Average Personal Loan Interest Rates

The average personal loan rate is 20.86%, decreased from last week.

You can use a personal loan to pay for anything from weddings to home renovations, dental work, and even income taxes. However, most borrowers use them to consolidate debt. That purpose is so popular that some lenders, including Happy Money and Reach Financial, specialize in debt consolidation loans.

Today's Loan Rates

Best Personal Loans with Low Interest Rates

Borrowers with excellent credit typically get the best low-interest personal loans, while borrowers with bad credit are offered the highest rates.

Generally speaking, a good loan interest rate is in the single digits. The lower the interest rate, the less you'll pay over the life of the loan. These are the top three best APRs available among the 27 lenders we track:

• Reach Financial Personal Loan: starting at 5.99%*
• LightStream Personal Loan: starting at 6.49%**
• American Express Personal Loan: starting at 6.90%***

Current Average Personal Loan Interest Rates in 2025

We've put together a database of 27 personal loan products and averaged their rates to help you get a handle on the current landscape of loans for all purposes. You're more likely to get a lower rate with a better credit score.

The lowest rate of the companies we track is from Reach Financial Personal Loan, which is starting at 5.99%* APR. The highest rate is fromNetCredit Personal Loans, which has a maximum APR of 99.99%.

All borrowers aren't necessarily qualified for the average personal loan rates above. The rates you'll get depend on your credit score and other aspects of your financial situation.

Average Personal Loan Rates by Credit Score

These rates are based on data from borrowers who applied for loans and received rates on loans for all purposes.

Percentage of Borrowers by Loan Purpose

These loan purposes are based on data from 31 borrowers who applied for personal loans and received rates.

Average Debt Consolidation Rates

We've put together these average rates from our database of 23 debt-consolidation loan products for this past week:

Debt Consolidation Rates by Credit Score

A higher credit score generally means you'll receive a lower rate, but not always.

How Economic Factors Impact Loan Rates

The Federal Reserve's decisions on the federal funds rate play a significant role in influencing loan rates across the economy. When the Fed raises or lowers the federal funds rate, it impacts the cost of borrowing for banks, which in turn affects the interest rates they offer to consumers. These rate changes are used by the Fed as a tool to either stimulate the economy or control inflation.

Current economic conditions also significantly impact loan rates. During periods of economic growth, demand for loans tends to increase as businesses expand and consumers spend more. This higher demand can lead to higher interest rates as lenders capitalize on the demand for credit. During times of economic uncertainty or recession, borrowing demand may decrease, and lenders may lower rates to encourage borrowing and stimulate economic activity.

What Are Personal Loan Interest Rates?

Personal loan interest rates represent the cost of borrowing money through a personal loan. They are usually expressed as an annual percentage rate (APR), which includes both the interest rate and any fees associated with the loan. Interest rates can vary significantly based on factors such as the type of loan, the lender, the borrower's creditworthiness, and the loan term.

How Personal Loan Rates Are Determined

Personal loan rates are determined by a combination of factors, including the lender's policies, the borrower's credit score, income, and debt-to-income ratio, as well as market conditions. Lenders typically use these factors to assess the risk of lending to an individual and determine the interest rate accordingly.

Several factors influence the interest rate on a personal loan, including your credit score, loan term, and income stability. A lower debt-to-income ratio and a shorter loan term often result in better rates. The type of lender, whether a bank, credit union, or online lender, can also impact the rate offered.

Fixed vs. Variable Interest Rates

With fixed-rate loans, the interest rate remains the same throughout the entire loan term, making it easier to budget and predict monthly payments. On the other hand, the interest rate on variable-rate loans can change over time, typically tied to a benchmark rate, such as the prime rate. This can result in fluctuating monthly payments.

How to Qualify for the Lowest Personal Loan Rates

Credit Score Requirements for Low Interest Loans

To qualify for the lowest interest rates, most lenders typically require a good to excellent credit score, often 700 or higher. A higher credit score shows the lender that you are a reliable borrower, which reduces the perceived risk and results in a more favorable interest rate. Borrowers with lower credit scores may still qualify for a loan, but they may face higher rates to offset the increased risk.

Debt-to-Income Ratio (DTI) and Loan Eligibility

Your debt-to-income ratio (DTI) is an essential factor that lenders consider when determining your loan eligibility and interest rate. A lower DTI (ideally under 36%) shows that you can manage existing debt while taking on additional borrowing, which can help you qualify for better rates. A higher DTI could signal financial strain, which might result in higher rates or denial of the loan application.

Tips for Improving Your Loan Approval Chances

• Check your credit report: Ensure there are no errors or discrepancies, and resolve any issues before applying.
• Pay down debt: Paying off existing debt will lower your DTI and improve your credit score, which can help secure a lower rate.
• Increase your savings: Focusing on saving money can help you borrow less or provide a larger down payment, which can help reduce your loan amount and the interest rate.
• Build your credit: Focus on paying bills on time, reducing credit card balances, and avoiding new credit inquiries to boost your score before applying for a loan.
• Consider a co-signer or co-borrower: If your credit score or income isn't ideal, having a co-signer or co-borrower with better financial standing can help you qualify for a better rate.

Comparing Low Interest Personal Loan Options

Short-Term vs. Long-Term Loans: Which Has Lower Rates?

Short-term loans typically have lower interest rates compared to long-term loans. This is because lenders face less risk with shorter repayment periods, as they can recover their funds more quickly. Long-term loans may come with higher rates to compensate for the extended repayment period and greater risk of loan default.

Secured vs. Unsecured Personal Loans: Interest Rate Differences

Secured loans, backed by collateral such as a home or car, usually offer lower interest rates because they provide the lender with a safety net in case of default. Unsecured loans, which don't require collateral, tend to have higher interest rates since they present more risk to the lender. If you have valuable assets to secure the loan, a secured loan is often the better choice for lower rates.

Online Lenders vs. Traditional Banks vs. Credit Unions: Where to Find the Best Rates

The best online lenders often offer lower interest rates than traditional banks due to lower operating costs and more flexible lending criteria. Traditional banks may offer competitive rates, especially to customers with strong relationships, but their rates are often higher due to their larger overhead and more stringent approval processes.

Credit unions, on the other hand, typically offer competitive rates, as they are member-owned, nonprofit organizations that focus on serving their members rather than generating profits. It's a good idea to shop around and compare rates from online lenders, traditional banks, and credit unions to find the best deal.

Pros and Cons of Low Interest Loans

Pros of Low Interest Loans

• Lower cost of borrowing. With a lower interest rate, the total cost of the loan is reduced, meaning you'll pay less over time.
• Easier repayment. The lower interest rate can make monthly payments more affordable and manageable.
• Better for your credit. Making regular, on-time payments on a low-interest loan can improve your credit score over time, especially if you borrow responsibly.

Cons of Low Interest Loans

• Eligibility requirements. Low-interest loans often come with stricter eligibility criteria, such as a higher credit score, stable income, or lower debt-to-income ratio.
• Potential fees. Some low-interest loans may still come with fees, such as origination or late-payment fees, which could add to the overall cost.
• Longer approval process. Securing a low-interest loan may take more time and paperwork, especially if the lender has stricter requirements.

How to Apply for a Low Interest Personal Loan

Step-by-Step Guide to Getting a Low Interest Loan

1. Check your credit score: Review your credit score to ensure you meet the lender's requirements for low interest rates. Aim for a score of 700 or higher for the best rates.
2. Gather required documentation: Prepare financial documents such as proof of income, identification, and any other documents the lender may request.
3. Compare lenders: Research and compare interest rates, loan terms, and fees from different lenders, including online lenders, banks, and credit unions.
4. Calculate your loan amount: Determine how much you need to borrow and ensure it aligns with your repayment capabilities.
5. Complete the application: Fill out the application form accurately and submit the necessary documents.
6. Review the loan offer: Carefully review the loan terms, including the interest rate, fees, and repayment schedule, before accepting the offer.
7. Accept the loan: Once you're satisfied with the terms, accept the loan and begin making payments as per the agreement.

Common Mistakes to Avoid in the Application Process

One common mistake is neglecting to check your credit report before applying. Errors in your report can negatively affect your credit score and lead to higher interest rates. It's essential to review and correct any discrepancies before submitting a loan application.

Another mistake is applying for loans with multiple lenders at once. Each application results in a hard inquiry on your credit report, which can lower your credit score. It's better to research and apply to one or two lenders that best match your qualifications and needs. Aim for personal loan pre-approval, which allows you to check your potential loan terms without affecting your credit score.

What to Do if You're Denied a Personal Loan

If you're denied a personal loan, start by understanding why. Lenders typically provide a reason, such as a low credit score, high debt-to-income ratio, or an error in your credit report. Request a free copy of your credit report from the three major bureaus to check for inaccuracies and dispute any errors.

Then, work on improving the factors that led to the denial. Pay down debt, make timely payments, and reduce your credit utilization to boost your credit score. If income or debt-to-income ratio was an issue, consider ways to generate passive income or reduce debt. After addressing these areas, you may be in a better position to reapply or explore alternatives like secured loans, co-signing, or credit union options with more flexible criteria.

Alternatives to Personal Loans with Low Interest Rates

Balance Transfer Credit Cards vs. Low Interest Loans

The best balance transfer credit cards offer a low or 0% interest rate for an introductory period, typically ranging from six to 18 months. This can be a good option for consolidating credit card debt, as long as the balance is paid off before the promotional period ends. However, after the introductory period, the interest rate increases, so it's important to pay attention to the terms. Low-interest loans, on the other hand, typically provide a fixed rate for the entire loan term, which can offer more stability.

Home Equity Loans and HELOCs as Alternatives

Home equity loans and home equity lines of credit (HELOCs) allow you to borrow against the value of your home. Home equity loans offer fixed interest rates, while HELOCs typically have variable loan rates. These options usually have lower interest rates than personal loans because they are secured by your home. However, they come with the risk of losing your home if you default on the loan, so it's essential to consider the risks before choosing this option.

Peer-to-Peer Lending and Other Low-Cost Borrowing Options

Peer-to-peer (P2P) lending platforms connect borrowers with individual investors who are willing to lend money at competitive interest rates. These platforms often offer lower loan rates than traditional banks or credit unions. Additionally, borrowing from friends or family may be an option, though it comes with potential risks to personal relationships.

Factors Affecting Average Personal Loan Rates

• Your credit score: The higher your credit score, the more likely you are to qualify for the lowest rates. Lenders rely heavily on credit scores to determine each borrower's rate eligibility. 
• The loan term: Longer loan terms usually equal lower monthly payments, but be aware that you'll end up paying more in interest with a longer term. 
• The type of lender you choose: When it comes to lenders, you have options. So, it's worth shopping around and comparing rates. For instance, Reach Financial currently offers the lowest rates starting at 5.99%, and PenFed Credit Union offers its members personal loan APRs starting as low as 8.99%. 
• The current economic climate: The Federal Reserve influences personal loan interest rates. This means that borrowers can also expect lower rates when the Fed cuts rates. 

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FAQs

*The average rates (APRs), terms, and loan amounts were provided by Even Financial, sourced through MoneyLion. This information is based on aggregated, anonymized offer data from MoneyLion's lender marketplace of financial services providers as of March 2. The data presented in this table applies only to lenders with APRs below 30% and is not specific to any individual lender or consumer.

Maddy Scheckel

Maddy Scheckel is a registered nurse turned writer specializing in personal finance and business topics.Maddy enjoys traveling the world using credit card reward points to fly in Business Class and stay in luxury hotels. Her favorite international experiences so far have been the beauty of La Fortuna in Costa Rica, the magic of Paris, the breathtaking views of Cinque Terre in Italy, and the delightful Christmas markets of France and Germany.Maddy has made the journey from being in debt to now having excellent credit, along with money invested for retirement. She has expertise in a variety of personal finance topics including credit building, personal and student loans, insurance, investment products.In her spare time, Maddy enjoys going to country music concerts, watching Grey's Anatomy, and savoring churros dipped in warm Nutella.You can reach her at contentbymaddy@gmail.com. 

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Layla Melendez

Personal Finance SEO Editing Fellow

Layla Melendez is a personal finance SEO editing fellow based in New York City, specializing in optimizing content to help readers navigate financial decisions with ease and confidence. With over a year of experience in student journalism, she has developed expertise in copyediting, content creation, and digital media management, including working with CMS platforms to organize, upload, and manage digital archives. She recently joined the team at Business Insider in January 2025, where she works on enhancing the accessibility and visibility of personal finance content for a global audience.ExperienceLayla is passionate about making financial literacy approachable and practical. In her role, she focuses on optimizing personal finance articles, with a focus on student loans, personal loans, and mortgages.Before joining Business Insider, Layla gained experience in communication, journalism, and media through a variety of roles:

• At Relentless Awareness, she developed press materials and advocacy campaigns, including efforts that contributed to a $50 million funding boost for upstate NY cities.
• As a World News Intern for GBH’s The World, she edited and published digital stories, designed social media posts, and contributed to newsletter production.
• During her time with the NYC Comptroller’s Office, she managed social media accounts, created engaging IG Reels, and captured event photography featured in outlets like Politico and City & State NY.

ExpertiseLayla’s growing expertise includes:

• SEO strategy and content optimization
• Financial literacy education for beginners
• Digital storytelling, copywriting, and social media management
• Multimedia content creation using tools like Canva, Adobe Creative Suite, and WordPress

EducationLayla holds a degree in Communication and Journalism from the University at Albany, SUNY, where she has been recognized for academic excellence with awards such as the Spellman Academic Achievement Award and the Summa Cum Laude distinction.When she’s not working, Layla enjoys travel, listening to music, reading, and seeking out new experiences across the city.

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