomically high rates instead.
| Credit score | Average interest rate |
|---|---|
| Below 640 | 15.91% |
| 661-780 | 15.56% |
| 661-780 | 10.93% |
| 781-850 | 6.59% |
You can pay less interest in several ways. Try some of the following strategies to save money on your personal loan:
Most importantly, shop around and compare loan offers to make sure you’re getting the best interest rate available for your situation.
When comparing loans, there are other factors beyond the interest rate to weigh.
When you need extra funds, a personal loan can be just the ticket — as long as you’re not overpaying on interest. However, it can’t be overstated, it’s crucial to compare multiple loan offers, so you can see at a glance what your options are and make an informed decision.
Related: Learn more about getting a personal loan