If you've been putting off a home repair, a medical bill, or a credit card payoff, the math on personal loans has quietly shifted in your favor.
Average rates on a two-year personal loan recently landed near 12 percent, down from a peak above 13 percent last year, according to Bankrate's long-running survey of lenders.
That's not a dramatic drop, but on a $10,000 loan it's real money.
Here's the catch: that 12 percent figure is an average, and averages lie.
Borrowers with excellent credit, roughly a 720 FICO score or higher, are routinely seeing offers in the 7 to 11 percent range right now.
Those with scores below 640 are often quoted 20 percent or more, sometimes closer to 30 percent.
Same product, same lender, wildly different price.
The gap matters because personal loans are usually unsecured, meaning there's no house or car backing them.
So the single most valuable move before applying is checking your credit score and pulling your free reports at AnnualCreditReport.com.
Disputing one error can move a score enough to shave several points off an offer.
Banks, credit unions, and online lenders all price differently, and many let you check a rate with a soft pull that doesn't ding your score.
A Federal Reserve study found that borrowers who compared multiple offers saved meaningful money over the life of the loan.
Credit unions are often the quiet winner here, especially if you already have a membership.
Some lenders charge origination fees of 1 to 8 percent, which gets subtracted from what you actually receive.
A 10 percent rate with a 6 percent fee is not really a 10 percent loan.
Ask for the APR, not just the interest rate, and read the prepayment penalty clause before signing anything.
One more thing worth knowing: personal loans are a decent tool for consolidating credit card debt, which currently carries average rates above 20 percent.
But they only work if you stop using the cards afterward.
Otherwise you've just moved the debt and added a payment.
Rates are better than they were a year ago, but the spread between a great offer and a terrible one is wider than most people realize.
Fifteen minutes of comparison shopping is the highest-paid work you'll do this week.
If you're carrying high-interest debt and your credit is decent, this is a reasonable window to at least run the numbers.
Final Thoughts
Just don't let a friendly preapproved mailer make the decision for you.