Personal Loan Rates & Trends, Week of March 13: Rates Rise

Average rate on personal loans bumped higher this week, mostly impacting those with the best credit

Woman looking at rates

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The average personal loan rate across all credit tiers jumped 22 basis points this week, raising to 19.96% from 19.74%. It's the highest average seen since late January. The minimum and maximum rates across all surveyed lenders remained at 5.99% APR and 36.00% APR, respectively.

This week's average loan term held steady at 50 months, while the average loan amount increased by $15 to $21,485.

Segmenting loans by credit tier shows that those with excellent credit saw a large rate increase on average this week, while rates improved for those with good, fair, and poor credit.

Personal Loan APRs by Credit Quality
Credit Quality Average APR Last Week Average APR This Week Week over Week Change
Excellent 17.74% 18.22% + 0.48
Good 21.52% 20.91% - 0.61
Fair 25.59% 24.39% - 1.20
Poor 26.88% 26.50% - 0.38
All tiers 19.74% 19.96% + 0.22
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 eight last rate decision meetings, but often hiked the rates by historically large increments. Indeed, six of the last eight 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 Fed'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 Federal Reserve to raise its key interest rate an eye-popping 4.5% 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 come down a bit but still remains an issue. Therefore, the Fed still expects to raise rates further, with markets currently predicting we'll see two more minor increases this year. It's critical to note, however, that Fed rate decisions are made one at a time based on the freshest economic data, so nothing can be reliably predicted.

The Federal Reserve's rate-setting committee meets every six to eight weeks, with its next meeting concluding March 22.

 Lender Average APR Average Loan Term (months) Average Loan Amount 
Avant 29.91% 37 $11,236
Axos 12.36% 54 $24,368
Bankers Healthcare Group 16.27% 87 $71,795
Best Egg 21.13% 48 $17,141
Citibank 14.99% 36 $26,000
Discover 15.99% 60 $21,250
Happy Money (formerly Payoff) 19.20% 43 $25,702
LendingClub 19.01% 46 $18,090
LendingPoint 29.85% 44 $10,610
LightStream 12.12% 59 $28,975
OneMain Financial 25.67% 45 $7,129
PenFed 11.00% 52 $23,944
Prosper 22.51% 47 $16,341
Reach Financial 25.17% 41 $15,117
SoFi 14.92% 48 $28,006
Universal Credit 21.22% 47 $15,349
Upgrade 21.39% 48 $15,156
Upstart 26.58% 52 $10,520
All Lenders Above 19.96% 50 $21,485

What Is the Predicted Trend for Personal Loan Rates?

With the Fed expected to raise the federal funds rate still higher in 2023, personal loan rates could rise higher. 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 19 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."