A low-interest personal loan is any loan that has an interest rate under the current market average. As of March 20, 2024, the average personal loan rate sits at around 12.10 percent.

To qualify, you will need excellent credit and good finances. Compare at least three lenders to see which is willing to give you the most competitive offer.

Top lenders like Upstart and LightStream have a starting annual percentage rate (APR) under 8 percent. Provided you have excellent credit and strong income, you may be able to qualify for a low-interest personal loan with an APR under 10 percent.

Interest rates on loans fluctuate significantly with the rest of the finance market. Because rates have increased over the last year across loan products, even borrowers with good credit could still face rates over 10 percent. You are unlikely to find any lender offering an APR under 7 percent.

This also affects what lenders and borrowers consider a low rate. While it won’t be as low as it might have been a few years ago, it can still be a competitive rate when compared to the rest of the current market.

Low-interest personal loans are just like any other loan — they just cost less. You can find competitive low rates with online lenders, banks and credit unions. However, you may need to meet some additional requirements to score the absolute lowest rate available.

Online lenders

Online lenders offer low rates and quick applications. In many cases, you can apply for a loan and, if approved, receive your funds within a week. This makes them quick, but many reserve their lowest rates for borrowers with extremely strong credit profiles. And if you do manage to score the minimum APR offered, you will need to sign up for automatic payments — in most cases — to truly get the low interest rate advertised on the lender’s website.


Not every bank has personal loans. Those that do, however, may offer a relationship discount if you already have a checking or savings account. Like online lenders, you may need to sign up for automatic payments from that account to get a discount off your APR.

Both local and national banks offer low rates to customers with excellent credit because of their financial backing, which makes them a good place to look first if you don’t want to send out a dozen applications.

Credit unions

Credit unions are owned by their members, so many can offer low rates with less strict eligibility criteria. Unfortunately, it also means that you will need to have an account to qualify for a personal loan.

Overall, credit unions will likely offer similar rates as banks and online lenders for borrowers with good to excellent credit. The major difference is with borrowers who have fair credit. If you are able to qualify, you may be able to take advantage of a small personal loan that has its rate capped under 20 percent — which is much lower than lenders that have a maximum APR stretching up to 36 percent.

To qualify for a low-interest personal loan, you will need excellent credit, strong income and a low debt-to-income (DTI) ratio

  • Pay off debts. If your DTI is above 36 percent, lenders will be less likely to offer you a loan. Not only will paying off your debts help you score a lower rate, but it may also improve your credit score by lowering your credit utilization ratio.
  • Improve your credit score. Lenders will only offer their lowest rates to borrowers with good to excellent credit. By improving your credit, you give yourself an edge when searching for a low interest rate.
  • Compare lenders. Although you may not be able to qualify for the lowest interest rates on the market, you can still find a lender with low rates for your credit bracket. Compare lenders to see which offers the best rates, lowest fees and other features that matter to you.
  • Apply for prequalification. Most lenders will offer a prequalification process on their personal loans. This allows you to preview your rates and see what you might qualify for.

While it is possible to qualify for the lowest rates available right now, there have been lower rates within the past few years. Rates typically rise and fall alongside the federal funds rate, which determines how pricey it is for banks to lend

This means that you will face higher rates than you might have seen in 2020 or 2021. But if rates drop significantly after you take out your loan, you can always refinance or consolidate your debt at a lower rate to take advantage of the change.

The bottom line

Low-interest personal loans can be key when paying less for large expenses. Ultimately, a high credit score and income will give you access to the lowest rates. If you already qualify, compare loan options to find the best fit for your budget. If you don’t qualify for top lenders, take time to build your credit score before applying.

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