Finance
This week’s personal loan rates rise for 3-year terms, fall for 5-year terms
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
The latest trends in interest rates for personal loans from the Credible marketplace, updated weekly. (iStock)
Borrowers with good credit seeking personal loans during the past seven days prequalified for rates that were higher for 3-year loans and lower for 5-year loans when compared to fixed-rate loans for the seven days before.
For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender between April 15 and April 21:
- Rates on 3-year fixed-rate loans averaged 15.46%, up from 15.04% the seven days before and from 13.63% a year ago.
- Rates on 5-year fixed-rate loans averaged 20.26%, down from 20.28% the previous seven days and up from 16.59% a year ago.
Personal loans have become a popular way to consolidate debt and pay off credit card debt and other loans. They can also be used to cover unexpected and emergency expenses like medical bills, take care of a major purchase, or fund home improvement projects.
Average personal loan interest rates
Average personal loan interest rates increased over the last seven days for 3-year loans and decreased for 5-year loans. While 3-year loan rates rose by 0.42 percentage points, rates on 5-year loans fell by 0.02 percentage points. Interest rates for both terms remain significantly higher than they were this time last year, up 1.83 percentage points for 3-year terms and up 3.67 percentage points for 5-year terms.
Still, borrowers can take advantage of interest savings with a 3- or 5-year personal loan, as both loan terms offer lower interest rates on average than higher-cost borrowing options such as credit cards.
But whether a personal loan is right for you depends on multiple factors, including what rate you can qualify for, which is largely based on your credit score. Comparing multiple lenders and their rates helps ensure you get the best personal loan for your needs.
Before applying for a personal loan, use a personal loan marketplace like Credible to comparison shop.
Personal loan weekly rate trends
Here are the latest trends in personal loan interest rates from the Credible marketplace, updated weekly.
The chart above shows average prequalified rates for borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender.
For the month of March 2024:
- Rates on 3-year personal loans averaged 22.22%, up from 21.68% in February.
- Rates on 5-year personal loans averaged 24.38%, down from 24.88% in February.
Rates on personal loans vary considerably by credit score and loan term. If you’re curious about what kind of personal loan rates you may qualify for, you can use an online tool like Credible to compare options from different private lenders.
All Credible marketplace lenders offer fixed-rate loans at competitive rates. Because lenders use different methods to evaluate borrowers, it’s a good idea to request personal loan rates from multiple lenders so you can compare your options.
Current personal loan rates by credit score
In March, the average prequalified rate selected by borrowers was:
- 12.58% for borrowers with credit scores of 780 or above choosing a 3-year loan
- 31.39% for borrowers with credit scores below 600 choosing a 5-year loan
Depending on factors such as your credit score, which type of personal loan you’re seeking and the loan repayment term, the interest rate can differ.
As shown in the chart above, a good credit score can mean a lower interest rate, and rates tend to be higher on loans with fixed interest rates and longer repayment terms.
How to get a lower interest rate
Many factors influence the interest rate a lender might offer you on a personal loan. But you can take some steps to boost your chances of getting a lower interest rate. Here are some tactics to try.
Increase credit score
Generally, people with higher credit scores qualify for lower interest rates. Steps that can help you improve your credit score over time include:
- Pay bills on time: Payment history is the most important factor in your credit score. Pay all your bills on time for the amount due.
- Check your credit report: Look at your credit report to ensure there are no errors on it. If you find errors, dispute them with the credit bureau.
- Lower your credit utilization ratio: Paying down credit card debt can improve this important credit-scoring factor.
- Avoid opening new credit accounts: Only apply for and open credit accounts you actually need. Too many hard inquiries on your credit report in a short amount of time could lower your credit score.
Choose a shorter loan term
Personal loan repayment terms can vary from one to several years. Generally, shorter terms come with lower interest rates, since the lender’s money is at risk for a shorter period of time.
If your financial situation allows, applying for a shorter term could help you score a lower interest rate. Keep in mind the shorter term doesn’t just benefit the lender – by choosing a shorter repayment term, you’ll pay less interest over the life of the loan.
Get a cosigner
You may be familiar with the concept of a cosigner if you have student loans. If your credit isn’t good enough to qualify for the best personal loan interest rates, finding a cosigner with good credit could help you secure a lower interest rate.
Just remember, if you default on the loan, your cosigner will be on the hook to repay it. And cosigning for a loan could also affect their credit score.
Compare rates from different lenders
Before applying for a personal loan, it’s a good idea to shop around and compare offers from several different lenders to get the lowest rates. Online lenders typically offer the most competitive rates – and can be quicker to disburse your loan than a brick-and-mortar establishment.
But don’t worry, comparing rates and terms doesn’t have to be a time-consuming process.
Credible makes it easy. Just enter how much you want to borrow and you’ll be able to compare multiple lenders to choose the one that makes the most sense for you.
About Credible
Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options – without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 6,500 positive Trustpilot reviews and a TrustScore of 4.7/5.
Jason Wilk
Source: Jason Wilk
Jason Wilk, the CEO of digital banking service Dave, remembers the absolute low point in his brief career as head of a publicly-traded firm.
It was June 2023, and shares of his company had recently dipped below $5 apiece. Desperate to keep Dave afloat, Wilk found himself at a Los Angeles conference for micro-cap stocks, where he pitched investors on tiny $5,000 stakes in his firm.
“I’m not going to lie, this was probably the hardest time of my life,” Wilk told CNBC. “To go from being a $5 billion company to $50 million in 12 months, it was so freaking hard.”
But in the months that followed, Dave turned profitable and consistently topped Wall Street analyst expectations for revenue and profit. Now, Wilk’s company is the top gainer for 2024 among U.S. financial stocks, with a 934% year-to-date surge through Thursday.
The fintech firm, which makes money by extending small loans to cash-strapped Americans, is emblematic of a larger shift that’s still in its early stages, according to JMP Securities analyst Devin Ryan.
Investors had dumped high-flying fintech companies in 2022 as a wave of unprofitable firms like Dave went public via special purpose acquisition companies. The environment turned suddenly, from rewarding growth at any cost to deep skepticism of how money-losing firms would navigate rising interest rates as the Federal Reserve battled inflation.
Now, with the Fed easing rates, investors have rushed back into financial firms of all sizes, including alternative asset managers like KKR and credit card companies like American Express, the top performers among financial stocks this year with market caps of at least $100 billion and $200 billion, respectively.
Big investment banks including Goldman Sachs, the top gainer among the six largest U.S. banks, have also surged this year on hope for a rebound in Wall Street deals activity.
Dave, a fintech firm taking on big banks like JPMorgan Chase, is a standout stock this year.
But it’s fintech firms like Dave and Robinhood, the commission-free trading app, that are the most promising heading into next year, Ryan said.
Robinhood, whose shares have surged 190% this year, is the top gainer among financial firms with a market cap of at least $10 billion.
“Both Dave and Robinhood went from losing money to being incredibly profitable firms,” Ryan said. “They’ve gotten their house in order by growing their revenues at an accelerating rate while managing expenses at the same time.”
While Ryan views valuations for investment banks and alternative asset manages as approaching “stretched” levels, he said that “fintechs still have a long way to run; they are early in their journey.”
Financials broadly had already begun benefitting from the Fed easing cycle when the election victory of Donald Trump last month intensified interest in the sector. Investors expect Trump will ease regulation and allow for more innovation with government appointments including ex-PayPal executive and Silicon Valley investor David Sacks as AI and crypto czar.
Those expectations have boosted the shares of entrenched players like JPMorgan Chase and Citigroup, but have had a greater impact on potential disruptors like Dave that could see even more upside from a looser regulatory environment.
Gas & groceries
Dave has built a niche among Americans underserved by traditional banks by offering fee-free checking and savings accounts.
It makes money mostly by extending small loans of around $180 each to help users “pay for gas and groceries” until their next paycheck, according to Wilk; Dave makes roughly $9 per loan on average.
Customers come out ahead by avoiding more expensive forms of credit from other institutions, including $35 overdraft fees charged by banks, he said. Dave, which is not a bank, but partners with one, does not charge late fees or interest on cash advances.
The company also offers a debit card, and interchange fees from transactions made by Dave customers will make up an increasing share of revenue, Wilk said.
While the fintech firm faces far less skepticism now than it did in mid-2023— of the seven analysts who track it, all rate the stock a “buy,” according to Factset — Wilk said the company still has more to prove.
“Our business is so much better now than we went public, but it’s still priced 60% below the IPO price,” he said. “Hopefully we can claw our way back.”
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