Average Personal Loan Rates End The Year Flat

Average Personal Loan Rates: Personal loan rates remained largely unchanged in December, closing out 2022 on a flat note according to data from leading financial websites. The average personal loan interest rate held steady at around 9.46% APR, just slightly below the annual peak of 9.50% in August.

While rates trended up for most of 2022 amid rising inflation and Federal Reserve rate hikes, the increases slowed in the second half of the year. The average personal loan rate rose a modest 0.30% from the start of 2022 through December.

What’s Driving Flat Loan Rates

Several factors contributed to the flattening of personal loan rates toward the end of 2022:

  • The Fed raised its benchmark rate by 0.50% in December, a step down from the 0.75% hikes implemented earlier in the year
  • Inflationary pressures eased somewhat, reducing concerns about runaway price increases
  • Consumer demand for personal loans declined as borrowers grew wary of rising rates
  • Lenders competed aggressively for borrowers amid fears of a potential recession

This combination of moderating Fed hikes, inflation, lower demand, and lender competition put a lid on further personal loan rate increases.

Personal Loan Rate Forecast for 2023

Economists expect personal loan rates could resume their upward march in 2023 as the Fed continues dialing back stimulus:

  • The Fed forecasts its policy rate could rise to 5.1% in 2023, implying multiple additional hikes.
  • As the Fed tightens, lenders will pass higher funding costs to borrowers.
  • An expected economic slowdown could also prompt lenders to increase rates to compensate for higher defaults.

However, the pace of increases next year should be more modest than in 2022. Personal loan rates aren’t directly linked to the Fed’s interest rates, so they likely won’t rise in lockstep.

Average Personal Loan Rates

Current Personal Loan Rates by Lender

While the average personal loan rate held at 9.46% in December, actual interest rates vary significantly by lender. Here are current rate ranges for major personal loan providers:

  • Marcus: 7.49% – 28.99% APR
  • LendingClub: 8.34% – 35.99% APR
  • Prosper: 7.95% – 35.99% APR
  • Lightstream: 4.29% – 19.99% APR
  • SoFi: 5.99% – 20.28% APR
  • Best Egg: 5.99% – 29.99% APR

The lowest rates are offered by lenders like Lightstream and SoFi that cater to borrowers with excellent credit. Those with poor credit will pay toward the top end of ranges.

Maximizing Savings on Personal Loans

Although average personal loan rates trended flat recently, borrowers can often find lower rates by shopping around and optimizing their credit profile. Ways to maximize savings include:

  • Compare rates across multiple lenders to find the lowest option.
  • Work to improve your credit score through on-time payments, limiting hard inquiries, and lowering credit utilization.
  • Consider secured loans or loans with a cosigner if you don’t qualify for the lowest rates.
  • Opt for shorter loan terms which tend to have lower interest rates.
  • Make extra payments whenever possible to reduce the total interest paid.

Being an informed, credit-savvy borrower is key to getting the most competitive personal loan rate and saving money.

The Role of Personal Loans

Personal loans play an important role for millions of households. Reasons consumers seek personal loans include:

  • Consolidating high-interest debt – Personal loans allow borrowers to pay off credit cards and other debt at lower interest rates, reducing monthly payments.
  • Covering emergency costs – Job losses, medical bills, home repairs, and other unexpected costs can be managed through personal loans.
  • Funding major purchases – Borrowers use personal loans to finance large expenses like weddings, moving costs, home renovations, etc.
  • Establishing credit history – Personal loans help demonstrate creditworthiness and build credit scores, especially for younger borrowers.

Used responsibly, personal loans provide an accessible way for consumers to overcome financial hurdles and achieve their goals.

Outlook for Personal Loan Borrowing

After hitting record highs in 2021, personal loan origination volume slowed in 2022 amid economic uncertainty. Lenders originated an estimated $202 billion in new unsecured personal loans as of October 2022 – a 5% decrease from the same period last year, per TransUnion.

Going forward, the appetite for personal loans may wane if unemployment rises. However, steady income growth, lower inflation, and strong household balance sheets could offset economic worries and support personal loan demand in 2023.

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