Personal Loan Rates Rise This Week: July 29, 2025

Rising Personal Loan Rates: What Borrowers Need to Know

Personal loan rates have seen an upward trend in recent weeks, making it more important than ever for borrowers to stay informed and strategic when seeking financing. While the average interest rate has increased, highly qualified borrowers may still find competitive offers. For those looking to finance a major purchase or project, now is a good time to explore available options.

From July 21 to July 26, the average fixed interest rate on a three-year personal loan was 13.96% for borrowers with a credit score of at least 720 who prequalified on Credible.com's personal loan marketplace. This represents an increase of 0.72 percentage points from the previous week. Similarly, the average rate on a five-year personal loan rose from 19.46% to 19.62%.

However, the actual rate you receive depends on your creditworthiness and the specific terms offered by your preferred lender. Well-qualified borrowers may be able to secure rates significantly lower than the average, depending on their financial profile and the lending institution.

Understanding Personal Loan Rate Trends

Personal loan rates fluctuate frequently, and each lender sets its own rates based on various factors. While your rate isn't guaranteed until you sign your loan agreement, you can get an idea of average lender rates by reviewing current market trends.

Key Factors Influencing Interest Rates

Lenders typically consider your loan term and credit history when determining your interest rate. A longer loan term often comes with a higher interest rate, while a shorter term may offer lower rates but require larger monthly payments.

Your credit score also plays a significant role in the interest rate you're offered. Lenders use your credit profile and other factors to evaluate your risk as a borrower. In general, the higher your credit score, the lower the interest rate you’ll receive.

How to Secure the Lowest Personal Loan Rates

To compare and secure the best personal loan rates, follow these steps:

• Prequalify: Prequalifying allows you to understand the rates you might be offered before officially applying. Although these terms aren’t guaranteed, they can help you compare lenders.
• Compare Offers: Prequalify with multiple lenders to compare offers side by side. Consider interest rates, loan amounts, repayment terms, and potential fees.
• Apply: After choosing your lender, submit an application. Have any required documentation ready, such as bank statements, W-2s, and employer information.

When to Consider a Personal Loan

We recommend getting a personal loan only when it’s necessary. If you’re considering a personal loan, ask yourself the following questions:

• Identify why you need funds: Common uses include home improvement, debt consolidation, and covering emergency expenses. Avoid using personal loans for nonessential expenses like vacations or holiday gifts.
• Determine how much financing you need: Calculate how much you need to cover your costs. This amount will inform you of the loan amount you need or if you can use an alternative.
• Consider alternatives: If you only need to borrow a small amount, consider alternatives like a payday alternative loan (PAL) or a buy now, pay later service.
• Find a lender that fits your needs: If no alternatives fit, look for a personal loan lender that provides sufficient financing.

Pro Tip

In some cases, a personal loan may not be the best decision. For example, we don’t recommend a personal loan if you can’t afford the monthly payments or if you can wait to save up the money you need.

Where to Get a Personal Loan

You can find a personal loan online or in person, depending on the institution. With varying lenders offering personal loans, you can find one that works best for you. Some common options include:

• Banks: Best for in-person banking and opening a personal loan with your current bank.
• Online lenders: Ideal for flexible qualification requirements and an online-only experience.
• Credit unions: Suitable for those who meet a nearby credit union's eligibility requirements or are current members.

Frequently Asked Questions

What is a good interest rate on a personal loan?
A good rate on a personal loan is less than the market average. As of July 26, 2025, the current average personal loan interest rate for a three- and five-year loan is 13.96% and 19.62%, respectively.

Can I pay off a personal loan early?
You can typically repay a personal loan early. However, some lenders charge a prepayment penalty as a percentage of your loan or a flat fee. If you want to pay off your loan early, confirm with your lender whether it charges a fee.