If you’re considering borrowing a personal loan to consolidate debt, pay for home renovations, or finance another major purchase, there’s never been a better time to do it. This is because interest rates have fallen back to a new all time low.

The average rate on a two-year personal loan fell to 9.09% in the fourth quarter of 2021, according to the Federal Reserve. This is the lowest personal loan rates have been since the Fed began collecting this consumer credit data.

The previous record was set in the third quarter of 2020 when personal loan interest rates averaged 9.26%. The fixed rate has rebounded between 9.65% and 9.39% since then, before falling back to the current average of 9.09%.

Read on to learn more about personal loans, including how to lock in a low rate now. You can compare the personal loan rates of several lenders at a time in Credible’s online financial market.

PERSONAL LOANS ORIGINATION COSTS: ARE THEY WORTH THE COST?

How are personal loan interest rates determined?

Personal loans allow consumers to borrow a lump sum of cash that is repaid in fixed monthly installments over a set period of time, usually a few years. Funding is quick, which means the loan can be deposited into your checking account in just one business day. Personal loans are generally unsecured which means they don’t require collateral so you can use the funds however you want.

Because they are unsecured, personal lenders determine your interest rate and eligibility based on your creditworthiness. The interest rate you qualify for is determined by your credit rating and debt-to-income ratio (DTI), as well as other loan terms such as the loan amount and length of the loan.

Borrowers with very good or excellent credit, defined by the FICO model as 740 or higher, will qualify for the best personal loan rates available. Conversely, those with bad or fair credit will see higher interest rates on personal loans if they qualify for loan approval.

If you are considering borrowing a personal loan, it is important to check your credit score to see where you stand. Then visit Credible to view your estimated personal loan offers for free without impacting your credit, to determine if this financial product is right for you.

WHAT IS A GOOD ANNUAL PERCENTAGE RATE (APR) ON A PERSONAL LOAN?

How to lock in a low personal loan rate

Since personal loan interest rates are based on a borrower’s creditworthiness, having good credit is important in order to benefit from the lowest rates available. Here are some tips to improve your credit score and get a low interest personal loan:

• Pay off credit card debt. One of the most important factors in your credit score is your credit utilization rate, which is the amount of credit card debt you carry relative to your total available credit. Reducing your credit usage will have an immediate positive impact on your credit score. It will also help lower your DTI ratio, which is another factor affecting personal loan eligibility.
• Become an authorized user. It may be beneficial to become an authorized user on someone else’s credit card to establish your payment history on time. Just make sure that this person is a trusted financial partner, such as a spouse or parent.
• Compare the rates of several lenders. Since personal loan interest rates vary from lender to lender, it’s important to shop around to make sure you’re getting the lowest possible interest rate for your financial situation. Many personal lenders allow you to pre-qualify to see your estimated rate without affecting your credit score.

You can view your prequalified offers from multiple personal lenders within minutes by filling out just one form on Credible. Browse the interest rates of online lenders in the table below and visit Credible to begin the application process.

GUARANTEED LOANS: WHAT YOU NEED TO KNOW

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