4 Facts You Need to Know About Personal Loan APRs

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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

personal loan apr

Personal loans have gotten popular in recent years, thanks in part to their relatively low costs of borrowing.

Although CreditCards.com lists the national average APR on a credit card at 16.38% as of January 2018, the rates on three-year unsecured loans are only 9.22% for credit unions and 10.09% for banks as of March 2018, according to the National Credit Union Association.

An online lender might provide an even lower personal loan APR, with FreedomPlus offering rates starting at 4.99% and SoFi at 5.83%.

But while these personal loan options boast rates that are lower than those on most credit cards, what do they tell us about the costs of a personal loan? Here are four important facts about personal loan APRs that you need to understand before you borrow.

1. Personal loan APR includes interest and most fees

An APR reveals how much you’ll pay in interest and fees on your personal loan. Because it includes fees, it’s a more comprehensive measure than interest rate alone.

That said, your APR might equal your interest rate if your personal loan doesn’t come with any other fees. Santander’s personal loan page, for example, states, “Santander does not have any upfront fees so the APR and the interest rate are the same.”

Note that penalty fees, such as those for a late payment or a bounced check, are typically not included in an APR. So your costs of borrowing could be greater if you fall behind on repaying your loan.

APR is typically expressed as a percentage of your total loan balance. You can enter your APR into our personal loan calculator, along with your loan amount and repayment term, to understand how much you will pay in interest and other fees.

If you borrow a $10,000 personal loan with a 10.00% APR and a one-year repayment term, for example, you can expect to pay $550 in interest and fees. Crunch the numbers before you borrow so that you understand the true costs of borrowing.

2. Your APR depends on many factors

When it comes to APR, each lender determines its rates. Plus, most lenders offer different APRs and origination fees to different borrowers.

Your rates and terms depend on a few factors, including your:

  • Credit score
  • Debt-to-income ratio
  • Loan amount
  • Repayment terms

The better your credit score, the lower rates you’ll get. You might also get a lower rate if you choose a shorter repayment term.

Consider a Citizens Bank personal loan of $10,000, for instance. On a seven-year repayment term, the lowest APR you could get is 8.29%. But if you shorten your term to three years, you could get an APR as low as 5.00%.

Of course, a shorter repayment term means higher monthly payments. So although a one- or two-year term could save you money on interest, a four- or five-year term might work better with your budget.

3. You can use APR to compare personal loan offers

Personal loan lenders are all different when it comes to rates and terms. Earnest, for example, offers rates as low as 5.49%, whereas Avant starts at 9.95%.

SoFi charges no origination fee, while LendingClub charges between 1% and 6%. And while Citizens Bank offers a maximum repayment term of seven years, Payoff doesn’t extend past five years.

With all these variations, it’s tough to compare one personal loan offer with another. Fortunately, APR helps you compare personal loans on an apples-to-apples basis.

Thanks to the Truth in Lending Act, all lenders must disclose loan costs so you can comparison shop. Because personal loan APR is defined the same way across the board, you can use it to compare loans easily.

For instance, consider the following comparison of Loan A and Loan B. Both loans have terms of three years and interest that compounds on an annual basis.

Loan A

Loan B

Loan amount

$10,000

$10,000

Repayment term

3 years

3 years

Interest rate

12.00%

10.00%

Origination fee

$0

$500

APR

12.00%

13.74%

Total loan cost

$11,851.95

$12,120.65

As you can see, Loan B has a significantly lower interest rate than Loan A (10.00% compared to 12.00%). But because of its origination fee, Loan B has a higher APR and costs $268.70 more in the long run.

Loan A would be the more affordable choice in this instance. Rather than merely looking at the interest rate, you can look to APR for a full picture of loan costs.

4. Your repayment terms affect your costs of borrowing

Although APR is a useful comparison tool, it’s not the only factor to take into consideration. You should also think about how long it will take you to pay off the loan.

In the example above, both loans had a three-year repayment term. But what if you extended the term to seven years?

Loan A

Loan B

Loan amount

$10,000

$10,000

Repayment term

7 years

7 years

Interest rate

12.00%

10.00%

Origination fee

$0

$500

APR

12.00%

11.73%

Total loan cost

$14,554.14

$14,446.56

In this case, Loan A would be the slightly more expensive option because you would be paying a higher interest rate for a longer amount of time. Correspondingly, you can see that Loan A has a higher APR than Loan B.

On the flip side, let’s say you shortened your repayment term to one year.

Loan A

Loan B

Loan amount

$10,000

$10,000

Repayment term

1 year

1 year

Interest rate

12.00%

10.00%

Origination fee

$0

$500

APR

12.00%

20.61%

Total loan cost

$10,627.45

$11,052.16

On a one-year term, Loan B is more expensive than Loan A. In fact, you would pay $424.71 more over the course of the year.

Your repayment term has a big effect on the costs of borrowing. So as you compare APRs, make sure you’re taking repayment terms into account. The length of your loan could make a big difference in which lender you choose.

Shop around for the best rates and terms

When it comes to personal loans, you have a lot of lenders from which to choose. You might borrow from an online loan company or go with a traditional bank or credit union.

Although you have more options than ever, your main goal remains to find the loan with the lowest costs of borrowing.

Make sure to shop around with more than one lender and compare your offers.

Many online lenders let you check rates without a hard credit inquiry, so it won’t affect your credit score. And if a bank or credit union doesn’t offer a rate quote, you can still compare general terms and conditions.

Take the time to look at APR offers to compare personal loans comprehensively and find the best one for you.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 5.950% APR to 14.490% APR (with AutoPay). Variable rates from 5.825% APR to 14.365% APR (with AutoPay). SoFi rate ranges are current as of May 3, 2018, and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.825% APR assu[mes current 1-month LIBOR rate of 1.90% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 4.99% – 16.24% (4.99% – 16.24% APR) based on applicable terms. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank


Upgrade Bank Disclosures


  • Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.
  • Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% - 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
5.83% - 14.74%1$5,000 - $100,000
Check rate nowon SLH's secure site
5.96% - 35.97%*$1,000 - $50,000Visit Upgrade
8.00% - 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% - 29.99%$10,000 - $35,000Visit FreedomPlus
4.99% - 16.24%2$5,000 - $50,000Visit Citizens
15.49% - 34.49%$2,000 - $25,000Visit LendingPoint
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.49% - 18.24%$5,000 - $75,000Visit Earnest
9.95% - 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.