April 25, 2022—Rates Move Higher – Forbes Advisor

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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.

For borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace, the average interest rate on a three-year personal loan was 10.86% from April 18 to April 22. According to Credible.com, that’s a 0.15% increase from the previous week. The average rate on a five-year personal loan rose 0.12% last week to 13.37% from 13.25%.

Keep in mind that the rate you’ll receive depends on several factors, including your creditworthiness and the loans available through your chosen lender. The most creditworthy borrowers may be able to receive rates significantly lower than average.

Related: Best Personal Loans

Compare Personal Loan Rates

When you start shopping for a loan, look for lenders that offer a prequalification process. Lenders provide a range of rates online, not an exact rate based on your specific qualifications. Prequalifying provides a more accurate picture of the rate you’ll receive. During the prequalification process, lenders run a soft credit check, which has no impact on your credit score.

Based on this information, the lender will give you a snapshot of the terms you could qualify for, including loan rates, terms and limits. You can prequalify at multiple lenders and compare the terms to find the best loan for your specific situation.

Prequalification doesn’t imply approval for a loan. You’ll still need to submit a formal application and additional documentation to get the loan you want. Typically, lenders run a hard credit check when you’re officially applying for a loan. Hard credit checks can ding your score by one to five points.

Related: 5 Personal Loan Requirements To Know Before Applying

Calculate Monthly 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.

Let’s say you get a three-year, $5,000 personal loan at a fixed rate of 10.86%. You’d pay approximately $163 monthly and about $881 in interest over the life of the loan, according to the Forbes Advisor personal loan calculator. You’d pay $5,881 in total over those three years, which includes both principal and interest.

Personal Loan Rates by Credit Score

The rates below are average estimated personal loan interest rates according to VantageScore risk tiers, according to Experian. Though the rates below can serve as a general guideline, note that interest rates are ultimately set and determined by lenders.

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.

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