The Average Personal Loan Rate – What You Need To Know

Personal loans have become a popular choice for those looking to consolidate debt, pay for unexpected expenses, or even finance a major purchase. However, before you apply for a personal loan, it’s important to understand the average personal loan rate and how it can impact your finances.

What is the Average Personal Loan Rate?

The average personal loan rate can vary depending on a number of factors, including your credit score, income, and credit history. However, according to data from LendingTree, the average interest rate for a 24-month personal loan was 9.50% in 2020.

It’s important to note that this is just an average and your personal loan rate could be higher or lower based on your individual circumstances. For example, if you have a low credit score, you may be offered a higher interest rate than someone with a higher credit score.

How is the Average Personal Loan Rate Calculated?

The average personal loan rate is calculated by taking into account the interest rates of various lenders and then finding the average rate. This can give you an idea of what the current market rate is for personal loans.

It’s important to note that the average personal loan rate can change over time as lenders adjust their rates to reflect changes in the market. This means that the average rate you see today may be different than the average rate you see a few months from now.

Factors that Impact Your Personal Loan Rate

As mentioned earlier, there are a number of factors that can impact your personal loan rate. These include:

• Credit score – Your credit score is one of the most important factors lenders consider when determining your interest rate. A higher credit score will typically result in a lower interest rate, while a low credit score may result in a higher interest rate.
• Income – Your income can also impact your interest rate. Lenders want to see that you have enough income to comfortably repay the loan.
• Loan amount – The amount you borrow can also impact your interest rate. Generally, larger loans may come with lower interest rates than smaller loans.
• Loan term – The length of your loan term can impact your interest rate as well. Generally, shorter loan terms may come with lower interest rates than longer loan terms.
• Credit history – Your credit history can also impact your interest rate. Lenders may look at your past payment behavior to determine your likelihood of repaying the loan on time.

How to Find the Best Personal Loan Rate

If you’re in the market for a personal loan, it’s important to compare rates from multiple lenders to find the best rate for you. Here are some tips to help you find the best personal loan rate:

• Check your credit score – Knowing your credit score can help you understand what kind of rates you may be offered.
• Compare rates from multiple lenders – Don’t settle for the first offer you receive. Compare rates from multiple lenders to find the best rate for you.
• Consider a co-signer – If you have a low credit score, consider asking a family member or friend with a higher credit score to co-sign the loan with you.
• Look for lenders that offer rate discounts – Some lenders offer rate discounts for things like setting up automatic payments or having a checking account with them. Be sure to ask about any rate discounts available.

The Bottom Line

The average personal loan rate can vary depending on a number of factors. By understanding what impacts your personal loan rate and how to find the best rate for you, you can save money on interest charges and repay your loan quickly and efficiently.

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