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November 28, 2022—Rates Go Up – Forbes Advisor

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Good news for borrowers. Over the past week, personal loan rates have slowly declined. As long as you are a qualified borrower, you get a relatively low interest rate. For many, this means that financing for a major purchase or project is close at hand.

For borrowers with a credit score of 720 or higher who prequalified on the Credible.com personal loan marketplace, the average interest rate on a three-year personal loan was 12.67% from November 28 to December 3 . According to Credible.com, that’s a 0.47% drop from the previous week. The average rate on a five-year personal loan fell 0.39% last week to 15.40% from 15.79%.

However, the actual rate you receive depends on your creditworthiness and what is available through your preferred lender. Well-qualified borrowers can find rates that are significantly lower than average.

Related: The best personal loans

Personal Loan Rate Comparison

You can start the comparison process by prequalifying for a loan. Consider looking into lenders that offer prequalification online, which can make the process much more convenient. Prequalifying can give you a more accurate idea of ​​the rate you’ll receive from a particular lender, since you’ll be prescreened through a soft credit check (which doesn’t affect your credit score).

Based on this information, the lender will give you a snapshot of the terms you might qualify for, including rates, terms, and loan limits. You can prequalify at multiple lenders and compare terms to find the best loan for your specific situation.

However, prequalification does not guarantee approval. Once you find an offer you like, you’ll still need to submit a formal application and provide additional documentation to the lender. When you apply, a lender will typically run a thorough credit check, which will lower your credit score by between one and five points.

Related: 5 personal loan requirements you should know before applying

How to Calculate Your Personal Loan Payments

Once you have an idea of ​​your personal loan interest rate, you can calculate your monthly payments. You will need to enter the interest rate, amount and term of your loan. This will help you determine how much you will have to pay each month and how much interest you will pay over the life of your loan.

For example, let’s say you get a personal loan of $5,000 with a five-year term at a fixed interest rate of 15.40%. You’d pay about $120 a month and about $2,200 in interest over the life of the loan, according to Forbes Advisor’s personal loan calculator. In general, you would pay $7,200 in total, which includes principal and interest.

Personal loan rates by credit score

The rates below are average estimated personal loan interest rates based on VantageScore risk levels, according to Experian. Although the rates below can serve as a general guide, keep in mind that interest rates are set and ultimately determined by lenders.

How to get the best rates

Your credit is an important factor in the rates you receive. According to Rod Griffin, Experian’s senior director of consumer education and advocacy, “checking your credit report and scores three to six months before applying for a personal loan” is a good idea. This gives you plenty of time to make any necessary corrections.

A credit score of 720 or higher will generally get you the best terms. If you are not in that credit score range, consider taking steps to improve your credit score. Pay off existing debt to lower your credit utilization ratio, eliminate errors on your credit report, and pay your bills early or on time.