Personal Loan Rates & Trends, Week of April 24: Rates Keep Climbing

Personal loan rates jumped again, registering a fourth week of increases.

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For a fourth week in a row, rates on personal loans have risen, this time seeing the overall rate average increase more than a third of a point. Monday's climb of 37 basis points takes the average nearly to 21%, after reading about 19% just four weeks ago.

Yet again, the lowest rate reported by our surveyed lenders was 5.99% APR, while the highest was again 36.00% APR.

The average loan amount rose $230 this week, to $20,435, and the average term remained at 50 months.

Rates segmented by credit tier show that borrowers with Poor credit saw a notable rate decrease this week, while those in the Excellent tier saw a large increase. Rate movement was minimal in the Good credit tier and essentially flat for those with Fair credit.

Personal Loan APRs by Credit Quality
Credit Quality Average APR Last Week Average APR This Week Week over Week Change
Excellent 18.70% 19.94% + 1.24
Good 22.76% 22.43% - 0.33
Fair 27.64% 27.66% + 0.02
Poor 28.60% 27.58% - 1.02
All tiers 20.60% 20.97% + 0.37
For the average rates, loan amounts, and loan terms for various lenders, see Lender table below.

Personal loan rates rose over the course of 2022 due to major interest rate hikes by the Federal Reserve. To fight the highest inflation rates seen in 40 years, the Fed not only raised the federal funds rate at each of its last nine rate decision meetings, but often hiked the rates by historically large increments. Indeed, six of the nine increases were by 0.50% or 0.75%.

The Federal Reserve and Personal Loan Rates

Generally speaking, moves in the federal funds rate translate into movement in personal loan interest rates, in addition to credit card rates. But the Federal Reserve's decisions are not the only rate-setting factor for personal loans. Also important is competition, and in 2022, the demand for personal loans increased substantially.

Though decades-high inflation has caused the Fed to raise its key interest rate an eye-popping 4.75% since last March, average rates on personal loans haven't risen that dramatically. That's because high borrower demand required lenders to aggressively compete for closed loans, and one of the primary ways to best the competition is to offer lower rates. Though personal loan rates did increase in 2022, the fierce competition in this space prevented them from rising as much as the federal funds rate.

As for 2023, inflation has started to tame, though it's still relatively high. As a result, the Fed is contemplating when to step off the gas on rates. Market forecasts currently predict one more quarter-point increase from the Fed and then a rate plateau, perhaps followed by a rate decrease still this year. The Federal Reserve's next rate-setting committee meeting concludes May 3.

 Lender Average APR Average Loan Term (months) Average Loan Amount 
Avant 27.73% 38 $13,034
Bankers Healthcare Group 16.12% 87 $71,441
Best Egg 20.58% 48 $16,914
Citibank 14.49% 36 $26,000
Discover 15.99% 60 $21,250
LendingClub 16.71% 46 $18,959
LendingPoint 31.44% 46 $10,420
LightStream 11.90% 58 $26,613
OneMain Financial 25.60% 45 $6,682
Prosper 24.82% 47 $11,915
Reach Financial 24.04% 41 $17,000
SoFi 15.27% 48 $26,176
Universal Credit 21.25% 46 $14,334
Upgrade 21.80% 47 $14,402
Upstart 26.82% 52 $11,392
All Lenders Above 20.97% 50 $20,435

What Is the Predicted Trend for Personal Loan Rates?

If the Fed raises the federal funds rate higher in 2023, personal loan rates could also increase. However, with competition for personal loans still stiff, upward movement in loan rates could be dampened even in light of an increased federal funds rate, perhaps leaving averages not far from current levels.

Because most personal loans are fixed-rate products, all that matters for new loans is the rate you lock in at the outset of the loan (if you already hold a fixed-rate loan, rate movements will not affect your payments). If you know you will certainly need to take out a personal loan in the coming months, it's likely (though not guaranteed) that today's rates will be better than what you can get in the next few months, if the Fed does indeed hike rates further.

It's also always a wise move to shop around for the best rates. The difference of a percentage point or two can easily add up to hundreds or even thousands of dollars in interest costs by the end of the loan, so searching out your best option is time well invested.

Lastly, don't forget to consider how you might be able to reduce your spending to avoid taking out a personal loan in the first place, or how you could begin building an emergency fund so that future unexpected expenses don't sink your finances and cause you to require additional personal loans.

Rate Collection Methodology Disclosure

Investopedia surveys and collects average advertised personal loan rates, average length of loan and average loan amounts from 15 of the nation's largest personal lenders each week, calculating and displaying the midpoint of advertised ranges. Average loan rates, terms, and amounts are also collected and aggregated by credit quality range (for excellent, good, fair, and bad credit) across 29 lenders through a partnership with Even Financial. Aggregated averages by credit quality are based on actual booked loans.

Article Sources
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  1. Board of Governors of the Federal Reserve System. "Open Market Operations."

  2. CME Group. "CME FedWatch Tool."

  3. Federal Reserve Open Market Committee 2023 Meeting Calendar