The 7 best low-interest personal loans of 2024, and how to snag a competitive rate (2024)

Why is a low interest rate important?

Your personal loan’s interest rate represents the cost of borrowing money — the lower your rate, the less you’ll pay to borrow. Since minimizing costs is top of mind for most borrowers, finding a loan with the lowest interest rate is key.

Example: Let’s say you need to borrow $10,000 — take a look at the difference in monthly and overall costs between the following three-year loans:

The difference between a lender’s best rate and its maximum rate can be significant. In the example above, you’ll pay $135 more each month and $4,873 in additional interest charges with the highest rate.

What factors affect your personal loan rate?

Many factors contribute to your personal loan interest rate — some are within your control, like your credit scores or repayment term, while others aren’t. Here are a few of the factors your lender will consider when setting your personal loan rate:

Economic factors

Interest rates climb during periods of high inflation because the Federal Reserve’s policymaking affects the federal funds rate, or the rate at which banks lend to each other. When it’s more expensive for banks to borrow, lenders raise rates to cover costs.

Lenders also consider the loan market when setting rates. If inflation leads to a high rate of borrower delinquency, lenders may raise interest rates to offset their risk. Or, if other lenders are dropping their rates, your lender may drop theirs to remain competitive.

Borrower factors

Your credit scores play a major role in your interest rate because they help lenders predict how likely you are to repay the loan as agreed. If you have a history of responsible credit usage (and the scores to show for it), you’re more likely to qualify for a lender’s lowest rate.

Many lenders calculate your debt-to-income ratio (DTI) when determining your eligibility — that is, the percentage of your monthly income that goes toward debt payments. A high DTI signals that you may not have much room in your budget for a new loan payment. To qualify for a low interest rate, aim for a DTI under 36%. Consistent income and a stable employment history are also important factors.

Related >> Personal loan requirements and how to meet them

Loan details

Your loan rate is a reflection of the risk your lender is taking, and some loans are riskier than others. The higher your loan amount and the longer your repayment term, the more likely you are to struggle with repayment at some point. As a result, the lowest personal loan interest rates are typically associated with small-dollar loans and short repayment terms.

Average personal loan rates

The lowest interest rates are usually found on short repayment terms. If you can afford the higher monthly dues that come with a short-term loan, you can save money on repayment. (Plus, the shorter your term, the less time interest has to accrue.)

Here’s a look at this week’s average loan rates:

Average personal loan rates by credit score

Today’s lowest personal loan rates are reserved for borrowers with credit scores above 780, but rates vary by lender and may also be influenced by other factors. Still, there may be as much as a 15-percentage-point difference between the rates offered to borrowers with excellent versus bad credit.

7 tips for getting a loan with a low interest rate

1. Improve your credit scores

Since higher scores can result in a double-digit improvement in interest rates, boosting your credit scores is one of the most effective ways to qualify for a low rate.

Payment history accounts for 35% of your total scores, so start by making all payments on time. In fact, a single missed payment may drop your scores by 80 points or more and can stay on your reports for up to seven years, though the impact lessens over time. Other steps include paying down credit card debt balances, avoiding new credit applications and avoiding closing long-standing credit accounts.

Related >> Factors that affect your credit scores

2. Pay down debt

Debt can be a double whammy that keeps a low interest rate just out of reach. Not only does a high amount of debt hurt your credit scores (“amounts owed” accounts for 30% of your scores), but it also results in a high DTI.

There are several debt repayment strategies, but two of the most popular are the debt snowball and debt avalanche. With the debt snowball, you put extra funds toward your smallest debt and pay the minimum amount on the rest. When the smallest debt is paid in full, you move those monthly funds to the next-smallest debt. With the debt avalanche method, extra funds go toward the debt with the highest interest rate. Avalanche will save you the most money over time, but snowball may keep you motivated and on track.

3. Pre-qualify with multiple lenders

You may be tempted to stick with your current financial institution or accept the first loan offer you receive. But since rates vary widely between lenders, comparing several institutions can pay dividends.

Many lenders offer a pre-qualification process, where you can check your potential rates and confirm eligibility without impacting your credit scores. Getting pre-qualified with multiple lenders can help you narrow your list to the ones with the lowest rates. But keep in mind that pre-qualification isn’t a firm offer — your rate may change when you submit an official application and the lender conducts a hard credit check.

When comparing rates, review each lender’s APR, not the simple interest rate. APR includes any applicable fees and is a truer measure of the loan’s cost. Also look at the total cost of borrowing, loan amounts, the availability of rate discounts and borrower reviews for each lender.

4. Select a short repayment term

Sure, a low interest rate is critical, but your loan’s repayment term also impacts your out-of-pocket costs. Choose the shortest repayment term you can comfortably manage. Lenders offer lower rates on short repayment terms because their risk is lower. Plus, a shorter repayment term also means less time for interest to accrue.

5. Check for rate discounts

The most common rate discount is for enrolling in autopay — many personal loan lenders will drop your rate by 0.25 percentage points because it increases the likelihood that you’ll make your payments on time. (Some lenders offer as much as 0.5 percentage points off your rate.)

Some banks give rate discounts to existing customers, and a few credit unions offer a discount after you’ve made a certain number of timely monthly payments. If you’re using the funds for debt consolidation, you may get a discount for letting the lender manage creditor repayment on your behalf.

While a discount is unlikely to drop your rate below the lender’s basem*nt, every little bit helps.

6. Apply with a cosigner or co-borrower

Your rate is based on how likely the lender believes you are to repay the debt. A second applicant helps to reduce the lender’s risk — with two borrowers guaranteeing repayment, the lender can afford to offer a lower rate.

Cosigners and co-borrowers both promise to repay the loan if you default, but only co-borrowers share equal access to loan funds. Think carefully before asking a loved one to join your loan application. Not only will they be on the hook for repayment, but any missed payments will negatively impact their credit scores and potentially damage your relationship.

7. Back the loan with collateral

Personal loans are usually unsecured, meaning there’s nothing but your signature promising to repay. However, secured loans have lower rates because they’re backed by collateral. If you default on the loan, your lender can seize the collateral to recoup its losses. Unsecured loan rates commonly range from 7% to 36%, but you may find a secured personal loan with a rate as low as 3.05%.

To qualify, you must have valuable collateral the lender is willing to accept. Common types include savings account balances, investment accounts, a vehicle title or even the fixtures in your home.

Where to find loans with low interest rates

Credit unions

Our list of the best low-interest personal loans contains several credit unions because they tend to offer the lowest average rates. In fact, the NCUA requires all federally insured credit unions to cap borrowing rates at 18%, which is much lower than some lenders charge. Plus, as nonprofit, member-owned institutions, credit unions tend to charge a smaller profit margin.

Credit union personal loans commonly have average interest rates nearly a full percentage point lower than traditional banks. In the first quarter of 2024, the average rate on a three-year personal loan was 10.83% at credit unions, versus 11.65% at banks, according to NCUA data.

Related >> Credit union vs. bank: Which is best for you?

Banks

While banks often have higher interest rates than credit unions, they’re more likely to offer rate discounts, especially to long-standing customers. Banks also have stricter eligibility requirements, but if you have excellent credit, you can qualify for a low interest rate.

Online lenders

Without the high overhead costs associated with brick-and-mortar branches, online lenders commonly offer competitive interest rates. They also have fully digital pre-qualification and application processes, so you can compare multiple lenders and find a low interest rate.

How to apply for a low-interest loan in 7 steps

1. Work on your credit. Start by checking your credit reports, which you can access for free from AnnualCreditReport.com. If you spot inaccuracies that could drag down your scores, like a payment wrongly reported as late, dispute the error with the appropriate credit bureau. Keep making your payments on time and work on paying down your debt.
2. Determine how much you need to borrow. Consider your purpose for borrowing: Do you need funds for medical bills or home repairs, or do you want to repay high-interest debt? Calculate how much you need to borrow so you know how big of a loan you’ll need. Next, review your budget to determine how much you can afford to put toward monthly loan repayment. Use a personal loan calculator (like Calculator.net’s) to estimate your monthly dues.
3. Pre-qualify with multiple lenders. Compare rates from at least three different lenders to find the lowest rates. Loan pre-qualification shouldn’t affect your credit scores, but it’s worth confirming.
4. Gather financial information. To avoid delays, have copies of the necessary documentation ready to present. Lenders typically request a government-issued form of ID, W2s, pay stubs and recent bank statements.
5. Submit an application. Once you’ve chosen a lender, you’ll submit your personal loan application. Many lenders offer fully online applications, but you may also be able to apply over the phone or in person. Loan approval timelines vary by lender — some may issue a loan decision in minutes, while others may take a few business days.
6. Review and sign the loan contract. If the lender approves your application, they’ll provide a loan agreement that spells out the terms and details of your loan. Read this contract carefully — it will contain important information about your interest rate and applicable fees, including late payment fees, prepayment penalties or origination fees. When you’re satisfied with the terms, sign and return the contract.
7. Wait for funding. Disbursem*nt timelines also vary by lender — some may take up to a week, while others can issue loan funds in hours.

Alternatives to low-interest loans

Home equity loans or HELOCs

Best for: Homeowners

If you own a home and have more than 20% equity, you could consider a home equity loan or home equity line of credit (HELOC). These loans let you borrow against the equity you’ve built in your home without selling it. The national average five-year home equity loan rate was 7.09% at credit unions and 7.37% at banks in the first quarter of 2024, according to the Federal Reserve.

While borrowing against your home’s equity can provide access to low rates and large loan amounts, it can be risky. If you’re unable to keep up with the loan payments, you risk foreclosure.

Related >> HELOC vs. home equity loan

0% APR credit card

Best for: Small loan amounts

If you have great credit and need to borrow a small amount, some credit cards offer introductory 0% APR periods between 12 and 21 months. You won't have to pay interest if you pay off the purchase before the promotional period expires.

However, any balance remaining after the intro period is subject to interest — and credit card interest rates can be above 20%.

Buy now, pay later

Best for: Short-term, small-dollar borrowing

If you don’t have the cash on hand to pay for that big retail purchase, a buy now, pay later (BNPL) app lets you pay it off in four installments over six weeks, typically without interest. Most BNPL loans are under $1,000.

Many BNPL providers also offer larger loans with longer repayment terms, but they come with interest (and may not be a better deal than a personal loan). While a Pay-in-4 BNPL loan typically doesn’t require a credit check, your on-time payments also won’t help you build credit.

Methodology

After our editorial team established a rubric to evaluate 26 leading personal loan lenders, our data research team scored these lenders across the following four categories to elicit a five-star rating. The seven lenders above received the highest scores across each of the 26 loan features under consideration.

Loan cost (40%)

Given that you’re seeking the best and lowest personal loan rates, we weighted this category highest. We heavily favored lenders that offer low starting and top-end rates, plus those that offer opportunities for rate discounts and charge fewer fees. Lenders that offer pre-qualification, or the ability to check rates via a soft credit check, were rewarded.

Loan details (25%)

This category comprises six criteria. Lenders that scored best disburse loans in one business day or less, have low minimum and high maximum borrowing amounts and offer five or more repayment term options.

Eligibility (20%)

To qualify for the lowest interest rates, you’ll need good credit and perhaps a cosigner or co-borrower. With that in mind, we rewarded lenders with transparent (and accessible) credit requirements and few restrictions. We also considered whether each lender offers loans nationwide.

Customer experience (15%)

Repayment can be easier if you get some help along the way, and the most helpful and well-rated lenders earned the highest marks in this category. We considered 10 factors, including the availability and accessibility of lenders’ customer support teams, and judged their performance using metrics from independent organizations like the Better Business Bureau and the Consumer Financial Protection Bureau.

What didn’t make the cut

Although each lender under our microscope offered unique benefits to borrowers, 19 lenders fell short of our list, including a few popular institutions:

• Axos Bank and Happy Money have high starting APRs.
• Achieve, Avant, LendingPoint and LendingClub have high maximum APRs.
• Rocket Loans, Universal Credit and Upstart charge high origination fees.
• Navy Federal Credit Union loans are only available to military borrowers, and Wells Fargo loans are only available to current customers.

Frequently asked questions (FAQs)