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Average Personal Loan Interest Rates & What Affects Them

By Anna Davies · December 23, 2021 · 7 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Average Personal Loan Interest Rates & What Affects Them

You may have seen personal loans advertised as starting at a certain interest rate or annual percentage rate (APR). But when you check your personal loan interest rate, you may find that what is offered to you is significantly higher. Why is that?

The average personal loan interest rate is dependent on several factors, including the amount borrowed, credit history, and income, among others. Average interest rates for personal loans may also differ depending on the type of the loan. Here are some factors that may affect the personal loan interest rate you’re approved for.

Average Personal Loan Interest Rates By Credit Score

The average interest rate for personal loans is calculated by looking at several factors, including the requested amount, the applicant’s income history, and the reasons for borrowing, among others. An applicant’s credit score is a large percentage of the calculation, also. In general, the higher a borrower’s credit score, the lower the interest rate offered to the borrower may be. For example, average December 2021 personal loan interest rates by credit score range are:

Excellent credit score (781 to 850)


Very good credit score (661 to 780) 10.93%
Good credit score (601 to 660) 15.56%
Fair credit score (below 640) 15.91%

Factors That Can Lower Personal Loan Interest Rates

One thing to know about personal loans is that your unique credit profile will likely affect the interest rate offered to you.

Improving Credit Score

In general, the higher a borrower’s credit score, the lower their interest rate may be. Improving your credit score can, potentially, be one way to be eligible for more personal loans, perhaps with lower interest rates to choose from. And there are many ways to improve and build credit, many of which can positively affect your credit score in a short time. These can include:

•   Checking your credit report. Make sure your personal information — e.g., name, address, phone number, Social Security number — is correct; look for any erroneous public record information, such as lawsuits or bankruptcies filed that you were not a part of; and errors or inaccuracies in the credit accounts section. You can dispute any errors with the credit reporting agency.

•   Lowering your credit utilization ratio. Your credit utilization ratio — the amount of debt you have compared to the amount of credit available to you — plays a large part in credit score calculation. Paying down your debt will lower this ratio.

•   Avoiding late payments. Late payments can have a large effect on your credit score for a long period of time. If there are any late payments in your history, you may be able to minimize their impact by creating a record of on-time payments in the future. Setting up autopay for debt payments is one way to make sure those payments are made regularly and on time.

Recommended: How AutoPay Works & When to Consider Using It 

Secured Versus Unsecured Personal Loans

How a personal loan functions depends on the type of personal loan chosen. As you research loan options, you may come across options for secured and unsecured personal loans.

What’s the difference between a secured and unsecured personal loan?

•   A secured personal loan requires the borrower to pledge collateral to guarantee the loan. This collateral is something of value that the borrower owns, such as a car, investments, or savings account. If the borrower cannot or does not make the loan payments, then the lender can seize that collateral.

•   An unsecured personal loan, also called a signature loan, is backed by the borrower’s estimated creditworthiness. If the borrower can’t pay back the loan, the lender can’t take any of their property or valuables to recoup its loss. The lender can, however, take other steps to recoup its loss, such as suing the borrower, which may affect the borrower’s credit score and future financial options.

Borrowers may offer only certain types of loans. And secured personal loans may go by different names, such as a car title loan. People who may not qualify for an unsecured personal loan, or may only be offered an unsecured personal loan with high interest rates, may find more options with secured loans. But, as with any financial decisions, it’s important to weigh the pros and cons of each option.

Income and Employment Status

Your income and employment status may affect the rate you’re offered on a personal loan. And you might need additional paperwork to prove your income if you’re a freelancer, independent contractor, or business owner than you would if you worked a W-2 job.

If your income is irregular, having a creditworthy co-applicant may help you be approved for more favorable interest rates. Asking someone to be a co-applicant is a big commitment, though, and having a conversation about all that it entails can help alleviate any concerns of both parties.

Factors That May Increase Personal Loan Interest Rates

Lenders must assess how risky an unsecured loan might be and the likelihood of the loan being paid back. To do that, they look at the applicant’s credit history, employment status, and loan amount requested, among other factors. Things that may lead a lender to think a loan is more risky — and a potentially higher rate for the borrower — can include:

Credit Score

An applicant’s credit score is one factor that affects the personal loan interest rate they might be approved for. In general, the lower the credit score, the higher the rate of interest. Improving a credit score may make it possible to qualify for a loan with a lower interest rate.

Debt-to-Income Ratio

Debt-to-income ratio refers to how much debt someone has in relation to how much income they have. This is expressed as a ratio: Monthly debts divided by gross monthly income. Monthly debts include all debt payments, such as mortgage, car payments, and credit card payments. In general, the higher your DTI ratio, the riskier you may seem to lenders.


A personal loan application will ask for proof of income, usually in the form of W2s or tax returns from prior years. The lender wants to know that a borrower has a steady source of income. If a loan applicant is unemployed, it may be harder — but not impossible — to have a loan approved.

Recommended: How Does Unemployment Work?

Recent Bankruptcy

Bankruptcy will appear on an applicant’s credit report and can make it challenging to be approved for a personal loan. Applying with a cosigner may make it easier to be approved for a personal loan after recent bankruptcy. But keep in mind that if you are unable to repay the loan, your cosigner would be responsible for the debt.

Is a Personal Loan the Right Choice for You?

Individual circumstances really determine whether a personal loan is the right choice for any one person.

•   A personal loan can be a good option for people who want to consolidate high-interest debt, like that of credit cards, to save money. For this method to be successful, it’s important to discontinue using the credit cards to accumulate more debt.

•   Having a fixed interest rate and steady payment amount can be helpful when using a personal loan to cover a big purchase. A personal loan is installment debt with a payment end date, in contrast to the revolving debt of a credit card.

•   A personal loan is still debt and increases a person’s overall debt load, so it can be a good idea to have a sense of how you’ll repay it. Making late payments or failing to repay the loan will negatively affect your credit score.

SoFi Personal Loan Interest Rate Range

Our personal loan rates are fixed and competitive in comparison to other lenders. Specific interest rates are dependent on several factors, including an applicant’s credit history, credit score, income, and loan amount, among others.

A personal loan rate calculator can be a helpful tool to estimate your personal loan rate and will not affect your credit score.* Your offered rate may vary slightly when you officially apply for a loan, but an estimate can give you a good benchmark for comparison.

The Takeaway

Personal loan interest rates vary depending on an applicant’s financial circumstances, but can also vary by lender so it can make sense to shop around for rates. Trying to improve aspects of your credit that may be considered a shortcoming may increase your chances of loan approval with a more favorable interest rate.

Checking prequalification for a SoFi Personal Loan is an easy, online process that takes just one minute. With no fees required and terms to fit a variety of budgets, an unsecured personal loan from SoFi may be a financial tool that will work for your unique needs.

See if a SoFi Personal Loan is right for you

Photo credit: iStock/alexsl

*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s


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