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Nerdy takeaways
- APR is the combined total of the interest rate plus most upfront fees, expressed as a yearly percentage.
- Interest only reflects the percentage you pay annually for the loan and does not include fees.
- APRs for personal loans range from 7% to 36%, with the lowest rates going to borrowers with strong credit.
A personal loan annual percentage rate (APR) is the combined total of the interest rate plus the origination fee, calculated on a yearly basis and expressed as a percentage.
APR is important because it shows you the full cost of borrowing over one year. It’s usually the best point of comparison if you’re comparing multiple personal loan offers.
APR vs. interest rate: What’s the difference?
An interest rate is the percentage of the principal loan amount that you pay in interest each year to borrow money. It reflects the cost of the loan itself but doesn’t include any upfront fees the lender may charge.
APR includes the interest rate plus the origination fee, expressed as a yearly percentage. Because it factors in those extra costs, the APR is often higher than the interest rate and gives a more complete picture of what you’ll pay.
If a loan doesn’t charge fees, the APR and interest rate will be the same.
How APR determines your total loan cost
When you’re shopping for personal loans, the APR provides an apples-to-apples cost comparison. A loan with an APR of 20% costs more than one at 18%, for example. The interest rate or monthly payment alone does not reflect the true cost of the loan.
Personal loans are fixed-rate installment loans, meaning your interest rate won't change over the loan term. You repay the loan in equal, monthly installments.
Interest rates …
Current personal loan rates range from about 7% to 36%, and terms are typically two to seven years. Lenders assign an interest rate based on your credit score, credit history and debt-to-income ratio, among other factors.
Plus fees …
Personal loans may come with an origination fee, typically ranging from 1% to 10% of the loan amount. Lenders consider factors like credit score, loan amount and income when calculating the fee.
… equals APR
When the interest rate and fee are combined, you get the APR.
How APR works — an example with real numbers
Let’s calculate the APR on two different loans to show how it can help you choose the most affordable option. Assume you want to borrow $5,000 and repay it over three years. You pre-qualify with two lenders and receive the following rates:
| Lender 1 | Lender 2 | |
|---|---|---|
| Interest rate | 10%. | 11%. |
| Origination fee | $250 (5% fee). | $100 (2% fee). |
| Monthly payment | $161. | $164. |
| APR | 13.4%. | 12.4%. |
| Total cost | $1,058. | $993. |
Initially, it’s hard to know which loan is cheaper. One lender offers a lower interest rate but charges a higher fee. The monthly payment is almost equal.
That’s when APR comes in: The first loan has an APR of 13.4%, and the second loan has an APR of 12.4%. The loan from Lender 1 has a higher APR and higher total loan cost, making Lender 2 the less expensive option overall.
NerdWallet generally recommends picking the loan with the lowest APR for a given loan term because it’s the cheapest option.
In some cases, it can make sense to choose a loan with a higher APR — if the monthly payment is a better fit for your budget, for instance, or if the origination fee is lower. Most lenders deduct this fee upfront, so even if you get approved for a $5,000 loan, you may get less in hand.
» MORE: Best personal installment loans
Calculate APRs for personal loans
Use our personal loan calculator to see your estimated APR, monthly payment and total interest based on your loan amount, interest rate and desired loan term.
Loan details
2026
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Apr
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Your loan estimate
Monthly payment
$212.47
Total principal
$10,000
Total interest payments
$2,748.23
Total loan payments
$12,748.23
Payoff date
03 / 2031
Show amortization schedule
What's a good APR for a personal loan?
A good APR on a personal loan is the lowest one you qualify for, and that depends on your creditworthiness. If you have good to excellent credit (scores in the mid-600s or higher), you’ll likely receive a rate on the low end of a lender’s range.
Here’s what personal loan interest rates look like, on average:
| Borrower credit rating | Score range | Estimated APR |
|---|---|---|
| Excellent | 720-850. | 11.81%. |
| Good | 690-719. | 14.48%. |
| Fair | 630-689. | 17.93%. |
| Bad | 300-629. | 21.65%. |
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified through NerdWallet from January 1, 2024, through December 31, 2024. Rates are estimates only and not specific to any lender. The lowest credit scores — usually below 500 — are unlikely to qualify. Information in this table applies only to lenders with maximum APRs below 36%.
Bad-credit loan APRs
If you have bad credit (a score in the 500s or lower), you may still qualify for a personal loan. Some lenders work specifically with bad-credit applicants and consider other factors on your application, like your monthly free cash flow, education level or employment history. It's especially important to compare multiple lenders if you have bad credit.
» MORE: See bad-credit loan options
Bad-credit borrowers will likely receive an interest rate on the high end of a lender's range. Look for an APR below 36%, which consumer advocates agree is the highest rate an affordable loan can have, and make sure the monthly payments fit comfortably in your budget.
Some types of loans don’t require a credit check, but they usually have exorbitant APRs and carry other risks. For example, payday loans have an average APR of 391% and require you to give the lender access to your bank account.
NerdWallet recommends avoiding payday loans and other loans with extremely high APRs. If you need quick cash and don’t qualify for a traditional loan, check out these payday loan alternatives.
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