Best Personal Loan Rates of December 2023

How do lenders set personal loan rates?

Macroeconomic conditions often help personal loan lenders determine their rates: A strong economy with low inflation and credit delinquencies can mean lower annual percentage rates (more on that below).

But personal loan rates often have wide ranges, and the specific rate you receive is based primarily on your credit and financial information.

» MORE: This month’s average personal loan rates

Unlike auto and mortgage loans, personal loans are usually unsecured and not backed by collateral the lender can take if you fail to repay the loan. Instead, lenders rely on your income, outstanding debts and credit history to assign your rate.

The lowest rates go to borrowers with excellent credit, high incomes, little outstanding debt and long histories of on-time loan and credit card payments. Other factors that can influence your rate include education, occupation, where you live, the requested loan amount and loan purpose.

» MORE: Learn more about personal loan requirements

Current personal loan rates

Personal loan rates are high compared to a year or two ago. Though they don’t fluctuate as much as mortgage rates, changes in the wider economy have pushed rates up and prompted lenders to tighten their underwriting standards. Persistent increases in the Federal Funds rate and recession fears are contributing to today’s higher personal loan rates.

» MORE: What rising rates mean for personal loan borrowers

What is a good interest rate on a personal loan?

A good personal loan rate is the lowest one you qualify for, which depends heavily on your credit and financial information.

Because rates can vary widely between borrowers, it’s not helpful to compare your rate to someone else’s. Instead, check for loan offers with multiple lenders to find the lowest rate and best terms.

How to get the best personal loan rate

Here are five ways to lower your approved personal loan rate:

1. Review your credit report before you apply. Check your report for errors or accounts that may be weighing down your score and address them before you apply. For example, a past-due account could be a reason a lender gives you a high rate or denies your application.

2. Adjust your loan amount and repayment term. Asking for a large loan or long repayment term could cause a lender to assign you a higher interest rate. Calculate your personal loan payment to decide how much loan you can afford.

3. Get rate discounts. Lenders offer discounts for a few different reasons. Many online lenders offer rate discounts for setting up automatic payments. Some banks offer rate discounts to existing customers who hold certain bank accounts.

4. Find a no-fee lender. The APR includes any fees a lender charges, like an origination fee. Not all lenders charge an origination fee, and some have loans with zero fees, including late fees.

5. Add a co-signer, co-borrower or collateral. Borrowers with blemished credit can add a co-applicant with better credit and higher income to get a lower rate. You may also lower your rate by pledging collateral like a vehicle or savings account. Just know the consequences if you default on the loan.

Many lenders let you pre-qualify for a personal loan. You provide some information about your credit, income and employment — as well as how much you want to borrow and why — to see your potential loan amount, rate and repayment term.

Because pre-qualifying only triggers a soft credit pull, you can do it multiple times without affecting your credit score. A lender does a hard credit pull if you submit a full application after pre-qualifying.

» Get started: Pre-qualify on NerdWallet

Calculate personal loan payments

Use this calculator to see how different loan amounts, interest rates and loan terms impact monthly personal loan payments.

Online personal loan rates

Online personal loan rates vary by the type of borrower they target. A bad-credit lender may offer higher rates than a good-credit lender.

Here are the average estimated APRs for online personal loans, based on credit score ranges:

» MORE: What credit score do you need for a personal loan?

Rates for excellent credit

In October, borrowers with excellent credit (720 or higher score) received rates from 12.06% to 16.58%, according to aggregate, anonymized data from NerdWallet’s personal loan marketplace. A high income and long credit history showing on-time payments to other creditors will help you get the lowest rates. Lenders may also offer special perks to excellent-credit borrowers, like rate discounts and zero fees.

» MORE: Best personal loans for excellent credit

Rates for good credit

NerdWallet users with good credit scores (690 to 719) received rates from 13.91% to 18.82% in October, according to NerdWallet’s anonymized marketplace data. A good score will help you qualify for a low rate, but the lowest rates go to those with low debt, high income and a credit history showing accounts in good standing.

» MORE: Best personal loans for good credit

Rates for fair credit

Fair-credit NerdWallet users (630 to 689 scores) received rates from 14.75% to 21.20% in October, according to NerdWallet’s anonymized marketplace data. If you have fair credit, adding a co-signer or joint borrower with better credit and higher income can help you get a lower rate.

» MORE: Best personal loans for fair credit

Rates for bad credit

NerdWallet users with scores below 630 who pre-qualified in October received rates from 19.11% to 23.30%, according to anonymized data. Consumers with the lowest scores may not qualify for a personal loan with a rate below 36%, which is the highest APR most consumer advocates say an affordable loan can have. Requesting a lower loan amount, adding a co-signer or securing your loan could help improve your chances for funding.

» MORE: Best personal loans for bad credit

Personal loan rates at banks

Banks may offer competitive rates — and rate discounts if you’re already a customer — but they typically have tougher eligibility requirements than online lenders. The average rate charged by banks in August 2023 for a two-year loan was 12.17%, according to the most recent data from the Federal Reserve.

» MORE: Best bank loans

Personal loan rates at credit unions

Credit union loans may carry lower rates than banks and online lenders, especially for those with fair or bad credit, and loan officers may be more willing to consider your overall financial picture.

The average rate charged by credit unions in September 2023 for a fixed-rate, three-year loan was 10.58%, according to the National Credit Union Administration. Federal credit unions cap personal loan APRs at 18%.

You have to become a member of a credit union to get a personal loan, which may mean paying fees or meeting certain eligibility requirements.

» MORE: Credit union personal loans

How we choose the best personal loan rates

We use a formula to compare dozens of lenders’ minimum, maximum and average personal loan rates to find the lenders with the lowest APRs. We also consider other factors to determine which lenders make this list, including:

• Borrower requirements.

• Lender type.

• NerdWallet star rating.

» MORE: NerdWallet’s personal loan star rating methodology

Personal loan APR vs interest rate

APR and interest rate are so similar they’re often used interchangeably, but on personal loans there’s an important distinction. A personal loan APR includes the interest rate plus any origination fee. According to the Truth in Lending Act, all lenders must disclose a loan’s APR before you sign an agreement.

» MORE: What is a personal loan APR?

Refinancing a personal loan to get a lower rate

If you currently have a personal loan with a high rate, you may be able to lock in a lower rate by refinancing a personal loan, especially if you’ve improved your credit score or lowered your debt since you first borrowed. Some lenders allow borrowers to refinance a personal loan you have with them or a different lender.