COVID-19: From payments to resources—we want to help. What is a good personal loan rate? Financial education, Loans April 30, 2021 7 min read Back to financial education What’s considered a good personal loan rate depends on your situation, financial history, and credit score (if you have one). Key takeaways The annual percentage rate (APR) is the amount of money you pay the lender in exchange for borrowing the money. The APR is made up of the interest and certain fees on your loan. The average APR on a personal loan is between 6 percent and 36 percent. The state you live in, your credit score, the type of loan (secured or unsecured), and the lender you choose can all impact the APR on your personal loan. The general rule: The higher your credit score, the lower your APR. Here’s what we’re going to cover today: What is a good personal loan rate? What factors impact a personal loan’s APR? How do you apply for a personal loan? Oportun: Affordable personal loans What is a good personal loan rate? The short answer is it depends, but lower is generally better. What might be a good loan rate for one person can be a bad rate for someone else. And a rate you were offered two years ago might not be as good as the rates you qualify for today. This is because lenders consider many factors when calculating your annual percentage rate (APR) for a loan. The factor that has arguably the most impact on the APRs you qualify for is your credit score. Generally speaking, when you have a higher credit score, you can get approved for loans at much lower, better rates. The average annual percentage rate (APR) for a personal loan can range anywhere from 6 percent to 36 percent. Unfortunately, many people without credit scores or limited credit history often have trouble getting approved for loans at lower rates and turn to title or payday loans, which often come with APRs as high as 400 percent. Plus, your loan term and any fees that are charged will have an impact on how much you pay in the long run. So why do rates of personal loans vary so much? Let’s take a look at two of the most important factors that impact APRs. What factors impact a personal loan’s APR? Two of the most important factors that affect APR are your credit score and whether the loan is secured or unsecured. Factor No. 1: Credit score Lenders want to be sure that you’ll pay back your loan on time. A lender determines the financial trustworthiness of a borrower by checking their credit score. Your credit score is a three-digit number between 300 and 850. The higher the number, the more a lender trusts that you’ll repay your loan on time. And the more they trust you, the more likely they are to offer you a good interest rate. Your credit score can go up or down depending on your financial behavior. If you have a low score today, you can slowly raise it up by making payments on your debts on time and in full. Personal loans can be great way to build up your credit and help you get lower rates in the future if your score is low. But be sure to choose a lender that won’t take advantage of your low score by offering you a triple-digit APR. If you don’t have a credit score, getting approved for a loan can be difficult. Most banks and credit unions won’t approve personal loan applications if the borrower doesn’t have a credit score. This leaves many people with limited options, most of which have extremely high APRs. If you don’t have a credit score, look for lenders that don’t require one to apply, like Oportun. These lenders understand that your credit score is only one piece of the puzzle and will look at other information when processing your application. Factor No. 2: Secured or unsecured personal loan Your APR is also affected by the type of loan you take out. A secured personal loan requires you to put down collateral. This collateral can be your home, your car, or something else of value that you own. If you fail to make your loan payments on time, your lender can take this collateral and apply it toward your payments. Collateral reduces risk for the lender and gives you an extra incentive to make your payments. As a result, a secured loan often has a lower interest rate than an unsecured loan. However, most personal loans are unsecured. Unsecured personal loans don’t require collateral. They allow you to borrow money without putting your personal assets on the line. However, unsecured personal loans are generally harder to qualify for than secured loans. How do you apply for a personal loan? Applying for a personal loan is simple. Just follow these steps: 1. Review your credit score Before you apply for a personal loan, check your credit score for accuracy. Everyone has the right to a free credit score check once a year from each of the three major credit bureaus: Equifax, TransUnion, and Experian. Additionally, due to COVID-19, AnnualCreditReport.com allows you to check your credit for free, once a week, until April 2021. If you find out that your credit score is wrong or contains errors, you must notify the credit bureau as soon as possible to get it fixed. 2. Gather the necessary documents Your credit report (if you have one) isn’t the only thing a lender will want to review. You’ll need to gather all these documents: A valid photo ID (driver’s license, passport, ID card, or a non-U.S. ID card) Proof of income (paystub or current bank statement) Verification of address, such as a piece of mail with your name and address Four or more personal references (from friends, family members, or employers) 3. Find a lender The next step is to find a lender (bank, credit union, or state-licensed lender). Dozens of lenders may offer you a personal loan, but not all lenders have your best interest in mind. Ask some questions before deciding whether to partner with them. Questions like: What is the APR range for your personal loans? Is there an origination fee or prepayment penalty? How quickly are applications processed? What are the loan terms? Is a credit score required? What’s the maximum loan amount? Are secured and unsecured loans offered? 4. See if you’re prequalified Before you officially apply for a loan, it’s common to apply for prequalification. This lets you know how much money you are likely to qualify for. You can fill out an online prequalification application in just a few minutes. The lender will ask for your contact information, desired loan amount, employment status, and income. Some lenders will do a soft inquiry on your credit, which lets them see your credit score (without impacting your credit score). This review should take only a few minutes. Once it’s finished, the lender will decide whether or not you prequalify. If you do, they’ll present you with an estimated loan offer. If you are prequalified for several loans from different lenders, you can compare the estimated terms and APR. It’s important to note that prequalification doesn’t necessarily mean you’ve been approved for the loan. For that, you’ll need to file a formal application. 5. Finish your application Once you’re prequalified, it’s time to finish your application. Lenders may request additional documentation in order to confirm your personal information, financial history, and employment status. At this point, the lender will perform a hard inquiry on your credit report. A hard inquiry allows your lender to view your full credit history. They also show up on your credit report as an indicator that you’ve applied for a new credit product. This can temporarily lower your credit score number. That means, if you apply with multiple lenders, finish your applications within a few days of each other—this will usually minimize the impact on your credit score. Once you’ve submitted your application, the lender will review it. Some lenders will notify you within hours, others may take a few days. 6. Sign the agreement After you’re approved, all that’s left to do is review and sign the contract. While you review the contract, be sure to ask your lender any questions that come to mind. Once you’ve signed, you’ll receive your money fairly quickly, usually within 24 hours. 7. Make scheduled payments You’re responsible for making regular payments on time and in full. This will help you avoid costly fees and build up your credit history. Oportun: Affordable personal loans Oportun can help you get an affordable personal loan, even if you have no credit history. As a state-licensed lender, we have years of experience helping individuals and families get the personal loans they need at affordable rates. We provide secured and unsecured personal loans ranging from $300 to $10,000. And our loans won’t ever exceed an APR of 36 percent. Applying for a loan with Oportun is fast and simple. The full online application process typically takes under 10 minutes to complete. Ready to get the money you need? Reach out today to see if you qualify. Sources Board of Governors of the Federal Reserve System. Consumer Credit G.19. Bankrate. Personal Loan Rates. Federal Trade Commission. Truth in Lending Act. The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied on as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation. Ready to build a better future? Apply now. Personal loans You might also like View financial education Ready to build a better future? Apply now. Sign up for updates To stay up to date with Oportun, please sign up for updates. Email Sign up Connect (866) 488-6090 hello@Oportun.com Log in Products Help Oportun Terms of use Accessibility Privacy Privacy settings View state licenses and notices. California loans made pursuant to a California Financing Law license. New Jersey residents: This is an advertisement for a consumer loan. New Mexico residents: TO REPORT A PROBLEM OR COMPLAINT WITH THIS LENDER, YOU MAY WRITE OR CALL: Customer Experience – Contact Manager, Oportun, PO Box 4085, Menlo Park, CA 94026; 888-408-3020; Complaints@oportun.com. This lender is licensed and regulated by the New Mexico Regulation and Licensing Department, Financial Institutions Division, PO Box 25101, 2550 Cerrillos Road, Santa Fe, New Mexico 87504. To report any unresolved problems or complaints, contact the division by telephone at 505-476-4885 or visit the website. NMLS #1671904. Click here for the NMLS Consumer Access Database. Lender information Personal loans in AZ, CA, FL, ID, IL, MO, NJ, NM, TX, UT, and WI are originated by Oportun Inc. NV loans originated by Oportun, LLC. Personal loans in AL, AK, AR, DE, IN, KS, KY, LA, MI, MS, MT, NC, ND, NH, OK, OR, RI, SC, SD, TN, VA, VT and WA are originated by MetaBank®, N.A., Member FDIC. Oportun® Visa® Credit Card is issued by WebBank, Member FDIC. The Oportun Credit Card is open to all consumers, except for residents in CO, DC, IA, MD, WI, and WV. See the Oportun Cardholder Agreement for details, including applicable fees. Oportun’s website terms, privacy, and security policies don’t apply to outside sites we reference. Please review those websites for their terms, privacy, and security policies to see how they apply to you. The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied on as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation. © 2021 Oportun, Inc. All rights reserved. We use cookies to bring you the best experience on our site. We never sell your information to third parties. When you use our site, you agree to our cookies policy. Find out more.