Oct 11, 2021 – Interest Rate Hikes for Well Qualified Borrowers – Forbes Advisor
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Personal loan rates soared last week. Even so, it is still possible for highly skilled borrowers to get a decent interest rate on a personal loan. If you’re interested in funding a major purchase or project, now is a good time to buy a loan.
For borrowers with a credit score of 720 or greater who prequalified on the Credible.com personal loan marketplace, the average three-year personal loan rate from October 4 to October 8 was 11.61%. According to Credible.com, that’s a 0.36% increase over the previous week. The average interest rate on a five-year personal loan dropped 0.63% last week to 14.23% from 14.86%.
However, the actual interest rate you will get will depend on your creditworthiness and what your preferred lender is offering. Well-qualified borrowers can potentially find interest rates well below average.
Related: Best Personal Loans October 2021
Average personal loan interest rates by creditworthiness
Here are the average estimated personal loan interest rates based on Experian VantageScore risk levels. Please note that the interest rates are determined and set by the lenders. The prices shown are estimates.
Comparison of Personal Loan Rates
Once you start actively looking for a loan, it is a good idea to get prequalified. The pre-qualification can give you a better understanding of the interest rate you will get from a particular lender, as they’ll pre-screen you through a gentle credit check (which doesn’t affect your creditworthiness).
After you pre-qualify, the lender can provide you with a snapshot of your loan options. This snapshot usually includes lending rates, terms and limits. To find the best loan for your situation, you should prequalify with several lenders and compare the terms.
However, prequalification does not guarantee admission. Once you’ve found an offer that you like, all you need to do is submit a formal application and provide the lender with additional documentation. When you apply, a lender usually does a tough credit check that rates your credit score between one and five points.
Related: 5 Personal Loan Requirements You Should Know Before Applying
Get the best prices
Two quick ways to get you cheaper rates are to pay off existing debt to lower your DTI and improve your credit score. The interest rate you can get on a personal loan depends on several factors. This includes your overall credit rating, credit score, income, and debt-to-income ratio (DTI).
While lenders have different qualification requirements, a minimum credit score of 720 will usually get you the best terms. If your score falls below this mark and you are looking for the lowest possible odds, there are steps you can take to improve your score. Try strategies like lowering your credit utilization, removing errors from your credit report, and paying your bills early or on time.
Calculate monthly personal loan payments
To see if it fits your budget, it is important to estimate how much you will pay monthly – and how much interest you will pay over the life of the loan. The easiest way to do this is with a personal loan calculator. You need your loan installment, term and amount.
For example, let’s say you received a $ 5,000 personal loan with a term of five years at a fixed rate of 14.23%. According to the Forbes Personal Loan Advisor calculator, you would pay about $ 117 per month and about $ 2,016 in interest over the life of the loan. In total, you would be paying a total of $ 7,016, which includes both principal and interest.