Knowing the cost of a personal loan is really important if you’re thinking about borrowing money. It’s like finding out how much you might need to pay back. Doing some research, comparing different offers, and keeping an eye on your loan can help you make smarter decisions and keep your costs down.
These days, lots of people use personal loans when they need money. You can use these loans for things like putting all your debts together, dealing with surprise bills, or buying something big.
In this article, I’ll explain what the average cost of a personal loan is and what things can make it more or less expensive. This way, you can make better decisions about your money.
How Much Do Personal Loans Cost?
Personal loans have different costs based on their terms. They’re popular for flexible payments and lower interest rates, better than credit cards.
Even though personal loans are easy to get, they have costs similar to other money you borrow. These include things like the Annual Percentage Rate (APR) [1] and other fees that lenders might not tell you upfront.
Here are some usual fees with personal loans that affect your money:
- Interest Charges: This is the money you pay for borrowing. It’s a big part of what you’ll pay back.
- Origination Fees: These are fees at the start of the loan that cover the paperwork and can be different from one lender to another.
- Late Payment Penalties: If you miss paying on time, you’ll be charged extra money.
- Early Repayment Penalties: Some loans make you pay more if you finish paying before the agreed time.
1. Personal Loan Interest Rates & APR
In personal loans, the Annual Percentage Rate (APR) is the key. It shows how much borrowing money costs each month, even though it’s displayed yearly. This rate splits the interest into monthly bits added to what you repay.
- Fixed-rate APR: Picking a fixed-rate APR means sticking to the same interest rate for the whole loan period. This keeps your monthly payments steady, helping you plan your budget better.
- Variable-rate APR: On the other hand, a variable-rate APR changes based on the Federal Reserve’s prime rate. This can cause your interest rate and monthly payments to go up or down as time passes.
Most personal loans use fixed-rate APRs to keep things predictable. But there are loans with variable rates, where monthly payments might change due to interest rate shifts.
The average APR for personal loans is around 9.34%. However, if you have a low credit score, your rates might shoot up to 32%. [2]
Calculating the real cost of a loan depends on how long it takes to pay it off. For easier math, try an interest calculator for more accurate estimates.
Personal Loan Interest Rates By Lender
Loan costs vary by lender. I’ve gathered interest rates from top companies to help you understand them better.
Every company sets its own rates. These rates affect how much you’ll repay overall. Big lenders follow their own rules, impacted by economic changes.
| Lender | Typical APR Range | Loan Amounts |
|---|---|---|
| Barclays | 5.74% – 20.99% | $5,000 – $35,000 |
| Citibank | 7.99% – 17.99% | $2,000 – $50,000 |
| PNC Bank | 5.99% – 25.44% | $1,000 – $35,000 |
| Wells Fargo | 7.49% – 24.49% | $3,000 – $100,000 |
| Lender | Typical APR Range |
|---|---|
| Laurel Road | 8.01% – 16.30% (with autopay) |
| LightStream | 3.99% – 16.99% (with autopay) |
| Marcus | 5.99% – 28.99% |
| Sofi | 5.74% – 16.99% (with autopay) |
Personal Loan Rates By State
Looking for a loan without extra fees? Start by checking your state’s Usury Limit. This limit sets the highest interest rate lenders can charge. Knowing these rates helps you avoid high charges and make smart borrowing choices.
| State | Maximum Loan Rate |
|---|---|
| Alabama | 8% |
| Alaska | 10.5% |
| Arizona | 10% |
| Arkansas | 5% above current Federal Revenue Discount Rate (FRDR) |
| California | consumer loans 10% /non-consumer loans 5% above the FRBSF Discount Rate |
| Colorado | consumer loans 12% /non-consumer loans 12% |
| Connecticut | 12% |
| Delaware | 5% above current Federal Revenue Discount Rate |
| Florida | loans < $500,000 18% /loans > $500,000 25% |
| Georgia | loans <$3,000 16%loans $3,000-$250,000 5%/month (must use simple interest) |
| Hawaii | personal loans 10% |
| Idaho | personal loans 12% |
| Illinois | personal loans 9% |
| Indiana | loans <$50,000 21% |
| Iowa | Iowa Superintendent of Banking determines Iowa monthly max rate |
| Kansas | 15% |
| Kentucky | loans < 15,000 is the lesser between 19% or 4% above current FRDR |
| Louisiana | 12% |
| Maine | No limit |
| Maryland | 8% |
| Massachusetts | 20% |
| Michigan | 7% |
| Minnesota | 8% |
| Mississippi | greater of 10% and 5% of current FRDR |
| Missouri | greater of 10% and 3% above the long term United States government bond yield |
| Montana | greater of 15% and 6% above the Wall Street Journal Prime Rate |
| Nebraska | 16% |
| Nevada | no limit |
| New Hampshire | no limit |
| New Jersey | 16% |
| New Mexico | No limit for written loan agreement |
| New York | 16% |
| North Carolina | loans <$25,000 is greater of 16% and 6% above 6 Month US Treasury Bills |
| North Dakota | consumer loans/personal loans 5.5% above the 6 Month US Treasury Bills |
| Ohio | loans < $100,000 is 8% |
| Oklahoma | 10% |
| Oregon | loans < $50,000 is the greater of 12% and 5% above the FRDR at the time the loan is made |
| Pennsylvania | unsecured loans < $50,000 is 12% / loans > $50,000 is 36% |
| Rhode Island | 21% or 9% above the Wall Street Journal Prime Rate |
| South Carolina | No Limit |
| South Dakota | 18% |
| Tennessee | lesser of 24% and 4% above the Bank Prime Rate |
| Texas | 10% |
| Utah | no limit |
| Vermont | 12% |
| Virginia | 12% |
| Washington | greater of 12% and 4% above the 26 Week Treasury Bill |
| West Virginia | 8% |
| Wisconsin | 8% |
| Wyoming | 8% |
2. Personal Loan Origination Fee
In loans, a start fee is what lenders take upfront for their admin stuff. It’s usually 1% to 5% of what you borrow or a set amount. [3]
If you borrow $20,000 with a 5% fee, you only get $19,000. The lender keeps $1,000, but you still owe $20,000, plus interest.
It’s smart to avoid these fees. A good credit score helps find fee-free loans. Look for lenders without this fee and use your good credit to get better loan deals.
3. Late Fee
If I miss paying on time, a late fee might be added. Some lenders give a few extra days after the due date for payments to go through. But each lender has different rules about these fees, so it’s good to check.
Not paying on time means owing more interest on what I owe, making it tougher to pay back. For instance, PenFed and Discover Personal Loans charge late fees of $29 and $39, respectively, as reported by CNBC.
4. Early Payoff (Repayment) Penalty
Certain lenders impose additional fees if you repay your loan ahead of schedule. They do this because they expect to earn interest for the whole loan term. This extra fee might be a piece of the remaining interest, part of what you still owe, or a fixed amount.
However, not all lenders play by these rules. Companies like LightStream Personal Loans, PenFed Personal Loans, and Happy Money are kinder. They don’t penalize you for paying off your loan ahead of schedule. This means if you have the chance to pay it off faster, you won’t get hit with more fees. Keep an eye out for these lenient lenders if paying off your loan early is your goal.
Factors Influencing Personal Loan Costs
Personal loans are a great help. Different things affect how much you’ll pay in total.
1. Primary Factors Affecting Personal Loan Costs
- Interest Rates: The rate decides much of what you pay back. A good track record might get you a lower rate, which means a cheaper loan. But if your credit’s not great, the rate could be higher, costing you more overall.
- Loan Amount: How much you borrow matters too. Larger loans might mean higher rates or extra fees, making the whole thing more expensive.
- Loan Term: How long you take to pay it back is important. Shorter times mean bigger monthly payments, but less interest overall. Longer times mean smaller monthly payments but could end up costing more overall.
- Credit Score and History: Your credit score really matters. Having a good one can get you better terms and lower costs.
- Fees and Charges: Besides interest, there could be extra charges like application fees or penalties for late payments. Knowing all these costs helps figure out the real amount you’ll pay.
2. Secondary Factors Affecting Personal Loan Costs
- Collateral (for secured loans): Some loans need something valuable as security. This can change the cost based on its value and risk.
- Type of Lender: Different lenders might offer different rates and fees. Checking different options helps find the cheapest loan.
- Economic Factors: How the economy is doing can affect loan costs. Unstable times might make lenders change rates, which affects what you pay.
- Early Repayment Fees: Some lenders charge fees if you pay back early. It’s good to know about these if you plan to pay off the loan before time.
Factors Influencing Personal Loan Interest Rates
Here’s what you should know about what affects personal loan rates:
- Credit Score and Creditworthiness: When you want a loan, your credit score is a big deal. Higher scores mean less risk for lenders and better rates for you. To boost your score, pay bills on time, lower credit card debts, and avoid applying for more credit. Keep an eye on your credit report for mistakes and use credit wisely.
- Debt-to-Income Ratio: Lenders check how much you owe compared to how much you earn. Lower debt compared to your income means lower rates. To improve this ratio, pay off debts, earn more, or spend less. Showing you can handle payments well helps get better rates.
- Loan Term: How long you take to repay affects rates. Shorter terms often mean lower rates. Longer terms might have lower monthly payments, but can cost more overall. Picking a shorter term can save money and pay off the loan quicker.
- Market Conditions and Economy: Economic changes affect loan rates. Good times usually mean better rates, while uncertain times can lead to higher rates. Keep an eye on things like inflation and interest rates to make smart borrowing choices.
Tips for Finding Personal Loans with Competitive Rates
Here’s how to find better rates for personal loans:
- Check and Compare: Look at different lenders and their loans. Find ones with good reviews and clear terms. This helps you get lower rates.
- Boost Your Credit Score: Paying bills on time and reducing credit card debt can raise your credit score. A higher score might mean lower interest rates on loans. Keep an eye on your credit report for any mistakes.
- Think About Term and Amount: Picking a shorter loan term often means paying less interest. But taking a bigger loan or a longer term might mean higher rates. Decide what works best for your needs and budget.
- Get Pre-Approved: Ask a lender for pre-approval. They’ll check your credit and give an idea of what loan terms you might qualify for. This helps when comparing offers and negotiating for better rates.
