Personal Loan Rates & Trends, Week of May 22: Rates Jump

Personal loan rates reverse course after declining for three weeks

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Personal loan rates jumped markedly this week after declining steadily over the prior three weeks. The overall rate spiked 51 basis points to 21.08%, surpassing the 21.00% threshold for the first time since Investopedia began tracking rates. The average annual percentage rate (APR) on personal loans first surpassed the 20.00% mark the week of April 10.

Rates segmented by credit tier show that the average APR for those with excellent credit decreased by 66 basis points, while those with fair credit experienced a significant jump of 184 basis points after experiencing an even larger decline of 286 basis points the week before. Borrowers with bad credit saw a further 64-point decrease in rates this week on the heels of a 142 basis point drop in average APR last week. Rates for those with good credit remained relatively flat, with a modest 6 basis point increase.

Key Takeaways

  • The overall average interest rate for personal loans jumped by over a half percent this week to 21.08%, breaching the 21.00% threshold for the first time this year, when Investopedia began tracking rates for personal loans.
  • The lowest average rate reported by our surveyed lenders remains 5.99% APR, while the highest was again 36.00% APR.
  • The average loan amount is now $23,220, a dramatic rise of $2,634, while the average loan term dropped to 48 months after trending at 50 months for five weeks.
Personal Loan APRs by Credit Tier
Credit Tier Average APR Last Week Average APR This Week Week-Over-Week Change
Excellent 19.39% 18.73% - 0.66
Good 22.34% 22.40% + 0.06
Fair 24.60% 26.44% + 1.84
Poor 26.70% 26.06% - 0.64
All Tiers 20.57% 21.08% + 0.51
For the average rates, loan amounts, and loan terms for various lenders, see Lender table below.

Personal loan rates began rising over the course of 2022 and in 2023 due to a sustained series of 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 10 rate decision meetings, but it often hiked the rates by historically large increments. Indeed, six of those increases were by 0.50% or 0.75%, though the last three increases were more modest at only 0.25%.

The Federal Reserve and Personal Loan Rates

Generally speaking, moves in the federal funds rate translate into moves 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 by approximately 500 basis points since March 2020, 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 beat the competition is to offer lower rates. Though personal loan rates did increase in 2022 and into this year, fierce competition in this space prevented them from rising at the same rate as the federal funds rate.

Inflation is beginning to chill, though it remains relatively high. As a result, Fed officials are divided on whether an 11th rate hike in June is necessary to tame inflation. The Fed raised the fed funds rate by just 25 basis points after its meeting in May, and now, the majority of futures traders predict there will be a pause on rate changes in June. The Federal Reserve's next rate-setting committee meeting will conclude on June 14.

 Lender Average APR Average Loan Term (Months) Average Loan Amount 
Avant 27.64% 37 $10,955
Bankers Healthcare Group 16.21% 87 $71,214
Best Egg 20.80% 48 $16,940
Citibank 14.49% 36 $26,000
Discover 15.99% 60 $21,250
Happy Money 30.00% 36 $35,000
LendingClub 14.51% 46 $20,609
LendingPoint 30.73% 47 $11,331
LightStream 11.83% 64 $28,747
OneMain Financial 25.55% 45 $6,551
Prosper 17.99% 36 $50,000
PenFed 20.38% 47 $12,224
Reach Financial 24.56% 41 $17,559
SoFi 15.47% 48 $27,995
Universal Credit 22.56% 46 $13,672
Upgrade 22.04% 47 $14,227
Upstart 27.64% 52 $10,463
All Lenders Above 21.08% 48 $23,220

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 or similar to what you could get in June, July, or even September, depending on how rates react to any Fed rate hikes or pauses.

It's also always a wise move to shop around for the best personal loan rates. The difference of 1 or 2 percentage points can easily add up to hundreds or even thousands of dollars in interest costs by the end of the loan, so seeking 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 necessitate taking out additional personal loans.

Rate Collection Methodology Disclosure

Investopedia surveys and collects average advertised personal loan rates, average length of loan, and average loan amount 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
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  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."