When you take out a personal loan, you’re getting a lump sum of money that you’ve agreed to pay back within a certain time period. You pay interest on this loan, and the rate typically depends on your credit history and your income. But the number can vary widely. 

The Federal Reserve Bank of St. Louis says that the average interest rate for a 24-month personal loan at a commercial bank is 11.40% as of February 2026. If you have a personal loan — or hope to get one soon — this guide will explain how personal loan rates are determined, what’s considered a good vs. bad rate and how to potentially get a lower one.

What Is the Current Average Personal Loan Rate?

The average interest rate varies for personal loans based on a number of factors. Credit unions will typically offer lower rates, but here’s a snapshot of what to expect based on the lender.

It’s important to remember that your interest rate is mostly determined by your own income and credit history. Even though the average rate of a loan from a credit union is pretty good at 10.64%, if you have a low credit score and unstable income, you’re not likely to land that kind of rate.

Average Personal Loan Rates by Credit Score

Credit scores are a huge factor in the interest rate you’ll get. Credit scores are meant to show how responsible of a borrower you’re likely to be. The better the score, the lower the rate. That’s why it’s a good idea, if possible, to wait to apply for a personal loan if your score isn’t in great shape. 

There isn’t any guaranteed rate you should expect based on your score, because there are other factors like your income and length of the loan. However, this table based on NerdWallet data can give you a good idea. It also cites average annual percentage rate (APR), which is the interest rate plus fees: 

Because personal loan rates can start as low as 5.99% and go as high as 36%, be prepared to potentially pay a rate outside of these estimates.

What’s Considered a Good Personal Loan Rate?

A lower rate at 5.99% would obviously be great, and 35.99% would definitely increase your borrowing costs. Basically, if they’re keeping it under 10%, that’s a pretty good deal. Any percentage over about 22%, it’s worth looking into another lender or taking time to boost your credit score. Here’s why:

Say you take out a $10,000 loan to pay back in three years at 12% you’re already paying close to $2,000 in interest charges. Go up to 22%, you’re paying $3,748 on top of the $10,000. A better rate can save you a bundle. 

What Factors Determine Your Personal Loan Interest Rate?

Although your credit score is a huge factor, it’s not the only thing lenders look at. Here’s what all comes into play:

• Credit score: This will have the biggest impact. It shows your borrowing history and shows lenders how responsible of a borrower you may be. 

• Debt-to-income ratio: This shows how much debt you already have relative to your income. If debt payments are taking up more than about 36% of your monthly pay, that makes lenders wary. 

• Loan term: The longer the loan term, usually the higher the interest rate. That’s because — in the lender’s eyes — you’re leaving more room for getting into financial trouble during the loan term. 

• Employment and income: the word “responsible” comes up again here. Someone with a solid salary and a steady job seems more likely to make on time payments than someone with a shaky job history or intermittent paychecks. 

• Lender type: Credit unions tend to offer lower rates, but not always.

APR vs. Interest Rate — What’s the Difference?

APR also accounts for other fees like origination fees, which are common among lenders, while interest rate does not. Always compare APR when shopping — two loans with the same interest rate can have very different costs if one charges an origination fee.

How Personal Loan Rates Compare to Other Borrowing Options

You have other options outside of personal loans when it comes to borrowing. These are some other avenues, plus when you should consider them. 

If you need a large amount of money and don’t have any home equity to tap into for the HELOC, a personal loan is likely cheaper. Credit card interest rates are typically way higher, even if you have a good credit score and solid income.

How Does the Fed Rate Affect Personal Loan Rates?

If you have a fixed rate (most personal loans do), yours won’t get lower if the Fed lowers interest rates. However, if you’re waiting for the ideal time to borrow, Fed decisions may affect whether rates go up or fall. The reason rates may change generally is because institutions are accessing money for less, and they may pass some of those savings to you. But it’s not a guarantee they will change, and it probably wouldn’t be by much. 

It’s important to remember your personal loan rate is primarily determined by your own factors, like credit score and income. This isn’t necessarily a bad thing — you can score a better rate based on your own finances vs. what the Fed is up to. 

How to Get a Lower Personal Loan Rate

It’s worth taking extra steps to secure a lower rate. Here’s what you can do:

1. Improve your credit score before applying

2. Pay down existing debt to lower your debt-to-income ratio

3. Add a co-borrower with a stronger credit profile

4. Choose a shorter loan term

5. If you already have a loan, enroll in autopay — most lenders offer a 0.25%–0.50% rate discount

6. Prequalify with multiple lenders, as this results in a soft credit pull that won’t do any damage. You can compare your options with marketplaces like AmOne. 

7. Consider a credit union if you qualify for membership