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Average Personal Loan Interest Rate by Credit Score

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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

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Janine
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Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Feb 6th, 2024
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For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

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average personal loan interest rate credit score

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Wondering about the average personal loan interest rate in the UK? You’ve come to the right place for answers! This guide will help you understand more about the impact of your credit score on loan interest rates.

We know it can be worrying if you’re unsure about how to handle your loan debt. Are you concerned about not being able to pay it off? Or the effects it could have on your future? We hear you, and you aren’t alone. In fact, every month more than 170,000 people turn to us for guidance on their debt worries.

In this easy-to-understand guide, we’ll take you through:

  • What the average personal loan interest rate is in the UK.
  • How your credit score can affect this rate.
  • Ways to get a free personal loan quote.
  • Tools to work out simple interest.
  • Tips to improve your credit score.

We’ll help you to get a clear picture of your situation and find a way forward that fits your needs.

Let’s dive in and discuss your options.

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

Average Personal Loan Interest Rate by Credit Score

When you’re applying for a personal loan, the lender will look at your credit report as an indication of your risk level when considering loan eligibility.

The average interest rate for a personal loan with excellent credit will naturally be better than it would be for someone with a lower score. Obtaining a personal loan with a low-interest rate will mean the repayment amounts and length of the loan are more favourable. 

  • In October 2022, the average interest rate on a personal loan with two-year repayment was 10.16%.
  • Personal loan interest rates typically range from 6% to 36% but can occasionally be higher. 
  • In April 2021, the average APR on a personal loan ranged between 9.30% to 22.16%.

The figures below show the average personal loan APR as of April 2021. 

Credit Score Average Personal Loan APR
Above 760 9.30%
720 – 759 13.32%
680 – 719 17.82%
640 – 679 22.16%

As you can see, the average interest rate on a personal loan when you have good credit is much better than those with a lower score. An excellent, good or fair credit score will help you get the best average personal loan interest rates and loan terms.

Additionally, those with a credit score lower than 640 might find it difficult to get a personal loan or be subject to higher interest rates they are seen as a higher default risk.

You can use my free interest calculator to see how your interest affects your monthly bills.

Simple Interest Calculator

£

This is a guidance tool only and not an assessment. For accurate interest calculations, contact the company issuing the credit. Do not rely solely on this calculator’s results.

Understanding credit score ranges

In the UK, there are three credit agencies, all with different credit score ranges. These are as follows:

Agency Excellent Good Fair Poor Very Poor
Experian 961-999 861-960 721-880 561-720 0-560
Trans Union 628-710 604-627 566-603 551-565 0-550
Equifax 800-850 740-799 670-739 580-669 300-579

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

Get started

Tips to Improve Your Credit Score

To improve creditworthiness, do the following:

  • Make sure you are on the electoral roll to prove where you live
  • Make regular payments on time
  • Do not use all of your available credit – aim to use 30-50%
  • Keep an eye on your record and report any suspicious or credit report errors.
  • Avoid moving home regularly – it can be a red flag to some lenders.

» TAKE ACTION NOW: Fill out the short debt form

Personal Loan Interest Rates by Credit Score FAQs

Am I eligible for a personal loan if I have bad credit?
If you have bad credit then this doesn’t necessarily mean you won’t be able to get a personal loan. However, people with bad credit might find there’s a stricter limit to how much they can borrow, as well as being subject to higher interest rates. Carry out an online loan comparison o see what deals are available to you.
What are alternatives to personal loans?
If you’re in need of credit but don’t want to go down the personal loan route, then there are other options available.

A credit card could be a better fit for your needs, or you may also consider using your overdraft. When using your overdraft, it’s always a good idea to talk to your bank about this in advance for financial advice. This is an opportunity to find out exactly how your overdraft works and if you’re going to incur any charges by using this option.
How does paying off a personal loan early affect your credit score?
You might be surprised to learn that paying off your personal loan early could temporarily negatively affect your credit score.

Having a mix of different credit types is good for your overall score. If you pay off a personal loan early, then you will no longer have this loan in your credit report. The age of your credit accounts and your credit utilisation also count towards your credit score and can be impacted if you pay off a loan early.

If you do find yourself with extra cash that you’d like to pay your loan off with, then it’s a better idea to keep the money in your account and continue making your payments on time. Additionally, you may find that you incur a penalty fee if you pay a personal loan back early, which could offset any money saved on the interest.
Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

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The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.