What Is the Average Personal Loan Interest Rate?

How Are Personal Loan Interest Rates Determined?

Several factors determine personal loan interest rates, including borrower creditworthiness, income, amount borrowed, and the length of the loan. Other factors can also influence each lender’s personal loan pricing, such as the availability and cost of lendable funds, delinquency rates, and loan underwriting policies.

Will Personal Loan Rates Continue to Go Down in 2025?

If the Federal Reserve continues to lower the fed funds rate at its meetings later in 2025 following the 50 basis point drop announced on Sep. 18 and 25 basis point drops on Nov. 7 and Dec. 18, 2024, personal loan rates could begin to drop further. However, the Fed did not make any rate adjustments at its first meeting of 2025 on Jan. 28-29. Neither did the Fed reduce the rate at its second meeting of 2025 on Mar. 18-19. Even if the Fed does cut rates again this year, other factors like the delinquency rate on personal loans could offset the lower cost of funds lenders would enjoy after a drop in prime rate, keeping personal loan rates near their current levels.

Because most personal loans are fixed-rate products, all that matters for new loans is the rate you lock in at the outset. If you already hold a fixed-rate loan, rate movements will not affect your payments. If you know you will need to take out a personal loan in the coming months, it’s likely (but not guaranteed) that rates in the future will be better than what they are now, depending on how lenders react to any Fed rate decreases. Unlike credit card rates, which are typically variable and indexed to the prime rate, fixed-rate personal loans offer the opportunity to know what you will be paying over the loan term.

It’s wise to shop for the best personal loan rates in any rate environment. The difference of 1 or 2 percentage points can quickly add up to hundreds or even thousands of dollars in interest costs by the end of the loan. Seeking out your best option is time well spent.

Lastly, don’t forget to consider how you might be able to reduce your spending to avoid taking out a personal loan in the first place or how you could begin building an emergency fund so that future unexpected expenses don’t sink your finances and necessitate taking out additional personal loans.

How Do People Use Personal Loans?

Investopedia commissioned a national survey of 962 U.S. adults between Aug. 14, 2023, and Sept. 15, 2023. Respondents were people who had taken out a personal loan or were planning to soon. We asked how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the most common reason people borrowed money, followed by home improvements and other large expenditures.

Where to Get a Personal Loan

Personal loans are provided by financial institutions such as banks, credit unions, and online lenders. Most lenders give rate quotes based on your credit score, the amount you wish to borrow, and the term of the potential loan. Rate quotes generally require a soft credit check that does not impact your credit score and only involves inputting several personal details like name, address, and last four digits of your Social Security number. Once pre-approved for a loan, a more detailed application can be submitted, and the loan is often directly deposited into your checking or savings account as early as the same day.

The Bottom Line

While the current average personal loan rate is 25.85%, the rate for any given loan will vary depending on borrower credit and income, loan amount, and loan term. Lenders offering personal loans, such as banks, credit unions, and online financial services providers, advertise available loan rates in a broad range of APRs based on these variable factors.

How We Find the Average Personal Loan Interest Rates

Investopedia collects average quoted personal loan rates, average length of loan, and average loan amount from MoneyLion, comprising 17 of the nation’s largest online personal lenders each week, which is used to calculate a four-week average. MoneyLion’s loan data is also aggregated by credit quality range (for excellent, good, fair, and bad credit). Investopedia separately collects and displays the advertised APR ranges each month for 59 of the largest personal loan lenders in the country, including online lenders, banks, and credit unions.

Learn more about how we evaluated personal loans in our complete methodology.

Results for how people use personal loans were obtained through a national survey of 962 U.S. adults aged 20 to 75 who are currently borrowing or planning to borrow a personal loan from 70 different lenders. Respondents opted-in to an online, self-administered questionnaire from a market research vendor. Data collection occurred between Aug. 14, 2023, and Sept. 13, 2023, with semi-structured interviews conducted with 17 respondents from Aug. 30, 2023, to Sept. 15, 2023. Multiple quality checks, including screeners, attention gauges, comprehension evaluations, and logic metrics, were used to ensure only the highest quality responses were included.