Why Are Personal Loan Rates So High? (2024)

Personal loan rates are so high because the Federal Reserve has increased its target interest rate 11 times since early 2022 in response to high inflation. The interest rates on personal loans tend to go up when the Fed raises its rate.

Personal loan rates also tend to be higher than interest rates for secured loans like mortgages and auto loans because most personal loans are not backed by collateral. For example, the average personal loan rate is around 5-8% higher than the average mortgage rate.

Average Personal Loan Rate by Year, 2003 – 2023

Year

Average Personal Loan Rate by Year

2023

11.87%

2022

9.87%

2021

9.38%

2020

9.51%

2019

10.32%

2018

10.32%

2017

10.13%

2016

9.69%

2015

9.75%

2014

10.23%

2013

10.20%

2012

10.71%

2011

10.88%

2010

10.87%

2009

11.10%

2008

11.37%

2007

12.38%

2006

12.41%

2005

12.06%

2004

11.89%

2003

11.96%


This data reflects the annual average finance rate on 24-month personal loans from commercial banks, according to the U.S. Board of Governors of the Federal Reserve System.

As you can see, personal loan rates haven’t always been as high as they are now. If you don’t want to wait for rates to subside in general, there are still some things you can do to minimize the cost of a loan.

Tips to Getting a Lower Personal Loan Interest Rate

  • Compare rates. Compare rates. Take advantage of WalletHub’s rate comparison tool to shop around for the best rates.
  • You can use WalletHub’s prequalification tool to estimate your chances of getting approved and the loan rates you might be offered, which can help you pick the lender with the best terms for you.
  • Adjust your loan term and amount. A shorter repayment plan or lower loan amount may help you get a lower interest rate.
  • Get a co-signer or co-borrower. If your co-signer or co-borrower has a better credit score, they may be able to help you qualify for a lower interest rate.
  • Raise your credit score. Lowering your debt-to-income ratio, keeping your credit accounts in good standing, and practicing other smart strategies can help give you the best shot at qualifying for lower rates.

You can join WalletHub to check your credit score for free and get personalized recommendations about how to improve your credit.

This answer was first published on 01/12/24 and it was last updated on 04/08/24. 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.

Why Are Personal Loan Rates So High? (2024)

FAQs

Why Are Personal Loan Rates So High? ›

Personal loan rates are so high because the Federal Reserve has increased its target interest rate 11 times since early 2022 in response to high inflation. The interest rates on personal loans tend to go up when the Fed raises its rate.

Why is my personal loan interest rate so high? ›

Loan amount: The more you borrow, the more risk the lender takes in the event that you default. As a result, higher loan amounts may have higher interest rates. Repayment term: Longer loan repayment terms typically come with higher interest rates because of interest rate risk.

What is a good interest rate on a personal loan? ›

Average online personal loan rates
Borrower credit ratingScore rangeEstimated APR
Excellent720-850.12.64%
Good690-719.14.84%
Fair630-689.18.69%.
Bad300-629.21.74%.
Apr 9, 2024

What is too high of an interest rate for a personal loan? ›

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.”

Will personal loan rates go down in 2024? ›

Lower personal loan rates may be on the horizon in 2024 after the Fed made progress curbing inflation at the end of 2023. That progress came after four more Federal Reserve rate hikes in 2023.

Is 7% a good rate for a personal loan? ›

A good personal loan interest rate depends on your credit score: 740 and above: Below 8% (look for loans for excellent credit) 670 to 739: Around 14% (look for loans for good credit) 580 to 669: Around 18% (look for loans for fair credit)

Is 12% good for a personal loan? ›

In most circumstances, 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.

How much would a $5000 loan cost per month? ›

Based on the OneMain personal loan calculator, a $5,000 loan with a 25% APR and a 60-month term length would be $147 per month. The loan terms you receive will depend on your credit profile, including credit history, income, debts and if you secure it with collateral like a car or truck.

How hard is it to get a $30,000 personal loan? ›

In general, lenders extend $30,000 loans to borrowers with good to excellent credit, which is typically 670 and higher. But there may be lenders who lend to borrowers with bad credit. If you're having difficulty qualifying, you may consider getting a cosigner or co-borrower to help you get approved for the loan.

What is the average interest rate on a $5000 personal loan? ›

The interest rate on a $5,000 loan from a major lender is usually around 6.4% to 35.99%. It's difficult to pinpoint the exact interest rate that you'll get for a $5,000 loan since lenders take many factors into account when calculating your interest rate, such as your credit score and income.

Can I ask for a lower interest rate on my personal loan? ›

Common debt negotiation strategies include asking for reduced interest rates, working with a lender to create a repayment plan and considering debt consolidation. Talking directly and honestly with your lender may be a helpful route to debt relief.

Can I get a lower rate on my personal loan? ›

Refinancing might be a good option if you need to extend your repayment term or your credit score has improved and you're able to obtain a more competitive interest rate as a result. Securing a lower interest rate through a refinance reduces your cost of borrowing so you'll pay less on your personal loan overall.

How to get rid of high interest personal loans? ›

If you're working to pay off high-interest debt, you might consider debt consolidation or making more than the minimum monthly payments on what you owe.

What is the average personal loan amount? ›

In general, personal loan amounts range from $1,000 up to $50,000, though some lenders may offer loans up to $200,000. The average personal loan amount was about $11,500 as of Q2 2023, according to data from TransUnion. Below, we look at how average personal loan balances vary by generation and state.

Which bank's personal loan interest rate is low? ›

Top 5 banks charge the lowest interest rates:

ICICI Bank: ICICI Bank charges anywhere between 10.65 to 16 percent per annum on loans. The loan processing charges of loan are up to 2.50 percent of loan amount plus applicable taxes. State Bank of India (SBI): SBI charges interest rate that starts from 11.15 percent.

What are the best personal loan companies? ›

The best personal loans are from LightStream, SoFi, PenFed, Discover, Upstart, U.S. Bank, Upgrade and Wells Fargo. They all have low interest rates, flexible loan terms and notable customer service. The best personal loan lenders don't charge origination fees and offer discounts for automatic payments.

How do I get a lower interest rate on a personal loan? ›

An excellent credit score, consistent income and low debt-to-income ratio are key to securing a low-interest personal loan. But if your finances aren't in the best shape, consider taking a step back to improve your credit score and lower your utilization rate before applying.

Can I lower my interest rate on my personal loan? ›

If you think you won't be able to continue making payments on your personal loan, there are a few options. You can refinance it to lengthen the term or lower the interest rate, both of which can reduce your monthly payments. You can also contact the lender directly to ask about renegotiating your loan.

How to get a lower interest rate on an existing personal loan? ›

How to Get a Lower Interest Rate on a Personal Loan:
  1. Ask for a lower rate. If you call your lender and express concern that your APR is too high, there's a chance the lender will reduce the rate. ...
  2. Tap into your home equity. ...
  3. Take out another personal loan. ...
  4. Move the debt to a balance transfer credit card.
Nov 27, 2019

Why is my APR so high with good credit? ›

Card rates are high because they carry more risk to issuers than secured loans. With average credit card interest rates above 20.7 percent, the best thing consumers can do is strategically manage their debt. Do your research to make certain you're receiving a rate that's on the lower end of a card's APR range.

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