Home American history October 10, 2022—Rates Rise – Forbes Advisor

October 10, 2022—Rates Rise – Forbes Advisor

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Personal loan rates jumped last week. However, if you are looking for a personal loan to finance a project, the purchase of a vehicle, unexpected bills or to improve your cash flow, it is possible to obtain a decent rate.

For borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace, the average interest rate on a three-year personal loan was 12.09% from October 3 through October 8. According to Credible.com, that’s a 0.50% increase over the previous week. The average five-year personal loan rate fell 0.23% last week to 15.63% from 15.86%.

Remember that qualified borrowers can benefit from significantly lower than average rates. The rate you will receive depends on several factors, such as your creditworthiness and the loan you choose.

Related: Best Personal Loans

Average Personal Loan Interest Rates by Credit Score

The rates below are estimated average interest rates for personal loans based on VantageScore risk levels, according to Experian. Although the rates below can serve as a general guideline, note that interest rates are ultimately set and determined by the lenders.

How to Compare Personal Loan Rates

If you want to get the best rate, be sure to research lenders that offer a prequalification process for personal loans. Although many lenders post their rates online, this only gives you a range of what they offer, not an exact rate based on the qualifications you meet. However, when you prequalify for a personal loan, a lender will perform a soft credit check to prescreen you, which has no impact on your credit score.

Based on this information, the lender will give you an overview of the terms you may qualify for, including loan rates, terms and limits. You can prequalify with multiple lenders and compare terms to find the best loan for your specific situation.

Prequalification does not imply loan approval. You will still need to submit a formal application and additional documents to get the loan you want. Typically, lenders do a thorough credit check when you formally apply for a loan. Credit checks can lower your score by one to five points.

Related: 5 personal loan conditions to know before applying

Get the best rates

Personal loan interest rates are based on a number of factors, including your overall creditworthiness, credit score, income, and debt-to-income ratio (DTI). Two quick ways to help you qualify for better rates is to pay off existing debt to help lower your DTI and improve your credit score.

Rod Griffin, senior director of education and consumer advocacy at Experian, recommends “checking your credit report and scores three to six months before applying for a personal loan” as this will give you plenty of time to bring the necessary improvements.

Although qualification requirements differ from lender to lender, a minimum credit score of 720 will generally get you the best deal. If your score falls below this marker and you’re looking for the lowest possible rate, you can take steps to improve your score. Try strategies such as reducing your credit utilization rate, removing errors from your credit report, and paying your bills early or on time.

How to calculate your personal loan payments

You can estimate your monthly payment and the amount of interest you will pay once you know the interest rate, term and amount of your personal loan.

For example, suppose you get a $5,000 personal loan with a term of five years at a fixed interest rate of 15.63%. You’d pay about $121 a month and about $2,237 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. Overall, you would pay $7,237 in total, which includes both principal and interest.