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Rates on personal loans are inching up. Yet, it’s still possible for highly qualified borrowers to pick up a reasonable interest rate on a personal loan. If you’re interested in financing a major purchase or project, it’s a good time to shop for a loan.

From July 1 to July 6, the average fixed rate on a three-year personal loan was 15.58% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace. The rate was 15.46% the previous week, according to Credible.com. The average rate on a five-year personal loan fell 0.19% last week to 19.69% from 19.88%.

Remember, well-qualified borrowers may receive rates significantly lower than average. The rate you’ll actually receive depends on various factors, like your creditworthiness and the loan you choose.

These rates are accurate as of July 8, 2024.

Related: Best Personal Loans

Comparing Personal Loan Rates

Once you actively start looking for a loan, it’s a good idea to get prequalified. Prequalifying can provide you with a more precise idea of the rate you’ll receive from a particular lender, since they’ll prescreen you by performing a soft credit check (which doesn’t impact your credit score).

Lenders generally provide you with a list of options after you prequalify that includes loan rates, terms and limits. You can find the best loan for your circumstances by prequalifying at multiple lenders and comparing loan offers.

You aren’t guaranteed approval if you prequalify. Lenders still require that you submit a formal application and additional documentation. After submitting your formal application, lenders typically run a hard credit check, which can ding your credit score by one to five points.

Related: 5 Personal Loan Requirements To Know Before Applying

How To Receive More Favorable Interest Rates

Your credit is a big factor in the rates you receive. According to Rod Griffin, senior director of consumer education and advocacy at Experian, “checking your credit report and scores three to six months before you apply for a personal loan” is a good idea. This gives you enough time to make any necessary fixes.

A credit score of 720 or better will typically get you the best terms. If you’re not quite in that credit score range, consider taking action to improve your credit score. Pay down existing debt to lower your credit utilization ratio, remove errors from your credit report and pay your bills early or on time.

Calculate Your Personal Loan Payments

To see if it fits into your budget, it’s important to estimate how much you’ll pay on a monthly basis—and how much you’ll pay in interest over the life of the loan. One of the easiest ways to do this is with a personal loan calculator. You’ll need your loan rate, term and amount.

For example, let’s say you have a personal loan with a $5,000 loan amount, 15.58% fixed interest rate and a term of 36 months. The Forbes Advisor personal loan calculator shows your monthly payment would be about $175 and you’d pay roughly $1,291 in interest over the life of the loan. Overall, you would owe $6,291, which includes both principal and interest.

Categorized in:

Daily rates, Personal Loans,

Last Update: July 9, 2024