Last week, personal loan rates increased. Yet, it’s still possible for highly qualified borrowers to pick up a reasonable interest rate on a personal loan. If you’re interested in financing a major purchase or project, it’s a good time to shop for a loan.

From August 19 to August 24, the average fixed rate on a three-year personal loan was 16.14% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s personal loan marketplace. The rate was 16.06% the previous week, according to Credible.com. The average rate on a five-year personal loan rose 0.41% last week to 21.64% from 21.23%.

The most qualified borrowers generally receive the best rates. In fact, well-qualified borrowers may receive a rate that’s significantly lower than average. The rate you receive depends on several factors, including your creditworthiness and the loans available through your chosen lender.

These rates are accurate as of August 26, 2024.

Related: Best Personal Loans

How To Receive More Favorable Interest Rates

Personal loan interest rates are based on a number of factors, including your overall creditworthiness, credit score, income and debt-to-income (DTI) ratio. Two quick ways to help you receive more favorable rates include paying down existing debt to help lower your DTI and improving your credit score.

Rod Griffin, senior director of consumer education and advocacy at Experian, recommends “checking your credit report and scores three to six months before you apply for a personal loan,” as this will give you enough time to make any necessary improvements.

While qualification requirements differ across lenders, a minimum credit score of 720 will typically yield you the best terms. If your score falls below this marker, and you’re on a quest for the lowest rate possible, you can take action to improve your score. Try strategies like lowering your credit utilization ratio, removing errors from your credit report and paying your bills early or on time.

Where Can I Get a Loan?

Personal loans are available through a variety of institutions, which should help you find a lender that meets your needs. Your creditworthiness and financing needs typically determine the best lender for you. You can get personal loans from:

• Banks: Best for in-person banking or if you have an existing banking relationship
• Credit unions: Best for existing credit union members or those who meet a local credit union’s eligibility requirements
• Online lenders: Best for an online-only experience with flexible requirements