When you apply for a personal loan, lenders will offer you an interest rate based on how risky they think you are as a borrower. That rate determines how much you'll pay on top of the amount you borrowed — and it can make a huge difference over the life of the loan.
What counts as a good rate?
Personal loan interest rates typically range from around 6% to 36% APR. As a general rule:
- Below 10% — excellent, usually reserved for borrowers with great credit
- 10% to 15% — good, available to most borrowers with solid credit history
- 15% to 20% — fair, common for average credit scores
- Above 20% — high, typically for borrowers with poor or limited credit
How your credit score affects your rate
Your credit score is the single biggest factor lenders use to set your rate. Here's a rough breakdown of what to expect:
- 720 and above — you'll likely qualify for the lowest rates available
- 660 to 719 — good rates, but not the best tier
- 600 to 659 — rates start climbing, expect 15% or higher
- Below 600 — options are limited and rates can be very high
Even a 2% difference in rate on a $10,000 loan over 3 years adds up to over $300 in extra interest. It pays to shop around.
How to get a better rate
There are a few things you can do to improve the rate you're offered:
- Check your credit report for errors and dispute any mistakes before applying
- Pay down existing credit card balances to lower your utilization ratio
- Apply with a co-signer who has strong credit
- Compare offers from at least 3 lenders — banks, credit unions, and online lenders
- Choose a shorter loan term if you can afford higher payments
Fixed vs variable rates
Most personal loans have fixed rates, meaning your rate and payment stay the same for the life of the loan. Variable rate loans can start lower but may increase over time. For most borrowers, a fixed rate is the safer and more predictable choice.
The bottom line
A good interest rate is one that's competitive for your credit profile and fits your budget. The best way to know if you're getting a fair deal is to get quotes from multiple lenders and compare the APR — not just the monthly payment — before you sign anything.