Personal loan

2-Year Personal Loan Rates Rise Slightly But Still Near Record Lows, Fed Reports

Creditworthy borrowers may want to take out a personal loan to consolidate debt or cover an unexpected expense when annual percentage rates are near record lows. (iStock)

The average interest rate on two-year personal loans rose in the first quarter of 2022, according to the Federal Reserve. Yet rates remain historically low on this unsecured loan product.

Two-year personal loan rates are currently at 9.41%, up slightly from the record low of 9.09% set during the fourth quarter of 2021. Over the past three years, interest rates Personal loan averages have fallen about one percentage point for 24 years. month term.

Average personal loan rate over 2 years

PERSONAL LOANS ARE THE FASTEST GROWING PRODUCT IN THE CAISSES

Personal loans are commonly used to consolidate high interest credit card debt. Fed data also showed that revolving credit balances have increased nearly 10% over the past year, suggesting that Americans are increasingly reliant on credit card spending at a time when the inflation reaches its highest level in 40 years.

If you’re considering borrowing a personal loan for credit card consolidation, now is still a good time to do so with personal loan rates at historic lows. You can visit Credible to compare personal loan interest rates for free without affecting your credit score.

PERSONAL LOAN SETUP FEES: ARE THEY WORTH THE COST?

Credit card debt rises as personal loans offer cheaper alternative

Compared to credit cards, personal loans generally offer lower fixed interest rates. The average credit card rate for accounts assessed interest was 16.17% in the first quarter of this year, the Fed reported, compared to 9.41% for personal loans.

This may present an opportunity for consumers to save money as revolving credit balances in America have increased. Over the past year, revolving credit debt has grown from $969.2 billion to $1.06 trillion, representing an increase of about 10% annually in February.

Revolving credit balances, previous year

5 THINGS TO KNOW ABOUT PERSONAL LOAN FEES AND EARLY PAYMENT PENALTIES

Credit card consolidation can help some borrowers save money over time while shortening their repayment term. If a consumer makes the minimum monthly payments on their credit card — which are typically between 1% and 3% of the total outstanding balance, according to Experian — they could save thousands of dollars in interest charges and get out of years of debt faster. debt by paying off their credit cards with a two-year personal loan.

You can visit Credible to learn more about debt consolidation and estimate how much you can save by consolidating your credit card debt.

SECURED PERSONAL LOANS: WHAT YOU NEED TO KNOW

How to get a low rate on a personal loan

Although personal loan rates are still near historic lows, this does not guarantee that all borrowers will qualify for a low interest rate. Here are some steps you can take to get the best possible personal loan deal for your financial situation:

Work on building your credit score

Personal lenders determine an applicant’s interest rate and eligibility based in part on the borrower’s credit history and debt-to-income ratio (DTI). Borrowers with very good credit will see the lowest rates available, while those with bad credit will likely see higher rates – if they meet the eligibility requirements.

Personal loan rate by credit score

If you’re considering borrowing a personal loan soon, you may be able to get a lower rate by taking simple steps to improve your credit score, such as establishing your on-time payment history or reducing your credit usage. This is more important than ever, as lenders are expected to issue more personal loans to subprime borrowers this year.

If you want help improving your credit score, you can visit Credible to sign up for free credit monitoring services.

PERSONAL LOAN AFTER VS. INTEREST RATES: WHAT’S THE DIFFERENCE?

Choose a shorter loan term

Typically, short-term personal loans with smaller loan amounts come with lower interest rates than longer-term loans. And because short-term loans pay off faster with higher monthly payments, they can save you even more money in interest charges over time.

If you can afford higher monthly payments, it may be worth opting for a short-term personal loan. You can use Credible’s personal loan calculator to estimate your monthly payments with different loan terms.

93% OF LOAN BORROWERS REGRET MAKING THEIR LOANS

Shop with multiple lenders online

Since personal lenders have their own unique set of eligibility criteria, you may be able to find a lower rate by searching multiple offers. Most lenders allow you to prequalify to see your estimated interest rate with a soft credit inquiry, which won’t affect your credit score.

You can browse the current personal loan rates in the table below. Then visit Credible to get prequalified with multiple online lenders at once without affecting your credit score.

UNSECURED LOANS: KNOW ALL

Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.