Is 12% a Good Personal Loan Rate? (2024)

FAQs

Is 12% a Good Personal Loan Rate? ›

In most circ*mstances, a 12% interest rate on a personal loan definitely qualifies as a good rate unless the borrower has nearly perfect credit. To guarantee that you will be able to qualify for an interest rate near 12%, you will need to have a good to excellent credit score of over 700 points.

APRs can vary based on a variety of factors, including your loan amount, loan term, credit score, annual income and debt-to-income (DTI) ratio. APRs for personal loans can range from around 8 percent to 36 percent. According to a Bankrate study, the average APR for a personal loan is 12.21 percent as of May 22, 2024.

National average: As of February 28, 2024, the average APR for a personal loan in India stands at approximately 12.10%. While this serves as a useful benchmark, your creditworthiness may qualify you for a more favourable rate. Credit score: Your credit score has the most significant impact on your APR.

A good credit card APR is a rate that's at or below the national average, which currently sits above 20 percent. While there are credit cards with APRs below 10 percent, they are most often found at credit unions or small local banks. If you don't have good credit, you're likely to receive a higher credit card APR.

The average interest rate on a personal loan for a borrower with excellent credit within the range of 720 and 850 points is between 10% and 12.5%. For a good credit score between 690 and 719 points, the average rate is 13% – 16%.

Average APRs

If you're going for more conventional finance such as a PCP deal (and your credit score is near perfect), you're likely to pay around 6% to 11% APR. If your credit score is near-prime (basically meaning you have a good credit score, but it's not excellent), then expect to pay from 12% to 19%.

Although loan amounts vary across lenders, the maximum amount for personal loans typically ranges from $500 to $100,000. In some cases, you may qualify for a loan larger than what you need. Before accepting any loan, consider what you can afford to repay and be sure you don't borrow more than what you can manage.

A high-interest loan has an annual percentage rate above 36%, the highest APR that most consumer advocates consider affordable.

How does 12% APR work? ›

APR vs. Annual Percentage Yield (APY)

Imagine that a loan's APR is 12%, and the loan compounds once a month. If an individual borrows $10,000, their interest for one month is 1% of the balance, or $100. That effectively increases the balance to $10,100.

Car Loan APRs by Credit Score

Excellent (750 - 850): 2.96 percent for new, 3.68 percent for used. Good (700 - 749): 4.03 percent for new, 5.53 percent for used. Fair (650 - 699): 6.75 percent for new, 10.33 percent for used. Poor (450 - 649): 12.84 percent for new, 20.43 percent for used.

A high-interest loan charges interest and fees that are higher than most other loans. Typically, a loan with an annual percentage rate, or APR, over 36% is considered a high-interest loan. If you need cash fast or have low credit, you may be offered a high-interest loan or feel like you don't have any other options.

The current average personal loan interest rate is 12.21%. People with good or excellent credit may qualify for lower-than-average interest rates, while rates for those with average or poor credit may be significantly higher.

For a $30,000 loan, you'll typically need a credit score above 600 just to qualify or above 700 to get a competitive rate. A high enough income: Part of the lender's evaluation of your loan application includes determining whether you can afford the payments.

Avoid loans with APRs higher than 10% (if possible)

"That is, effectively, borrowing money at a lower rate than you're able to make on that money."

What is a high-interest loan? A high-interest loan has an annual percentage rate above 36%, the highest APR that most consumer advocates consider affordable. High-interest loans are offered by online and storefront lenders that promise fast funding and easy applications, sometimes without checking your credit.

Key takeaways

Personal loans are typically unsecured, which means there's no collateral to back the loan. Your credit score plays a significant role in determining your personal loan interest rate, and a poor credit score can result in a higher interest rate.

However, the rate for consumer loans is capped at 12 percent unless they are “supervised loans,” which includes credit card debt, made by a “supervised lender.” These loans are capped at 36 percent.