A high-interest loan charges interest and fees that are higher than most other loans. Typically, a loan with an annual percentage rate, or APR, over 36% is considered a high-interest loan. If you need cash fast or have low credit, you may be offered a high-interest loan or feel like you don't have any other options.
A high-interest loan has an annual percentage rate above 36%, the highest APR that most consumer advocates consider affordable.
So, what is a good APR for a credit card? Few of the most popular credit cards offer an interest rate below 16%. More commonly, you'll pay around 20% in interest, even if you've got an excellent credit score and especially if you're applying for any of the best rewards credit cards.
Avoid loans with APRs higher than 10% (if possible)
According to Rachel Sanborn Lawrence, advisory services director and certified financial planner at Ellevest, you should feel OK about taking on purposeful debt that's below 10% APR, and even better if it's below 5% APR.
But depending on the lender, the borrower's credit score and financial situation and other factors, personal loan interest rates can generally range from under 6% to 36%—although higher interest rates aren't unheard of in states where it's allowed.
The SCRA can help service members who come into the military with high-interest debt. It limits interest rates on debt to 6%, including debt held jointly with a military spouse. The interest rate reduction covers the time when a service member first entered active-duty status to the day they are no longer active.
A good personal loan interest rate depends on your credit score: 740 and above: Below 8% (look for loans for excellent credit) 670 to 739: Around 14% (look for loans for good credit) 580 to 669: Around 18% (look for loans for fair credit)
Key takeaways. Your credit card APR can go up if the prime rate changes, you paid your credit card bill late, your intro APR offer ended or your credit score dropped. If your APR increases, you can work on paying down your balance or transfer your balance to a card with a low or 0 percent intro APR offer.
In most circumstances, a 12% interest rate on a personal loan definitely qualifies as a good rate unless the borrower has nearly perfect credit. To guarantee that you will be able to qualify for an interest rate near 12%, you will need to have a good to excellent credit score of over 700 points.
The California Constitution prohibits loans that are made primarily for personal, family or household purposes from having interest rates above 10% per year. This is California's general usury law.
A 30% APR is not good for credit cards, mortgages, student loans, or auto loans, as it's far higher than what most borrowers should expect to pay and what most lenders will even offer. A 30% APR is high for personal loans, too, but it's still fair for people with bad credit.
Individual factors. Lenders use your information about your financial situation to predict the likelihood you can repay a personal loan. If you have a history of late payments on credit cards or you're already stretched thin covering other debts, lenders may charge you a higher interest rate to account for the risk.
The interest rate of your personal loan depends on your financial report and credit score. You can negotiate your interest rate to adjust your EMI to make it more manageable.
The average personal loan interest rate for consumers with good credit (690 to 719 credit score) is 15.86%, according to aggregate, anonymized offer data from NerdWallet's pre-qualification marketplace.
Penalty APRs are part of why credit card overspending can be so dangerous, as they may reach higher than 29.99% when a payment is at least 60 days late. Interest rates this high would be unthinkable in most other common lending contexts.
There is no limit on card interest rates
While many states have usury laws that limit the interest rates that lenders can charge, a lot of these state laws don't apply in practice to credit card rates. Instead, they apply mainly to loans, and even then, financial institutions tend to get around them through exemptions.
The bottom line on APR
Remember that APR is only applied if you're carrying an outstanding balance on your card. You can typically avoid paying any interest charges if you pay off your card balance before the statement period ends each month.
Analysts with Fannie Mae and the Mortgage Bankers Association (MBA) both project that rates will fall going into 2024 and throughout next year. Fannie Mae economists expect rates to drop more quickly, falling below 6% by Q4 2024. Meanwhile, the MBA's forecast for Q4 2024 is 6.1% and 5.9% for Q1 2025.
A usury interest rate is an interest rate deemed to be illegally high. To discourage predatory lending and promote economic activity, states may enact laws that set a ceiling on the interest rate that can be charged for certain types of debt.