2025 Personal Loan Rates & Trends: Average APR at 20.67%, June Update
Explore the latest personal loan rates for June 2025, with average APR slightly declining to 20.67%. Understand how credit tiers affect rates and what to expect in the coming months.
Personal loan interest rates experienced a modest decline this week, continuing a subtle easing after last week's third of a percent drop. The average annual percentage rate (APR) decreased by 7 basis points to 20.67% as of June 5, 2024. Since crossing the 20% mark in April, rates have fluctuated, briefly surpassing 21% two weeks ago.
Breaking down by credit tiers, borrowers with excellent credit saw an increase of 31 basis points, while those with fair credit experienced a more significant rise of 88 basis points. Conversely, rates for good credit borrowers dropped by 34 basis points, and those with poor credit enjoyed a nearly 4% decline. These opposing trends balanced out, resulting in a slight overall change in the average APR.
Key Highlights for June 2024
- Overall average personal loan rate decreased by 7 basis points to 20.67% APR.
- Lowest reported average APR remains at 5.99%, with the highest at 36.0% APR.
- The average loan amount rose slightly to $20,147, up $120 from last week, with the average term steady at 50 months.
Personal loan rates have been influenced by the Federal Reserve's aggressive rate hikes since 2022, aimed at curbing inflation not seen in four decades. The Fed increased the federal funds rate multiple times, often by large increments of 0.50% or 0.75%, though recent hikes have been more moderate at 0.25%.
The Federal Reserve’s Impact on Personal Loan Rates
Typically, changes in the federal funds rate correlate with personal loan and credit card interest rates. However, lender competition and loan demand also play critical roles. Despite the Fed’s nearly 500 basis point increase since March 2020, personal loan rates have not risen proportionally due to fierce competition among lenders striving to offer attractive rates to borrowers.
Inflation is showing signs of easing but remains elevated. Fed officials remain divided on the necessity of an 11th rate hike in June. After a modest 25 basis point increase in May, futures markets largely anticipate a pause in rate changes during the upcoming June 14 meeting.
Outlook for Personal Loan Rates in 2024
If the Fed raises rates further this year, personal loan rates may follow suit, but intense lender competition could limit rate increases, keeping averages near current levels. Since most personal loans have fixed rates, locking in a rate now may be advantageous if you plan to borrow soon.
Shopping around for the best personal loan rates is essential, as even a 1-2% difference in APR can translate to significant savings over the life of the loan. Additionally, consider strategies to reduce expenses or build an emergency fund to minimize reliance on personal loans for unexpected costs.
How We Collect Rate Data
Investopedia gathers weekly data on average personal loan rates, loan terms, and amounts from 15 of the largest lenders nationwide, calculating midpoints of advertised ranges. Through a partnership with Fiona, aggregated loan data by credit quality (excellent, good, fair, poor) from 29 lenders is also analyzed, reflecting actual booked loans.
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