Average personal loan rate plummets to new record low, Fed reports

Here’s how to lock in the lowest rates on a personal loan

Two-year personal loan rates fell to 9.09% in the fourth quarter of 2021, which is the lowest rates have been since the Federal Reserve began collecting this data.  (iStock)

If you're considering borrowing a personal loan to consolidate debt, pay for home improvements or finance another large purchase, there's never been a better time to do so. That's because interest rates have fallen again to a new record 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 that personal loan rates have been since the Fed started 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 bounced between 9.65% and 9.39% since then, before falling to the current average of 9.09%.

Average two-year personal loan rate, Federal Reserve

Keep reading to learn more about personal loans, including how to lock in a low rate now. You can compare personal loan rates across multiple lenders at once on Credible's online financial marketplace. 


How are personal loan interest rates determined?

Personal loans allow consumers to borrow a lump sum of cash that's repaid in fixed monthly installments over a set period of time, typically a few years. Funding is fast, which means the loan can be deposited into your checking account in as little as one business day. Personal loans are typically unsecured, meaning they don't require collateral, so you can use the funds however you see fit. 

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

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

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


How to lock in a low personal loan rate

Since personal loan interest rates are based on a borrower's creditworthiness, it's important to build good credit in order to qualify for the lowest rates available. Here are a few tips to improve your credit score and get a low-interest rate personal loan:

  • Pay down 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 compared to your total available credit. Lowering your credit utilization will have an immediate positive impact on your credit score. This will also help to lower your DTI ratio, which is another factor that impacts personal loan eligibility.
  • Become an authorized user. It may be beneficial to become an authorized user on someone else's credit card to build your on-time payment history. Just be sure that this person is a trusted financial partner, such as a spouse or parent.
  • Compare rates across multiple lenders. Since personal loan interest rates vary between lenders, it's important to shop around to make sure you're getting the lowest interest rate possible for your financial situation. Many personal loan lenders let you get prequalified to see your estimated rate without affecting your credit score.

You can see your prequalified offers from multiple personal loan lenders in minutes by filling out a single form on Credible. Browse interest rates from online lenders in the table below, and visit Credible to begin the application process.


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