What Is a Personal Loan APR? How It Works & Examples

A personal loan APR, or “annual percentage rate,” is the loan’s interest rate plus the cost of any fees. It represents the total annual cost of borrowing, and it’s expressed as a percentage or range of percentages. For example, a lender’s APR range could be 6.99% to 29.99%, and a borrower could receive any rate within that range, based on their creditworthiness. In general, the minimum and maximum personal loan APRs lie between 6% and 36%. You may find the occasional lender with even cheaper rates, however, and some “bad credit” lenders offer personal loans with incredibly high APRs of 100%+.

It is important for borrowers to understand what personal loan APRs are and how they work for a variety of reasons, but the list starts with comparing offers and finding the best deal. Comparing one personal loan’s APR to another personal loan’s rate can quickly give you a sense of which offer may be cheaper. APRs are only part of the puzzle, though, so you’ll also have to account for approval requirements, loan amounts, fees, and other key features.

There are many factors that affect personal loan APRs, including the applicant’s credit score and income, the type of lender, and the loan’s origination fee. Personal loan APRs are often cheaper than the rates on credit cards, as the average new credit card offer has an APR over 19%. However, personal loans tend to be more expensive than home equity loans (4% to 8%), auto loans (3 to 7%), student loans (4% to 14%) and mortgages (3% to 6%).

Below, you can learn more about what a personal loan APR is, how lenders determine which APR to assign to each applicant, and how personal loan rates compare to the APRs common among other lending options. But we’ll start with a quick overview of the APRs available from major personal loan providers right now.

Personal Loan APRs by Lender

Note: Some lenders are WalletHub partners.

How to Find Your Personal Loan APR

You can usually find a lender’s personal loan APR range listed online or by calling the lender’s customer service department. The exact APR you receive from the advertised range will depend on your overall creditworthiness.

There’s also a way for you to get much more specific information about what rates you might personally receive. Many lenders offer pre-qualification, where you can enter some personal information in order to see if you’re likely to qualify for a loan and estimate your potential APRs. WalletHub allows you to check with multiple lenders at once.

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Pre-qualification only results in a soft pull of your credit, which does not harm your credit score. And even though being pre-qualified doesn’t guarantee approval for a loan once you actually apply, your odds are high.

What Is the Difference Between APR and Interest Rate on a Personal Loan?

The difference between APR and interest rate on a personal loan is simple. The APR is the total yearly cost of borrowing. The interest rate is equal to the APR minus the portion of that cost that comes from fees. Both the APR and interest rate are expressed as percentage rates, but the APR is always higher unless the loan includes no fees.

Fixed vs. Variable Personal Loan APRs

There are two types of personal loan APRs, fixed and variable. Fixed means that the APR will never change for the life of the loan. Variable rates, on the other hand, can go up and down at the lender’s discretion. These rates are generally tied to another interest rate, usually the “prime rate” at which banks lend to one another. If whatever index rate the lender uses goes up, so will the lender’s loan APRs, and vice versa.

Fixed APRs are far more common on personal loans than variable rates are. The majority of major lenders only offer fixed APRs. However, there are some lenders with variable rates, and a handful may let you choose between the two.

What Determines Personal Loan APRs?

Personal loan providers nearly always display their APRs as a range, such as 6.99% - 25.99%. There are a number of different considerations that affect both what the lender’s range is and what rates you can personally get within that range.

Factors that affect personal loan APRs:

1. Credit score. The lower a lender’s minimum credit score requirement is, the more likely that lender is to charge high APRs. How far your credit score is above a lender’s minimum will also play a big part in determining what rate you get within their range.
2. Income. The more money you make, the more funds you have to pay off debts. People with higher incomes may be able to score lower APRs because they are less risky customers.
3. Existing debts. The amount of money you owe to other lenders will have an impact on your APR. The more debts you have overall, the more risk you have of defaulting and the higher your APRs will likely be. Lenders will also be interested to know other monthly expenses like housing payments.
4. Type of lender. There are three main types of lenders that provide personal loans: banks, credit unions and online lenders. All three types can have APRs as low as 6%. Banks often set their highest personal loan APRs at less than 25%. Federal credit unions, meanwhile, are required to have a maximum APR no higher than 18% (state credit union maximums are set by the state). And online lenders often have maximum APRs as high as 36%, though plenty have far lower caps.
5. Origination fee. An origination fee is a fee to process your personal loan. Some lenders don’t charge it, but those that do can collect it in multiple ways. Sometimes you pay the amount upfront. Sometimes it gets subtracted from the original amount you receive. And sometimes it is simply built into the loan’s APR – so origination fees may affect what APR you get.
6. Loan size and timeline. The more money you want to borrow, the riskier the transaction is and the higher your APR is likely to be. In addition, shorter personal loans tend to have lower APRs than loans with longer payoff periods.

Lenders never disclose all of their specific requirements for obtaining personal loan approval or a certain APR on the loan. So it’s possible that other factors could affect your APR. But those are some of the most important considerations.

It’s also useful to note that while personal loans do not charge penalty APRs for late payments like credit cards do, most personal loan providers do charge a late fee of around $15 to $30.

What is a Good Personal Loan APR?

A good APR on a personal loan ranges between 3.99% and 11%. The lowest APR on a personal loan is around 3.99%. And the average APR for a personal loan is around 11%, according to the Federal Reserve.

You’ll likely only be able to get rates close to 3.99% if you have excellent credit. If you have bad credit, you can probably expect rates between 18% and 36%.

Personal Loan APRs vs. Other Options

A personal loan isn’t the only way to borrow money that you can use for any purpose. There are several other options available, each of which has different possible APRs.

Credit cards: You can use credit cards for nearly any expense, though you may be able to borrow more with a personal loan. The average credit card APR is 19% for all new offers and 15% for all existing cards in circulation.

Home equity loans/home equity lines of credit: These two borrowing options let you take out money against the equity in your house. A home equity loan gives you a lump sum, while a home equity line of credit (HELOC) functions similarly to a credit card. Because they are secured by your house, they have cheaper APRs than personal loans, usually around 4% to 8%. But you could lose your house if you default.

Payday/auto title loans: With payday loans, you borrow money against your next paycheck. They charge fees that are often equivalent to a 400%+ APR. Auto title loans are short-term loans (15 to 30 days) where you use your car as collateral. These loans might charge you a fee of as much as 25% of the amount you borrow. You should avoid both types of loans.

Final Thoughts

Personal loan APRs can be very cheap or quite expensive depending on the lender and other factors like your credit and income. In general, personal loans are a good borrowing option for people who aren’t able to get cheaper rates with a credit card and don’t want to consider borrowing from home equity.

But before applying for a personal loan, it’s always good to get pre-qualification from any lenders you’re interested in. That way, you can get a clear picture of your prospective personal loan APRs.