A good interest rate depends on the loan type, your credit score, and current market conditions

There is no single "good" interest rate because lenders charge different rates for different kinds of borrowing. A mortgage at 7% is excellent; a credit card at 7% would be a steal. The rate you are offered also depends on your credit history, income, the size of the loan, and how long you have to repay it. Rather than chasing a number, you need to understand what rates exist for your situation and how to compare them fairly.

Interest rates move with the Federal Reserve's decisions and market conditions, so the rates available today will not be the rates available in three months. When you shop for a loan, you are not looking for a rate that matches some universal standard — you are looking for the best rate you can get from multiple lenders right now.

Key Takeaways

  • Interest rates vary by loan type: mortgages typically range from 6% to 8%, auto loans from 5% to 10%, and personal loans from 8% to 36%, depending on current market conditions and your credit score.
  • Your credit score is the single biggest factor in the rate you are offered; a score above 740 usually unlocks the lowest available rates, while a score below 620 may limit you to subprime lenders.
  • The loan term matters: a 15-year mortgage carries a lower rate than a 30-year mortgage for the same lender, and a 36-month auto loan costs less in interest than a 72-month loan.
  • You should get rate quotes from at least three lenders before accepting any offer, because the difference between a 6.5% and 7.5% rate costs thousands of dollars over the life of the loan.
  • The interest rate shown in advertisements or online calculators is often the best-case rate, reserved for borrowers with excellent credit; your actual rate will likely be higher.

How credit score affects the rate you are offered

Lenders use your credit score to predict the risk that you will not repay. A higher score means lower risk, so you get a lower rate. The difference is substantial: a borrower with a 750 credit score might be offered a mortgage at 6.8%, while a borrower with a 650 score might be offered 8.2% for the same loan amount and term. Over 30 years, that 1.4 percentage point difference means paying roughly $100,000 more in interest on a $300,000 loan.

Credit scores range from 300 to 850. Most lenders consider 740 and above "excellent" and offer their lowest published rates to those borrowers. Scores between 670 and 739 are "good" and receive standard rates. Scores below 620 are considered "poor" and either disqualify you from traditional lenders or push you toward subprime lenders, who charge significantly higher rates. If your score is below 620, you may pay 2 to 4 percentage points more than a borrower with excellent credit.

You can check your credit score for free through AnnualCreditReport.com, which is the only federally authorized source. Knowing your score before you shop for a loan helps you understand what rate range to expect and whether you should work on improving your score before borrowing.

Interest rates by loan type

Mortgages typically carry the lowest rates because the home itself secures the loan — if you do not pay, the lender takes the house. Rates vary by term: a 15-year fixed mortgage usually costs 0.5 to 1 percentage point less than a 30-year fixed mortgage. In recent years, 30-year mortgages have ranged from roughly 6% to 8%, though this changes with Federal Reserve policy and market conditions.

Auto loans are also secured by the vehicle, so rates are lower than unsecured loans. New car loans typically range from 5% to 10%, depending on your credit score and the loan term. Used car loans are usually 1 to 3 percentage points higher because older vehicles are riskier collateral. A 36-month loan will have a lower rate than a 72-month loan from the same lender.

Personal loans are unsecured, meaning nothing backs them except your promise to repay. Rates are therefore much higher: from 8% to 36%, depending on your credit score and the lender. Banks and credit unions typically offer rates in the 8% to 18% range for borrowers with good credit. Online lenders and finance companies often charge 18% to 36%. Payday lenders and title lenders charge even more, sometimes exceeding 400% when expressed as an annual rate.

Credit cards are also unsecured. The standard purchase rate (called the APR, or annual percentage rate) ranges from roughly 18% to 29% for most borrowers, though some cards offer 0% introductory rates for 6 to 21 months. Penalty rates for late payments can exceed 30%.

How loan term affects your total interest cost

A longer loan term means a lower monthly payment but much more interest paid overall. For example, a $300,000 mortgage at 7% costs roughly $1,996 per month over 30 years and totals about $718,000 in interest. The same loan over 15 years costs roughly $2,996 per month but totals only about $239,000 in interest — a savings of nearly $480,000.

The interest rate itself is usually lower on shorter terms because the lender's risk is lower. A 15-year mortgage might be offered at 6.5% while a 30-year mortgage is offered at 7%. But even accounting for the lower rate, the shorter term saves you money if you can afford the higher payment.

When shopping for a loan, compare not just the interest rate but the total amount you will pay. Many lenders provide an amortization schedule or a loan estimate that shows the total interest cost. Use this to compare a 36-month auto loan at 6% against a 60-month auto loan at 6.5%, for example — the difference in total cost may surprise you.

What the advertised rate actually means

When you see an interest rate advertised online or in a commercial, that rate is usually the lowest rate the lender offers — the rate reserved for borrowers with excellent credit, a large down payment, and low debt. It is called the "best-case" or "prime" rate. Most borrowers do not receive it.

Lenders are required by law to disclose the range of rates they offer, but this range is often buried in fine print. A bank might advertise "Personal loans from 8.99%" but the fine print shows rates go up to 24.99%. You will not know your actual rate until you submit an application and the lender pulls your credit report and verifies your income.

When you receive a rate quote, ask whether it is a firm offer or an estimate. A firm offer means the lender has reviewed your information and will honor that rate if you move forward. An estimate is just a starting point and may change. Get quotes in writing, because rates can shift day to day.

How to compare rates across lenders

The only way to know whether a rate is good for you is to shop. Get quotes from at least three lenders — a bank, a credit union, and an online lender if you are looking for a personal loan, or multiple banks and mortgage brokers if you are looking for a mortgage. Request the same loan amount, term, and type from each so the quotes are directly comparable.

When comparing, look at the APR, not just the interest rate. The APR includes the interest rate plus fees, so it gives you a truer picture of the total cost. A loan with a 6% interest rate but $2,000 in origination fees may have a higher APR than a loan with a 6.2% rate and no fees.

Pay attention to the loan estimate document, which lenders are required to provide within three business days of your application. It shows the interest rate, all fees, the monthly payment, and the total amount you will pay over the life of the loan. Compare this document across lenders, not just the headline rate.

When a higher rate might be your only option

If your credit score is below 620, you may not be able to borrow from traditional banks or credit unions. Finance companies and online lenders will work with lower credit scores, but they charge substantially higher rates — often 24% to 36% for personal loans. This is not predatory pricing; it reflects the higher risk of lending to someone with a history of missed payments.

If you need to borrow but cannot afford the rates available to you, consider waiting a few months while you improve your credit score. Paying down existing debt, correcting errors on your credit report, and making all payments on time can raise your score by 50 to 100 points. A higher score may unlock rates that are 5 to 10 percentage points lower, saving you thousands of dollars.

Another option is to find a co-signer — someone with good credit who agrees to repay the loan if you do not. A co-signer's credit score and income are considered alongside yours, which can lower your rate. Be aware that if you miss a payment, the co-signer is legally responsible, so this should only be done with someone you trust.

Frequently Asked Questions

Is 6% a good interest rate for a personal loan?

Yes, 6% is an excellent rate for a personal loan and is typically only offered to borrowers with credit scores above 740 and low existing debt. Most borrowers with good credit receive rates between 10% and 18%. If you are offered 6%, accept it and shop around to confirm it is competitive, but do not expect to find much better.

What interest rate should I expect on a car loan with a 650 credit score?

With a 650 credit score, you should expect auto loan rates between 8% and 12% for a new car, depending on the loan term and the lender. Used car loans will be 1 to 3 percentage points higher. Get quotes from at least three lenders — banks, credit unions, and online lenders — because rates vary significantly even for the same credit score.

Does paying a higher down payment lower my interest rate?

A larger down payment reduces the amount you borrow, which lowers your monthly payment and total interest cost. However, it does not usually lower the interest rate itself — the rate is determined by your credit score, the loan term, and market conditions. The benefit of a larger down payment is that you borrow less, not that you get a better rate on what you do borrow.

Can I negotiate an interest rate with a lender?

Interest rates are not typically negotiable in the way a car price is. Rates are set by the lender based on your credit score, income, and the loan type. However, you can shop multiple lenders and choose the one offering the best rate. Some lenders also offer rate discounts for setting up automatic payments or for being an existing customer, so it is worth asking.

Why did I get offered a higher rate than the one advertised?

Advertised rates are the lowest rates the lender offers and are reserved for borrowers with excellent credit and strong finances. Your actual rate depends on your credit score, debt-to-income ratio, employment history, and the size of your down payment. If you were offered a higher rate than advertised, it reflects your individual risk profile as assessed by the lender's underwriting process.