Credible takeaways
- An interest rate tells you how much it costs to borrow money on an annual basis, excluding upfront fees.
- APR shows you the cost of borrowing, including upfront fees, expressed as a yearly percentage of the amount borrowed.
- Compare loans using APR, because it gives you the best look at the total cost for each loan, upfront fees included.
When you’re trying to find the best personal loan, rates matter. But how do you know if you should be looking at the APR or the interest rate? And which one matters more?
The interest rate tells you how much it will cost to borrow money with a particular loan, but the APR gives you a fuller picture: not only the interest you’ll pay, but upfront fees, too, making it a crucial number for comparison.
Learn the specifics of APRs and interest rates so you can confidently compare personal loans.
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What is an interest rate?
When you borrow, the lender expects you to repay the original amount, called the principal. But it also charges interest, which is the cost of borrowing the money. The interest rate is expressed as a percentage of the amount borrowed on an annual basis.
For instance, suppose you borrow $100 at a 10% annual interest rate, and repay the entire amount in one lump sum at the end of one year. You’d’ll repay $110, which is the amount you borrowed plus an extra $10 in interest (which is 10% multiplied by the $100 loan amount).
However, calculating interest isn’t usually as simple as multiplying the interest rate by the amount you borrow. That’s because instead of making one single annual payment, most loans are paid off monthly. And with each payment, the amount you owe goes down, which means the interest you pay also decreases.
There are two main types of interest rates: fixed interest rates and variable interest rates.
Check Out: Best Personal Loan Rates
Fixed interest rate
A fixed interest rate doesn’t change. If the interest rate is 7% and fixed, it’ll be 7% at the beginning of the loan and 7% at the end. Typically, with a fixed-rate loan, your payment will stay the same each month for the length of the loan.
Fixed interest rates are common with personal loans, including bad-credit loans and other kinds of loans. This also makes them appealing options for debt consolidation purposes.
Variable interest rate
A variable interest rate can change during the loan repayment period. These types of loans may have a low introductory rate for a set amount of time before the rate increases.
Variable interest rates are often tied to a benchmark or index, plus an additional percentage; when that benchmark changes, your interest rate may change, too. One common benchmark is the prime rate. If your variable interest rate is “prime plus 1%,” for example, and the prime rate goes from 5% to 6%, then your interest rate would change from 6% to 7%.
Credit cards usually have variable interest rates, as do a few personal loans. Personal lines of credit also often have variable interest rates.
See Also: Personal Loan vs. Personal Line of Credit
How is the interest rate used on a personal loan?
On a personal loan, the interest rate is used to determine how much your payments will be. Once the lender determines your interest rate, it uses a process called amortization to calculate a monthly payment that will pay off both the interest and principal, in full, by the end of the loan’s term.
Advertiser DisclosureOverview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 12 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 12 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the next business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full reviewOverview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Read full reviewOverview
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Eligibility
Available in all 50 states
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Read full reviewOverview
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Read full reviewOverview
LendingClub is a solid lender for good credit borrowers and some fair credit borrowers that apply directly on its website. It's easy to prequalify with LendingClub, especially if you're uncomfortable providing your Social Security number, as the company doesn't require it at the prequalification stage. (You will need to provide it if you move forward with a full application.)
While prequalification is not a guarantee that you'll be approved for a loan, LendingClub does a better job than most other Credible partner lenders at approving applicants that have successfully prequalified. In other words, you're less likely to have your application declined once you apply (if you've already prequalified). LendingClub may charge an origination fee between 3% and 8%.
Eligibility
Available in all 50 states
Loan uses
Debt consolidation, paying off credit cards
Read full reviewOverview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee (up to 6%) in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Read full reviewOverview
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 8.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Eligibility
Available in all states except DC, IA, VT, and WV
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
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Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
1 to 5 years (2 to 5 years through Credible)
Read full reviewOverview
It’s worth considering a personal loan through Splash if you have good credit (ideally, a FICO score above 700). The platform offers loans from a wide range of lenders, and next-day funding is available. Plus, Splash has a live chat feature so you can get real-time answers without having to wait on hold or for an email. Loans are available up to $100,000 if you apply via Splash’s website.
Rates are competitive, but borrowers with excellent credit may find lower APRs elsewhere. If you need a repayment term longer than five years, you’ll need to look elsewhere as well.
Loan amount
$5,000 - $100,000 (up to $35,000 on Credible)
Eligibility
Available in all states except VT. OH and NM net disbursed amount must be greater than $5,000. MA must be greater than $6,000
Time to get funds
Same day available, typically 1-3 days
Loan uses
Debt consolidation, home improvement, medical expenses, major purchases
Read full reviewOverview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Read full reviewOverview
Happy Money has been in operation since 2009 (formerly known as Payoff). It's an option for fair-credit borrowers (plus those with better credit), and notably has a relatively low top-end APR. In other words, you could qualify for a lower rate with Happy Money with fair credit, relative to other lenders that offer fair-credit loans. The company does charge an origination fee on some loans, up to 5%, but that's not as high as some other lenders' origination fees.
You should be prepared to wait a few days to get your money, as funding can take three to five days once approved. And loans aren't available in Massachusetts or Nevada. Happy Money has an A+ rating with the BBB and is ideal for debt consolidation and credit card consolidation loans.
Eligibility
Available in all states except MA, MS, NV, and OH
Time to get funds
As soon as 2 - 5 business days after verification
Loan uses
Debt consolidation and credit card consolidation only
Read full reviewOverview
BHG Money stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. You'll have up to 10 years to repay the loan, but you'll need an annual income of at least $100,000 to qualify and a FICO score that's 660 or higher. However, if you have a cosigner that meets these requirements, BHG will consider your application.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 2% and 4%, depending on your financial profile. Loan funds are available within three to 14 days of loan approval. Note that you can't prequalify with BHG.
Fees
Origination fees, late fees
Eligibility
Available in all states except Maryland and Illinois
Loan uses
Debt consolidation, baby (adoption), engagement ring financing, moving (relocation), business, home improvement, special occasion, cosmetic procedures, major purchase, taxes, credit card refinancing, medical expenses, vacation, wedding, other
Read full reviewFees
Origination Fee, $15 Late Fee, $25 NSF Fee
Eligibility
Available in all states except CO, CT, ME, NV, NH, TN, VT, WV, WY, and all U.S. Territories
Time to get funds
Funds typically deposited into your account in 1 business day13
Loan uses
Debt consolidation, credit card refinancing
Read full reviewOverview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Read full reviewWhat is APR?
APR stands for annual percentage rate, and it can be a little different from the interest rate. The APR on a loan indicates the total cost of the loan, including the interest rate as well as upfront fees like any origination or administrative fees. So, if there are no upfront fees, the interest rate and APR should be the same.
Like the interest rate, APR is expressed as a percentage. It’s useful when comparing personal loan lenders, because it lets you see how overall costs stack up. Otherwise, you’re not comparing apples to apples.
Fortunately, most lenders express loan costs in terms of APR, so there’s little work needed on your end to calculate it. But if a lender doesn’t, you can use an APR calculator. Simply enter the loan amount, upfront fees, interest rate, and the loan’s term, and the calculator will calculate the loan’s APR.
APR vs. interest rate
To illustrate the difference between APR and interest rate, let’s say you have a personal loan of $5,000. It has a fixed interest rate of 10%, a loan origination fee of 5%, and a repayment period of three years.
While the interest rate is 10%, the APR on this loan would actually be 13.57% (which we figured out by using an APR calculator). This is because of the upfront loan origination fee, which would be $250 in this case.
How rates are calculated
Lenders determine your interest rate and APR based on their perceived level of risk in lending to you. If lenders see you as a high-risk borrower, they’ll likely charge a higher interest rate to protect themselves. Lenders use a few key factors to determine interest rates:
- The loan amount: How much you intend to borrow. Most personal loans offer loan amounts from $600 to $100,000 or more, in some cases.
- Your credit score: Your score is indicative of your credit history, and lenders use it to gauge how likely you are to repay the loan on time. Most lenders prefer borrowers with FICO scores of 670 and above.
- The repayment term: Terms often range from 1 to 7 years, and have a big impact on the size of your monthly payment.
- Your other debts: Your debt-to-income ratio (DTI) shows the lender how many other obligations you have in addition to the loan you’re applying for. Many lenders prefer a DTI of 35% or less.
- Your income: The lender will want to know you have stable income that is sufficient enough to make payments so you can repay the loan.
Simple vs. compound interest
Whether interest is simple or compound makes a difference in how you calculate it and how much you’ll pay.
- Simple interest is determined by multiplying the interest rate by the amount you owe. But it’s not necessarily “simple.” If you pay the balance down monthly (which most of us do), interest is computed based on the new (reduced) principal balance each month, instead of in one lump sum at the end of the year. Since these loans also have set repayment terms, lenders use a process called amortization to set an equal monthly payment — you pay less in interest and more toward principal every month, but your payment stays the same. Personal loans often have simple interest, as do auto loans, student loans, and mortgages.
- Compound interest is more common with revolving debt. Instead of only calculating interest on the principal, you calculate interest due on the principal plus any accumulated interest. Interest may be compounded daily, weekly, monthly, annually, or at some other interval, depending on the lender and type of debt. Credit cards often use compound interest.
APR vs. interest rate FAQ
What is a good APR for a loan?
If you can get an APR lower than the national average, that would generally be a good rate. The Federal Reserve tracks this information, and reported the average APR on a personal loan was 12.49% as of February 2024.
The APR you get will depend on your credit history, the total amount borrowed, and even which lender you choose.
Why is the APR higher than the interest rate?
The APR is typically higher than the interest rate due to upfront fees factored in. For instance, a loan might have a 10% interest rate, but when you account for something like a loan origination fee, it could be north of 11%.
Where can I get a 0% APR?
It’s possible to get a 0% APR on some credit products. Balance transfer credit cards, for example, often offer a 0% APR as an introductory rate for a set period of time before adjusting to the regular rate. Auto loans, too, sometimes offer 0% APR financing, but often require borrowers to have excellent credit to qualify. Reputable personal loan lenders are not known to offer APRs that low, however. If you find a personal loan lender advertising a 0% APR, it is almost certainly an introductory (temporary), promotional rate, so read the fine print closely.
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Meet the expert:
Mary Beth Eastman
Mary Beth Eastman is a Credible authority on personal finance. Her work has been featured by The Balance, Money Under 30, and more.