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What is the average interest rate for a personal loan?

  • The average interest rate over 24 months Personal loan was 9.34% in August 2020, according to data from the Federal Reserve.
  • However, the interest rate you see on your personal loan may be different, depending on the state you live in, your credit score, and the type of lender you are borrowing from.
  • Before deciding on a personal loan, check your credit score. Then shopping around and getting pre-approved from multiple lenders could help you find the best deal.
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The average interest rate for a 24-month personal loan was 9.34% in August 2020, according to data collected by the Federal Reserve.

Personal loans can be used for a variety of reasons, including paying for large purchases and covering emergencies. Often times, personal loans are also used for debt consolidation, where a loan is used to consolidate credit card debt into a loan and a monthly payment. Personal loans can sometimes have a lower interest rate than credit cards – the average credit card carried an APR of 16.61% in 2020.

Before getting a personal loan, consider all the factors that could change your interest rate. A lower credit score could mean paying more for your loan, making it less useful for your purchase. Comparing offers from several different lenders could also help find the lowest interest rate.

Average rate of personal loans per year

The average interest rate on personal loans has fluctuated over time and is now at its lowest level in five years. Several factors influence the average interest rate on personal loans and the interest rate on individual loans, including the federal funds rate or the amount that banks pay to borrow money. Other factors include the reason for the loan and the length of the loan.

* Rate for a 24 month personal loan.

Since 2015, the average interest rate for personal loans has gone up and down. Since 2019, the average interest rate on personal loans has fallen by almost a percentage point to 9.34% in August 2020.

Average interest rate for personal loans by state

Where you live will also have an effect on the interest rate on your personal loan. State loan laws can influence the average interest rates available on personal loans. Across the country, personal loan interest rates can vary by more than 5 percentage points, depending on where you live. Here is the average interest rate for personal loans in each state, according to: Global S&P October 2020 data.

* Unsecured personal loan of $ 5,000, 36 months

Hawaii had the lowest personal loan interest rates of the 50 states at 7.07%, while West Virginia has the highest interest rate, with an average personal loan carrying an interest rate of 11.39%.

Average rate of personal loans by lender

Personal loans are sometimes available from traditional banks like Wells fargo. They can also be offered by credit unions, member-owned banking institutions that often offer lower interest rates.

According to data from the National Association of Credit Unions,

credit unions
could offer lower interest rates on personal loans:

* Rates in effect in June 2020.

Credit unions often have membership requirements, but they are usually straightforward to complete and are based on living in a certain area. If you are already a member of a credit union, it may be worth checking out how the interest rates on your personal loans compare to other offers from banks and online lenders. It might be more affordable to borrow from a credit union.

Average rate of personal loans by credit score

Your credit rating will play a large role in how much you will need to pay to borrow. A credit score is like a cumulative grade point average of financial scores, incorporating information, including your borrowing and repayment history. Credit scores are reported as a number between 300 and 850.

As with many other types of loans, the higher your credit score, the less interest you will pay over the life of a personal loan.

Based on data from The bank rateThe amount you will pay for your personal loan will vary widely depending on your credit score, from around 10% APR for those with the highest scores to over 20% for those with the lowest scores.

Since your credit score can have such a big effect on your interest rate, checking your credit score is a good way to start your search for a personal loan. Checking Your Credit Score should always be free. Once you know your credit score, start shopping for personal loans and compare the interest rates and loan terms available from several different lenders.

Garry Johnson

The author Garry Johnson

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