Today’s personal loan rates: January 3, 2023 – Rates move up
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Rates on personal loans jumped up last week. Still, if you’re in the market for a personal loan to finance a project, vehicle purchase, unexpected bills or to improve your cash flow, it’s possible to pick up a decent rate.
From December 26 to December 31, the average fixed rate on a three-year personal loan was 13.06% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace. The rate was 13.01% the previous week, according to Credible.com. The average rate on a five-year personal loan fell 0.04% last week to 17.29% from 17.33%.
However, the actual rate you receive depends on your creditworthiness and what’s available through your preferred lender. Well-qualified borrowers may be able to find rates significantly lower than the average.
How to Compare Personal Loan Rates
Start by looking for lenders that offer a prequalification process for personal loans. Lenders provide a range of rates online, not an exact rate based on your specific qualifications. Prequalifying provides a more accurate view 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.
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.
Estimate Your Personal Loan Payments
You can estimate your monthly payment and how much you’ll pay in interest once you know your personal loan interest rate, term and amount.
For example, let’s say you get a $5,000 personal loan with a term of five years at a fixed interest rate of 17.29%. You’d pay roughly $125 monthly and about $2,503 in interest over the life of the loan, according to the Forbes Advisor personal loan calculator. Overall, you’d pay $7,503 in total, which includes both principal and interest.
Personal Loan Rates by Credit Score
Here are the average estimated interest rates for personal loans based on VantageScore risk tiers, according to Experian. Please note that interest rates are determined and set by lenders. The rates provided are estimations.
How to Get the Best Rates
Personal loan interest rates are based on a number of factors, including your overall creditworthiness, credit score, income and debt-to-income (DTI) ratio. Two quick ways to help you receive more favorable rates include paying down existing debt to help lower your DTI and improving your credit score.
Rod Griffin, senior director of consumer education and advocacy at Experian, recommends “checking your credit report and scores three to six months before you apply for a personal loan,” as this will give you enough time to make any necessary improvements.
While qualification requirements differ across lenders, a minimum credit score of 720 will typically yield you the best terms. If your score falls below this marker, and you’re on a quest for the lowest rate possible, you can take action to improve your score. Try strategies like lowering your credit utilization ratio, removing errors from your credit report and paying your bills early or on time.
By Jordan Tarver
