2023 Personal Loan Rates Update: Average APR at 21.38%, Loan Amounts Rise to $21,429

This week, the average personal loan interest rate edged up slightly to 21.38%, marking a minimal increase of one basis point from last week.

After a brief dip last week, the average annual percentage rate (APR) for personal loans climbed back to 21.38%. This rate has fluctuated around the 21% mark since mid-May, reflecting ongoing market adjustments.

When analyzing rates by credit score, borrowers with excellent credit saw a significant decrease of 70 basis points, while those with poor credit benefited from a 59 basis point drop. Borrowers with good credit experienced a more modest decline of 17 basis points. Despite these decreases in specific credit tiers, the overall average rate across all lenders increased slightly by 1 basis point.

Key Highlights

• The national average personal loan APR rose marginally to 21.38% this week.
• The lowest reported APR among surveyed lenders remains at 5.99%, with the highest at 36.00%.
• Average loan amounts have increased by $850 to $21,429, while the typical loan term stays constant at 50 months.

The upward trend in personal loan rates throughout 2022 and into 2023 is largely influenced by the Federal Reserve's series of interest rate hikes aimed at combating four-decade-high inflation. The Fed implemented multiple increases, often by substantial increments of 0.50% or 0.75%, though recent hikes have been more moderate at 0.25%.

Following the Fed's June 14 announcement to pause rate hikes, market expectations suggest a 74% probability of another 25 basis point increase at the July 26 meeting.

Federal Reserve Impact on Personal Loan Rates

Federal funds rate adjustments generally affect personal loan and credit card interest rates. However, strong borrower demand and lender competition have tempered the rise in personal loan rates, preventing them from escalating in direct proportion to the Fed's rate hikes.

Despite inflation starting to ease, it remains elevated, and the Fed anticipates additional rate increases later this year. These factors contribute to the dynamic environment for personal loan interest rates.

Forecast for Personal Loan Interest Rates

Should the Fed continue raising rates in 2023, personal loan rates may also climb. Nonetheless, intense competition among lenders may limit how much rates increase, potentially keeping average rates near current levels.

Since most personal loans have fixed rates, the interest rate locked in at loan origination is critical. Prospective borrowers should consider securing a loan soon, as rates might rise following future Fed actions.

Shopping around for the best personal loan offers is essential, as even a 1-2% difference in APR can translate into substantial savings over the loan term.

Additionally, building an emergency fund can help reduce reliance on personal loans for unexpected expenses, promoting better financial stability.

Data Collection Methodology

Investopedia compiles weekly data on average advertised personal loan rates, loan amounts, and terms from 15 leading national lenders, calculating median rates within advertised ranges. Further, through a partnership with Fiona, aggregated loan data segmented by credit quality is collected from 29 lenders, reflecting actual booked loans.

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