Here’s what you can expect to pay for a personal loan right now

Personal loan rates have ticked up slightly: For those with excellent credit, the average interest rates on personal loans with 60-month terms hit 14.68% and for 36-month terms 13.77%. But if your credit score is less than stellar, expect to pay more. For personal loans with 36-month terms, average interest rates were 23.18%, while personal loans with 60-month, or 5-year terms, were 24.12%, according to the latest data from Bankrate for the week ending April 4. Of course, the rate you’ll pay depends on a variety of factors, including your credit score. You can see the lowest personal loan rates you can qualify for here. 

What is a personal loan?

Personal loans generally range from $1,000 to $100,000 and are borrowed from a bank, credit union or online lender. They are typically paid back over a set period of time, often 1-7 years, with interest. Personal loans are offered as secured (you provide collateral) or unsecured (no collateral), though most are unsecured.

Why should, and shouldn’t, you take out a personal loan?

Though personal loans have a broad range of uses, they tend to be most popular for debt consolidation and one-time large expenses or unexpected costs like home repairs and medical emergencies. Personal loans are among the quickest of loans to fund, as some release money just a day or so after an application has been approved. But personal loans tend to have higher interest rates than HELOCs or other types of loans (see the lowest home equity rates you can qualify for here) that require collateral to help protect the lender from a borrower who may not be able to repay their debt.

Personal loan borrowers should proceed with caution when taking out a loan because of just how easy it can be to collect the money. For this reason, borrowers may find themselves tempted to request more than they actually need, or use the money for non-essential expenses that they otherwise wouldn’t be able to afford. Experts advise only using a personal loan for the originally intended reasons you borrowed the funds, as defaulting on a personal loan repayment can ding your credit score and affect your ability to qualify for a loan or a competitive interest rate in the future. 

Though relatively painless to obtain, at least compared to many other loans, personal loans are often fraught with fees, like origination fees, which can range from 1% to 8% of the amount of the loan. In determining how much money you’ll need from  your personal loan, you’ll want to make sure you’ve padded in enough money to cover fees being skimmed off the top of the loan. Planning for this in advance will set you up for success so that you don’t come up short once your loan funds.

How to get the best rate on a personal loan

You’ll want to have the strongest credit score possible to  qualify for the most competitive interest rates. Experts recommend prequalifying for a loan to get a sense of what rate and terms you can expect to pay. Prequalifying entails a soft check of your credit score, so your score won’t be affected by the process — yet you’ll have a broader understanding of which lender will offer you the best rate for your personal situation. Further, this guide will help you understand the necessary documents and information you need to get a personal loan.