Personal loan rates are so high because the Federal Reserve has increased its target interest rate 11 times since early 2022 in response to high inflation. The interest rates on personal loans tend to go up when the Fed raises its rate.
Personal loan rates also tend to be higher than interest rates for secured loans like mortgages and auto loans because most personal loans are not backed by collateral. For example, the average personal loan rate is around 5-8% higher than the average mortgage rate.
Average Personal Loan Rate by Year, 2003 – 2023
| Year | Average Personal Loan Rate by Year |
| 2023 | 11.87% |
| 2022 | 9.87% |
| 2021 | 9.38% |
| 2020 | 9.51% |
| 2019 | 10.32% |
| 2018 | 10.32% |
| 2017 | 10.13% |
| 2016 | 9.69% |
| 2015 | 9.75% |
| 2014 | 10.23% |
| 2013 | 10.20% |
| 2012 | 10.71% |
| 2011 | 10.88% |
| 2010 | 10.87% |
| 2009 | 11.10% |
| 2008 | 11.37% |
| 2007 | 12.38% |
| 2006 | 12.41% |
| 2005 | 12.06% |
| 2004 | 11.89% |
| 2003 | 11.96% |
This data reflects the annual average finance rate on 24-month personal loans from commercial banks, according to the U.S. Board of Governors of the Federal Reserve System.
As you can see, personal loan rates haven’t always been as high as they are now. If you don’t want to wait for rates to subside in general, there are still some things you can do to minimize the cost of a loan.
Tips to Getting a Lower Personal Loan Interest Rate
- Compare rates. Compare rates. Take advantage of WalletHub’s rate comparison tool to shop around for the best rates.
- You can use WalletHub’s prequalification tool to estimate your chances of getting approved and the loan rates you might be offered, which can help you pick the lender with the best terms for you.
- Adjust your loan term and amount. A shorter repayment plan or lower loan amount may help you get a lower interest rate.
- Get a co-signer or co-borrower. If your co-signer or co-borrower has a better credit score, they may be able to help you qualify for a lower interest rate.
- Raise your credit score. Lowering your debt-to-income ratio, keeping your credit accounts in good standing, and practicing other smart strategies can help give you the best shot at qualifying for lower rates.
You can join WalletHub to check your credit score for free and get personalized recommendations about how to improve your credit.
This answer was last updated on 04/08/24 and it was first published on 01/12/24. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
A personal loan is one of the most versatile loans available, but it does have a higher interest rate than other loans. This is because it is an unsecured loan, which makes it riskier for lenders to give out. The higher interest rate helps them cover their potential losses.
Why are personal loan interest rates so high right now? ›
The federal interest rate set influences the prime interest rates lenders offer to new borrowers. The average personal loan interest rate was 10.28 percent at the beginning of 2022 and has risen steadily since. As the Fed introduced rate hikes throughout 2022 and 23, the average personal loan rate also increased.
Are personal loan rates expected to drop? ›
Anthony Capizzano, senior vice president of consumer lending at Axos Bank, predicts the federal funds rate will likely fall between 0.25% to 0.50% in 2024. He also says some lenders have already reduced personal loan rates in anticipation of rate cuts.
Why is my private loan interest rate so high? ›
Generally, the higher the credit score, the lower the loan's interest rate. Borrowers with lower credit scores are considered riskier to lenders, so lenders may charge these borrowers higher interest rates to compensate for the higher risk.
What rate is too high for a personal loan? ›
Personal loan APRs typically run from 6% to 36%, but the average rate depends on the loan length and amount, as well as the applicant's credit score, income and outstanding debts.
What is a reasonable interest rate for a personal loan? ›
Average online personal loan rates
| Borrower credit rating | Score range | Estimated APR |
|---|
| Excellent | 720-850. | 11.35%. |
| Good | 690-719. | 14.34%. |
| Fair | 630-689. | 17.64%. |
| Bad | 300-629. | 22.29%. |
Sep 9, 2024
Even people with good credit scores make mistakes, and a bank may charge a penalty APR on your credit card without placing a negative mark on your credit report. Penalty APRs typically increase credit card interest rates significantly due to a late, returned or missed payment.
How can I lower my personal loan rate? ›
How to get low-interest personal loans
- Know your credit score. An excellent credit score gives you the best chance of receiving a low interest rate on a personal loan. ...
- Pay down debt. ...
- Research all your options. ...
- Look for discounts. ...
- Only apply for the amount you need. ...
- Consider credit unions. ...
- Apply for prequalification.
Borrowers with low income or a history of missed payments tend to get the highest interest rates because there is no certainty that they will be able to make full payments. The length of the loan: Lenders make more money from long-term loans than short-term ones because the debt has more time to accrue interest.
What bank has the best personal loan rates? ›
Summary: Best Personal Loans From Banks
| Company | Forbes Advisor Rating | Current APR range |
|---|
| Discover | 3.5 | 7.99% to 24.99% |
| Wells Fargo | 3.5 | 7.49% to 24.99% |
| PNC Bank | 3.0 | Rates may vary by ZIP code |
| Citi® Personal Loan | 3.0 | 11.49% to 20.49%** |
2 more rowsAug 30, 2024
Current Interest Rate on Personal Loans
| Bank | Interest Rate (p.a.) | Processing Fee |
|---|
| ICICI Bank Personal Loan | 10.85% p.a. - 16.25% p.a. | Up to 2% |
| Yes Bank Personal Loan | 10.99% p.a. - 20% p.a. | Up to 2.5% |
| Kotak Mahindra Bank Personal Loan | 10.99% and above | Up to 3% |
| Axis Bank Personal Loan | 11.25% p.a. - 22% p.a. | Up to 2% of the loan amount |
25 more rowsA good personal loan interest rate depends on your credit score: 740 and above: Below 8% (look for loans for excellent credit) 670 to 739: Around 14% (look for loans for good credit) 580 to 669: Around 18% (look for loans for fair credit)
What is the highest legal interest rate on a personal loan? ›
The California Constitution prohibits loans that are made primarily for personal, family or household purposes from having interest rates above 10% per year.
Why is my personal interest rate so high? ›
Credit score
The lower your credit score, the more likely a lender will charge you a high-interest rate. So it's essential to check your credit score before shopping around. If you discover that you have a low credit score, it's a good idea to work on improving it. This could start by making repayments on time.
Why am I paying so much interest on my loan? ›
In the beginning of your mortgage term, you owe more interest, because your loan balance is still high. Most of your monthly payment is applied to the interest you owe, and the remainder is applied to paying off the principal.
Which bank has the lowest interest rate on personal loans? ›
Current Interest Rate on Personal Loans
| Bank | Interest Rate (p.a.) | Processing Fee |
|---|
| ICICI Bank Personal Loan | 10.85% p.a. - 16.25% p.a. | Up to 2% |
| Yes Bank Personal Loan | 10.99% p.a. - 20% p.a. | Up to 2.5% |
| Kotak Mahindra Bank Personal Loan | 10.99% and above | Up to 3% |
| Axis Bank Personal Loan | 11.25% p.a. - 22% p.a. | Up to 2% of the loan amount |
25 more rowsYour credit score has a huge impact on the interest rate you get on your personal loan so focus on improving it. Pay your bills on time, pay off short term or pay day loans and make sure you are paying any loan repayments on time.
