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Average Personal Loan Interest Rate

Victoria Araj6-Minute Read
UPDATED: October 19, 2023


As you explore different personal loan options, you’ll likely see a broad range of interest rate offers that may leave you wondering, “What is the interest rate on a personal loan? How does interest work? What different types of interest are there – and how can you know if you’re getting a good rate?” Typically, a “good” interest rate means a lower rate than a borrower pays on average for the type of loan you take out.

So, what is the average interest rate on a personal loan? Rates vary based on a number of factors, but the average personal loan interest rate falls in the 10% – 32% range according to ConsumerAffairs.

Let’s take a closer look at average personal loan interest rates and how to get the best rate possible.

What Are Interest Rates?

An interest rate is the percentage of the principal (total amount of money borrowed) that lenders will charge you to borrow money from them. This rate can show up as variable or fixed, and it represents the cost of borrowing any sum from a financial institution.

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Fixed Vs. Variable Interest Rates

There are two main types of interest rates: fixed and variable (also known as adjustable). Some lenders let borrowers choose between a fixed and variable interest rate. It’s a good idea to weigh both rate options carefully in light of your individual or household needs, before picking one.Fixed interest rates remain the same over the life of the loan. Since your rate won’t change, you’ll know exactly how much your monthly payment will be. If you prefer consistency, a fixed-rate loan is probably right for you. However, it’ll probably come with a higher price tag than a variable-rate loan, at least initially.Variable interest rates fluctuate with the market and can potentially change monthly. As market interest rates go up and down, so will your loan’s variable interest rate. Borrowers with good credit may qualify for a variable rate that’s lower than a fixed rate, although variable rates have the potential to rise and eventually be higher than the fixed-rate option. However, some variable rates are capped at a certain number that keeps them from exceeding that particular limit.

How Does Interest Work?

When borrowing money, the monthly payments you’ll make include sums that go toward interest as well as a portion of the principal – the remaining balance of money you owe the lender.

What Affects Interest Rates?

Depending on factors such as your credit score, borrowing history and type of loan, you’ll have a higher or lower interest rate. The higher the interest rate you’re assigned, the more you’ll pay in interest each month.

According to the Consumer Financial Protection Bureau, factors that go into calculating your interest rate on a personal loan include:

  • Your credit score
  • The state you live in
  • Your loan amount
  • Loan terms
  • A fixed versus a variable interest rate
  • Loan type

Lenders typically offer the lowest interest rates to borrowers they perceive as low-risk because they have a good credit score and a strong borrowing history. Likewise, lenders often assign a higher interest rate to borrowers they perceive as higher-risk.

While market fluctuations, government policy and other external factors can influence interest rates, lenders in similar markets typically offer comparable rates.

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What Is The Average Interest Rate On A Personal Loan?

As mentioned earlier, the average interest on a personal loan generally ranges from 10% – 32%. However, this rate can fluctuate for various reasons. Let’s look at how a few factors can impact the average personal loan interest rate.

Average Personal Loan Interest Rate By Credit Score

Your credit score is a major factor lenders will use to decide what interest rate to offer you. According to Time magazine, the estimated APR for borrowers in different credit score ranges is as indicated in the following table. 

Credit Score Range

Average Personal Loan Interest Rate (%)

300 – 579

20.1 – 36

580 – 669

15.6 – 20

670 – 799

12.6 – 15.5

800 – 850

10 – 12.5

Average Personal Loan Interest Rate By Lender Type

Your personal loan rate will vary with the type of lender you choose, per the information in the table below. 

Lender Type

Average Personal Loan Interest Rate (%)



Credit Union


Online Lender

7.67 – 29.32

1Per the National Credit Union Administration, the average interest rate for an unsecured fixed-rate loan with a 36-month term, as of June 30, 2023.

Some online lenders offer a variety of financial products in an effort to meet their borrowers’ unique needs. Since their product range tends to be wider, the average personal loan interest rate available from an online lender may vary more than the rate of a bank or credit union.

How To Get The Best Personal Loan Interest Rate

A lower interest rate can save you hundreds or even thousands of dollars over time and put money back in your pocket each month. As you prepare to apply for a personal loan, using the following tips as a guide can help you improve your chances of qualifying for the best rate.

  • Check your credit report. An excellent credit score is typically essential to locking in a good interest rate. Performing a credit check won’t raise your credit score, but it can help you identify opportunities to earn a higher score.

You may also discover inaccuracies on your credit report that are hurting your credit score. If you find errors in your credit history, be sure to dispute them before submitting your loan application.

  • Compare loan offers. Carefully research lenders to find the lowest rate possible. You may even be able to prequalify with some lenders, giving you an idea of the exact rate they’ll offer you.
  • Set up autopay. Some lenders offer a small interest rate discount if you set up automatic loan payments.
  • Choose a shorter repayment term. Personal loan repayment terms typically range from 12 to 60 months. A repayment term on the longer side often comes with a higher rate, so choosing a term closer to 12 months in length can help you get a lower rate. However, with a shorter term, you’ll have a higher monthly payment for the life of the loan.
  • Pay off other debt. Paying off credit card debt and other outstanding loan balances lowers your debt-to-income ratio (DTI). A lower DTI signifies to lenders that you’re more equipped to handle your current debts. As a result, you could receive a low-interest loan offer.

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Average Loan Interest Rate FAQs

If you’re interested in learning more about interest rates on personal loans, check out our answers to some common questions.

What is a good personal loan interest rate?

Generally, any rate lower than the average national rate is considered a good personal loan interest rate.

Your ability to secure a good personal loan interest rate will depend on your creditworthiness, the type of loan and lender, the loan amount and a variety of other factors.

How does inflation affect interest rates?

Generally, the higher inflation rates go, the more likely interest rates are to rise. In this scenario, lenders charge higher interest rates to compensate for the weaker purchasing power they’ll have from the money that borrowers pay them.

Since interest rates fluctuate with market conditions, the average interest rate at one point in time will likely differ from the average rate at another time.

Why do I pay interest on loans?

Borrowers pay lenders interest to compensate lenders for the use of borrowed funds. Interest is also a safeguard for a lender if a borrower defaults on the loan. In effect, you’re paying to get access to money you haven’t yet saved up – money a lender must temporarily part with and therefore can’t use to power their own investments.

Likewise, you’re also paying a premium for the risk the lender is taking on by loaning you a sum of money. Interest is one of the main ways that lenders protect themselves against risk and earn a profit.

What is the difference between interest rate and APR?

As you shop for a loan, you may come across the term annual percentage rate (APR), which may be higher than your interest rate – although the two are very similar. APR offers a more comprehensive look at the total cost of borrowing money over the life of the loan and includes borrowing fees.

The average APR for a personal loan tends to range from 4% to 36%.

Final Thoughts

An interest rate is the percentage of the borrowed amount that you’ll pay a lender for loaning you money.

Many factors determine the interest rate you receive. These factors include the type of loan and lender, term length and your credit score. For this reason, average personal loan interest rates vary quite a bit.

If you’re ready to find out what interest rate you qualify for, start an application online today with Rocket LoansSM.

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.