October 31, 2022—Rates are on the rise – Forbes Advisor

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Personal loan rates jumped last week. But you can still get a reasonable rate, whether you’re looking to finance a home improvement project, a vehicle, unexpected bills, or just temporarily need to improve your cash flow.

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 12.75% from October 24 through October 29. According to Credible.com, it’s a 0.57. % increase over previous week. The average five-year personal loan rate rose 1.57% last week to 16.93% from 15.36%.

Keep in mind that the rate you’ll receive depends on a number of factors, including your creditworthiness and the loans available from your chosen lender. The most creditworthy borrowers can benefit from rates that are significantly lower than the average.

Related: Best Personal Loans

Personal loan rate 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.

Compare personal loan rates

When you start shopping for a loan, look for lenders that offer a prequalification process. Lenders offer a range of rates online, not an exact rate based on your specific qualifications. Prequalification provides a more accurate picture of the rate you will receive. During the prequalification process, lenders perform a soft credit check, 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.

You are not guaranteed to be approved if you prequalify. Lenders always require you to submit a formal application and additional documents. After you submit your formal application, lenders typically perform a rigorous credit check, which can lower your credit score by one to five points.

Related: 5 personal loan requirements to know before applying

How to benefit from more favorable interest rates

Your credit is an important factor in the rates you receive. According to Rod Griffin, senior director of education and consumer advocacy at Experian, “checking your credit report and scores three to six months before applying for a personal loan” is a good idea. This gives you enough time to make the necessary corrections.

A credit score of 720 or better will generally get you the best deal. If you’re not quite in this credit score range, consider taking steps to improve your credit score. Pay off your existing debts to reduce your credit utilization ratio, remove errors from your credit report and pay your bills in advance or on time.

Estimate your personal loan repayments

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 16.93%. You’d pay about $124 a month and about $2,444 in interest over the life of the loan, according to Forbes Advisor’s Personal Loan Calculator. Overall, you would pay $7,444 in total, which includes both principal and interest.

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