For the week beginning October 30, 2023, personal loan APR rates fluctuated, with exceptional credit scores seeing an average increase of nearly 5%, while those with good and fair credit scores experienced significant decreases, particularly in the median APR for fair credit, which dropped over 20%. Very good credit scores saw mixed results, with a slight average decrease and marginal median increase, whereas poor credit scores had a minor average APR increase with no change in the median APR.
Throughout the week beginning on October 30th, 2023, APR rates for personal loans have seen varied changes across different credit tiers. For those with exceptional credit scores (800 or higher), the average APR increased by 4.91%, while the median APR also rose by 4.15%. Individuals in the very good credit bracket (740-799) observed a modest decrease of 0.21% in their average APR, alongside a slight increase of 0.06% in the median APR. Borrowers categorized with good credit scores (670-739) encountered a significant decrease of 11.59% in the average APR and a decrease of 4.24% in the median APR. Those with fair credit scores (580-669) experienced a decrease of 6.36% in average APR and a substantial decrease of 20.22% in the median APR. Finally, individuals with poor credit scores (below 580) saw a slight increase of 0.63% in the average APR, while the median APR remained unchanged.
Current personal loan rates
This week’s personal loan rates, categorized by credit score, are presented in terms of both median and average APRs.
It’s evident that these rates are significantly higher than the minimum rates promoted by lenders. It’s important to understand that these figures represent the average of prequalified loan offers that borrowers received on SuperMoney’s platform. This is based on the information they provided to lenders for rate determination rather than the ideal low rates that lenders often emphasize.
|Rating||FICO Score Range||Average APR||Median APR|
Change in median and average personal loan interest rates
|Rating||FICO Score||Median APR (22 Oct)||Median APR (29 Oct)||Change in Median APR||Average APR (22 Oct)||Average APR (29 Oct)||Change in Average APR|
Average and median personal loan rates for 24-month loans
This is what the rates look like for borrowers applying for a 24-month loan.
|Credit Rating||Credit Score Range||Average APR||Median APR|
As illustrated in the graph below, personal loan interest rates often fluctuate based on various elements, including the federal funds rate, lending practices, and prevailing market dynamics. Observe the disparity when considering all loan durations and amounts versus focusing solely on loans exceeding $20,000 with a 24-month term.
Personal loan interest rates compared to other loans
As highlighted earlier, personal loan rates can fluctuate significantly based on the loan’s size, duration, and borrower’s credit rating. This makes drawing comparisons with other credit types a complex task. The subsequent chart utilizes the most recent data from the Federal Reserve, focusing on 24-month personal loans provided by commercial banks. These banks usually set higher baseline loan amounts and enforce stricter qualification criteria. Including all loan durations and non-traditional lenders, which often adopt more lenient underwriting standards and charge elevated rates, would present a contrasting rate landscape.
Compare the median with the lowest available.
How are personal loan interest rates determined?
Various factors play a pivotal role in determining personal loan rates and eligibility. A borrower’s creditworthiness, reflected in their credit score, often stands as a primary determinant, with higher scores typically fetching lower interest rates. Additionally, lenders consider aspects like financial stability, employment status, loan duration, and even the type of lending institution, all of which collectively influence the terms and rates of a personal loan. The table below gives a breakdown.
|Creditworthiness||Borrowers with higher credit scores typically receive lower interest rates. The credit score reflects the borrower’s history of managing debts and payments.|
|Financial Stability||Lenders assess the borrower’s income and debt-to-income ratio to gauge their ability to repay the loan.|
|Employment Status||The borrower’s employment status and stability can influence the lender’s confidence in their ability to repay the loan.|
|Loan Term||The duration of the loan can impact the rate. Short-term loans often have higher interest rates compared to long-term loans.|
|Lender Type||Online lenders might offer lower starting rates, especially for those with excellent credit, compared to traditional banks and credit unions.|
|Other Factors||Events like recent bankruptcies or open collections cases, as well as lender-specific criteria like minimum income or credit score requirements, can influence loan rates.|
How can I determine my personal loan rate?
SuperMoney enables you to verify your rate without conducting a rigorous credit check, ensuring your credit score remains unaffected. The calculator provided below gives an approximation of your potential rate, drawing comparisons with rates given to borrowers of similar credit standings who sought the same loan amount and duration. Nonetheless, the rate you receive today might vary significantly. The definitive method to ascertain your rate is to submit an application. Rest assured, a thorough credit check isn’t required to view your rate, so your credit score will remain intact.
How does Fed policy affect personal loan interest rates?
Monetary policy goals
The Federal Reserve’s primary objectives, as mandated by Congress, are to promote maximum employment, stable prices, and moderate long-term interest rates. Achieving these goals often involves adjusting the federal funds rate, which indirectly affects interest rates for various forms of credit, including personal loans.
Federal funds rate
This is the interest rate at which banks lend money to each other overnight. When the Fed raises or lowers the federal funds rate, it typically leads to corresponding changes in interest rates for various types of loans and credit. A hike in the federal funds rate can lead to higher interest rates for personal loans, while a decrease can lead to lower rates.
Open market operations
The Fed conducts open market operations by buying or selling government securities. These actions influence the amount of money in the banking system. When the Fed buys securities, it injects money into the system, potentially leading to lower interest rates. Conversely, selling securities can remove money from the system and push interest rates up.
The Federal Reserve closely monitors various economic indicators, such as inflation, unemployment, and GDP growth. Depending on the economic outlook, the Fed might adjust its policies to either stimulate economic growth (potentially leading to lower interest rates) or curb inflation (which might result in higher rates).
To encapsulate the essence of the Fed’s influence on personal loan interest rates, Dennis Shirshikov, Head of Growth at Awning.com eloquently states, “Federal Reserve interest rate decisions are the drumbeat to which personal loan rates march. When the Fed hikes rates, borrowing costs typically rise, as lenders pass on the higher costs to consumers. This often results in a cooling effect on consumer borrowing — akin to turning down the thermostat on a heating market. Conversely, when the Fed lowers rates, we usually see an uptick in borrowing, as cheaper loans heat up consumer activity. It’s essential for consumers to listen for these beats, as the tempo of the Fed’s decisions can significantly impact the affordability of borrowing.” This insightful commentary underscores the recent changes in personal loan interest rates, highlighting the importance for consumers to stay attuned to the Fed’s policy decisions.
- Personal loan interest rates have seen significant shifts in the week of Oct. 30th, with exceptional credit holders experiencing a sharp increase in APRs.
- The fluctuating rates across all credit score categories underscore the impact of economic and policy changes on personal finance.
- Despite the general rise, good credit scores observed a notable decrease in rates, suggesting a possible strategic shift in lending criteria.
- SuperMoney’s platform provides a realistic preview of loan rates based on actual prequalified offers, which may differ from the low rates advertised by lenders.
- The Federal Reserve’s adjustments to the federal funds rate and open market operations continue to play a crucial role in the determination of personal loan interest rates.