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Personal loan rates are much lower in 2022 than they were a year ago, data shows

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So far in 2022, personal loan interest rates are lower than they were this time last year, according to credible data. (iStock)

Personal loans offer fast, lump-sum financing that can be used to consolidate debt, pay for home renovations, and fund major expenses. They are repaid in predictable monthly installments, usually over a period of a few years, at a fixed interest rate.

Average personal loan interest rates have been lower so far this year than they have been at this point in 2021, according to data from Credible. Rates also hit historic lows for three-year and five-year loan terms during February 2022.

Keep reading to learn more about personal loan rates in 2022, as well as how you can get a low interest rate on a personal loan. One way is to compare rates from multiple lenders at once using an online marketplace like Credible.

ANNUAL PERCENTAGE RATE (APR) VS. INTEREST RATES: WHAT’S THE DIFFERENCE?

Personal loan rates are lower in 2022 than they were in 2021

The current prequalification rate for qualified applicants using Credible to select a three-year personal loan is 10.80%, down from 11.42% a year ago. For the term of the five-year loan, the average interest rate is currently 13.10% and was 13.96% at this time in 2021.

More favorable personal loan rates mean lower monthly payments and lower interest charges over time. Depending on the term of the loan, the total cost of borrowing for a $10,000 personal loan is up to $266 cheaper today than a year ago.

$10,000 personal loan repayment, 2021 vs. 2022

With interest rates much lower than they were last year, there’s never been a better time to borrow a personal loan to consolidate high-interest credit card debt. or pay for a home improvement project. You can visit Credible to see your estimated personal loan rate for free without impacting your credit score.

PERSONAL LOAN SETUP FEES: ARE THEY WORTH THE COST?

How to get a low personal loan rate

Although personal loan interest rates are currently near record lows, this does not guarantee that every borrower will get a good rate. Here are some things you can do to get a low rate on a personal loan:

Learn more about each strategy in the sections below.

Work on building your credit score

Since unsecured personal loans do not require collateral, lenders determine your eligibility and interest rate based on your credit score and debt-to-income ratio (DTI). Borrowers with a good credit score of 720 or higher will see the lowest personal loan rates available, according to credible data. On the other hand, borrowers with fair or bad credit will see higher interest rates.

Personal loan rate by credit score

PERSONAL LOANS ARE THE FASTEST GROWING PRODUCT IN CREDIT UNIONS, DATA SHOWS

Before applying for a personal loan, you should consider finding ways to improve your credit score. Improving your on-time payment history can help improve your credit report over time. In the short term, look for ways to pay down your credit card balances to reduce your credit utilization rate.

Credit monitoring can help you get a better idea of ​​where you stand and how you can improve your credit history in the future. You can sign up for free credit monitoring services on Credible.

17 BEST PERSONAL LOANS

Consider a shorter loan term

Interest rates are generally lower for short-term personal loans than for longer-term loans, according to data from Credible. But the interest rate may not be the only factor to consider when borrowing a personal loan. Here are a few things to keep in mind:

  • Shorter personal loan terms will result in higher monthly payments than longer loan terms.
  • Short-term personal loans have lower overall borrowing costs, since you pay lower interest rates over a shorter period.
  • Long-term personal loans cost more over time because you pay higher interest rates over a longer repayment term.

Although shorter loan terms can save you money over the life of the loan, it’s important to consider whether you can afford higher minimum payments. If your goal is to lower your monthly payments, it may make sense to consider a longer-term loan despite higher repayment costs.

You can use Credible’s personal loan calculator to estimate your monthly payments.

15 BEST DEBT CONSOLIDATION LOANS FOR FAIR CREDIT

Shop around for personal lenders

Personal lenders have unique eligibility criteria when setting interest rates, which is why it’s important to shop around for quotes. Most lenders allow you to prequalify to see your estimated interest rate with a soft credit check, which won’t affect your credit score. Some may offer rate reductions, such as an autopay discount for setting up direct payments from your bank account.

You can browse the current personal loan interest rates from online lenders in the table below. Then you can visit Credible to be prequalified with multiple lenders, so you can find the lowest possible interest rate for your financial situation.

BEWARE OF EARLY REDEMPTION PENALTY FEES WHEN REFINANCING

Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.