Average personal loan rate drops to new record, Fed reports



Two-year personal loan rates fell to 9.09% in the fourth quarter of 2021, the lowest rates since the Federal Reserve began collecting this data. (iStock)

If you’re thinking of taking out a personal loan to consolidate debt, pay for home renovations, or finance another major purchase, there’s never been a better time to do it. This is because interest rates have once again fallen to a new high.

The average two-year personal loan rate fell to 9.09% in the fourth quarter of 2021, according to the Federal Reserve. These are the lowest personal loan rates since the Fed began collecting this consumer credit data.

The previous record was set in the third quarter of 2020, when personal loan interest rates averaged 9.26%. The fixed rate has since rebounded between 9.65% and 9.39%, before falling back to the current average of 9.09%.

Average two-year personal loan rate, Federal Reserve

Keep reading to learn more about personal loans, including how to lock in a low rate now. You can compare personal loan rates from multiple lenders at once on Credible’s online financial marketplace.


How are personal loan interest rates determined?

Personal loans allow consumers to borrow a lump sum of cash that is repaid in fixed monthly installments over a set period of time, usually a few years. Funding is fast, meaning the loan can be deposited into your checking account in as little as one business day. Personal loans are generally unsecured, meaning they don’t require collateral, so you can use the funds however you see fit.

Because they are unsecured, personal lenders determine your interest rate and eligibility based on your creditworthiness. The interest rate you qualify for is determined by your credit score and debt-to-income ratio (DTI), as well as other loan terms such as loan amount and term.

Borrowers with very good or excellent credit, defined by the FICO model like 740 or more, will qualify for the best personal loan rates available. Conversely, those with bad or fair credit will see higher personal loan interest rates if they qualify for loan approval.

If you’re considering taking out a personal loan, it’s important to check your credit score to see where you stand. Then visit Credible to see your personal loan offers estimated for free with no impact on your credit, so you can determine if this financial product is right for you.


How to lock in a low personal loan rate

Since personal loan interest rates are based on the creditworthiness of the borrower, it is important to establish good credit in order to qualify for the lowest rates available. Here are some tips to improve your credit score and get a low interest personal loan:

  • Pay off your credit card debt. One of the most important factors in your credit score is your credit utilization ratio, which is the amount of credit card debt you carry relative to your total available credit. Reducing your credit usage will have an immediate positive impact on your credit score. This will also help lower your DTI ratio, which is another factor that affects personal loan eligibility.
  • Become an authorized user. It can be beneficial to become an authorized user on someone else’s credit card to establish your payment history in time. Just make sure that person is a trusted financial partner, such as a spouse or parent.
  • Compare the rates of several lenders. Since interest rates on personal loans vary from lender to lender, it’s important to shop around to ensure you get the lowest interest rate possible for your financial situation. Many personal lenders allow you to be prequalified to see your estimated rate without affecting your credit score.

You can see your prequalified offers from multiple personal lenders in minutes by filling out a single form on Credible. Browse interest rates from online lenders in the table below and visit Credible to begin the application process.


Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.


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