A 5% APR is good for pretty much all types of borrowing, except for mortgages. On personal loans, credit cards, student loans, and auto loans, 5% is much cheaper than the average rate. You probably won’t be able to get a rate this low unless you have excellent credit, though – and it’s unlikely to even be offered in the case of credit cards.
5% Is a Good APR For:
Credit cards
A 5% APR is very good for a credit card. You’re unlikely to find an ongoing rate this low, though. The average credit card APR is 22.89%.
Personal loans
A 5% APR is very good for a personal loan. APRs on personal loans tend to range from around 4% to 36%.
Auto loans
A 5% APR is very good for auto loans. APRs on auto loans tend to range from around 4% to 10%, depending on whether you buy new or used.
5% Is NOT a Good APR For:
Mortgages
A 5% APR is not great for a mortgage. The average 30-year fixed mortgage rate is around 3%.
Student loans
A 5% APR is not great for federal student loans, which tend to have rates from around 3% to 5%. It’s decent for private student loans, whose rates range from 1% to 12%.
This answer was first published on 05/13/21 and it was last updated on 03/26/24. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
A 5% APR is good for pretty much all types of borrowing, except for mortgages. On personal loans, credit cards, student loans, and auto loans, 5% is much cheaper than the average rate.
Is a 5% interest rate good or bad? ›
A high-yield savings account that pays 5% interest is highly competitive. Not only does it significantly outpace the average savings account interest rate, but it's on the high end of the scale even for high-yield savings products.
Is 5% considered high interest debt? ›
Some experts say any loan above student loan or mortgage interest rates is high-interest debt, a range of about 2% to 6%. Financial planners often recommend paying off "high-interest debt" before saving or focusing on other financial priorities.
Is 5 APR good for a loan? ›
There's no specific Annual Percentage Rate (APR) that's good or bad across all types of loans, but the lower the APR you get offered, the better. This is because having a lower APR means you'll be charged less in interest and charges overall – bringing your total loan cost down.
What does 5 percent APR mean? ›
Annual percentage rate (APR) refers to the yearly interest generated by a sum that's charged to borrowers or paid to investors. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan or income earned on an investment.
How does 5 APR work? ›
Let's consider an example to explain the concept further. An individual takes out a $25,000 loan to buy a car. The loan comes with a fixed APR of 5% and must be paid back over the course of five years. This means that the individual will need to make regular monthly payments of around $470.
What's a good APR? ›
An APR is considered to be a good rate when it is at or below the national average, which currently sits at 20.40%, according to the Fed. This means that a credit card offering a fixed rate lower than 20.40% or a variable rate with a maximum of 20.40% would be considered a good APR for the average borrower.
Is 159% APR legal? ›
There's no federal regulation on the maximum interest rate that your issuer can charge you, though each state has its own approach to limiting interest rates.
What percent interest is too high? ›
A high-interest loan is one with an annual percentage rate above 36% that can be tough to repay. You may have cheaper options.
Is $5000 in debt a lot? ›
$5,000 in credit card debt can be quite costly in the long run. That's especially the case if you only make minimum payments each month. However, you don't have to accept decades of credit card debt. There are a few things you can do to pay your debt off faster - potentially saving thousands of dollars in the process.
Very high APRs
In most states, OppLoans charges an APR of 160%. That's extremely high — many times higher than the maximum APR that most traditional personal loan lenders offer. High APRs mean you'll end up paying more in interest over the life of your loan, and your monthly payments will also be higher.
What percentage should be bad debt? ›
In general, many investors look for a company to have a debt ratio between 0.3 and 0.6. From a pure risk perspective, debt ratios of 0.4 or lower are considered better, while a debt ratio of 0.6 or higher makes it more difficult to borrow money.
What is APR for dummies? ›
APR is the price you pay for a loan. It typically includes interest rates and fees. APR can sometimes be the same as a loan's interest rate, like in the case of most credit cards. APR may be fixed or variable, meaning the rate may stay the same or it might change with market factors.
What is a normal APR for loan? ›
Average online personal loan rates
| Borrower credit rating | Score range | Estimated APR |
|---|
| Excellent | 720-850. | 12.37%. |
| Good | 690-719. | 14.87%. |
| Fair | 630-689. | 18.40%. |
| Bad | 300-629. | 21.93%. |
May 14, 2024
On a 36-month loan, 5.9% APR with above-average credit is a bad rate. If you see a rate this high with captive financing, it could be because it's for a longer-term loan.
Is 5 APR good for a new car? ›
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.
What is a really good APR rate? ›
It depends on the type of card you're looking at, as well as your own credit. A credit card APR below 10% is definitely good, but you may have to go to a local bank or credit union to find it. The Federal Reserve tracks credit card interest rates, and an APR below the average would also be considered good.
What is 5 APR per month? ›
5% as a decimal is 0.05 per year. 0.05/12 = 0.00417 per month.
