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Personal loans are one of the fastest growing types of debt, and with good reason. These loans tend to have reasonable interest rates, especially for well-qualified borrowers. They are also a flexible type of financing – personal loans are available from banks, credit unions, and online lenders and the money can be used for almost any purpose.
While interest rates for the best personal loans tend to be well below the rates offered by credit cards, these rates can vary depending on a borrower’s credit history and financial profile. It’s helpful for those shopping for loans to have an idea of the typical personal loan interest rates being charged in 2022 to better determine if a loan offer is a good deal.
This guide will help you understand more about the personal loan market, how to get a loan, and the rates you could expect to pay if you borrow.
Key facts about personal loans
- The total outstanding personal loan balance in the United States is roughly $305 billion
- 38.4 million Americans have outstanding personal loans
- The average loan balance is $16,259
- The average monthly payment is $360
- The average percentage rate (APR) was 9.41%
- Defaulting on personal loans is relatively rare, as just 3.28% of personal loan borrowers were 60 days behind or more on payments
- The most popular reason for getting a personal loan was to cover large purchases or consolidate debt
Average personal loan interest rates in 2022
Personal loan rates vary widely, with rates commonly falling between 6% and 36% for borrowers with fair to good credit.
One factor that affects the rate you can expect to pay is the lender you choose. For example, the national average interest rate for an unsecured fixed rate 36-month personal loan in late 2019 was 9.41% from all credit unions and % from all banks, while LendingClub (a peer-to-peer lender) reported an average rate of %.
But while lender choice can impact your rate, credit score is the biggest driving force that determines what you’ll pay for a loan, as the table below shows. The lower your credit score, the higher your APR is likely to be.
Loan term can impact rates as well, with shorter-term loans generally having lower rates than loans with longer repayment timelines.
Personal loan trends
While personal loans used to be less common and often considered only by borrowers desperate to repay debt, the marketplace of personal loan lenders has grown rapidly as more Americans have decided to take advantage of this affordable type of financing.
Americans of all ages now take out personal loans, but in recent years, the average personal loan balance among millennials has grown far faster than average personal loan balances among other generations. In fact, the average personal loan balance for millennials has grown 44% in just five years, which is more than double the increase among their older and younger counterparts. Despite this, they haven’t yet count of debt Baby Boomers have taken on, as the table below shows.
Fintech companies have helped to drive the increase in personal loan borrowing, especially among younger borrowers, as these online-only lenders offer quick approval, fast access to cash, and affordable loans. Qualifying for loans with online lenders can also be easier than obtaining financing from traditional banks or credit unions, so the market has opened up to more would-be borrowers.