Economic uncertainty over the potential impact of President Trump’s tariff policies on the cost of American goods and services has dimmed the prospects for lower personal loan rates for the remainder of 2025. At its June meeting, the Fed held rates steady for the second time this year, citing uncertainty over the current path of inflation.
According to Bankrate chief financial analyst Greg McBride, the Fed’s holding pattern is likely to limit any downward movement in personal loan rates.
The Fed left benchmark interest rates unchanged through the first half of the year, and the odds of a meaningful drop in rates during the second half of the year are dwindling. Unless the economy rolls over, the Fed is unlikely to cut rates more than once or twice this year, if at all. Without that, there is little catalyst for lower personal loan rates.— Greg McBride, CFA | Bankrate chief financial analyst
Despite the disappointing Fed rate outlook, average personal loan rates are still substantially lower than average credit card rates. If you’re one of the two in five cardholders struggling with maxed-out credit cards, you may get some relief by consolidating them into one new personal debt consolidation loan.
Current personal loan interest rates
- Average rates have risen to 12.65% in June 2025, after ending 2024 at 12.29%.
- Average personal loan rates started at 11.93% in 2024.
- Some lenders’ starting rates have dropped below 6.5% for well-qualified borrowers.
- The lowest rates are typically offered to borrowers with credit scores over 780 for terms of three years or less.
What happened to personal loan rates in the first half of 2025?
Average personal loan rates were at 12.29 percent at the beginning of the year, but have recently risen to 12.65 percent as of June 18, 2025. That’s higher than the 12.4 percent average that personal loan rates hit in October 2024.
While that may disappoint consumers amid all the news about Fed rate cuts last year, there is a silver lining: Minimum APRs for consumers with excellent credit have dropped below 6.5 percent with some lenders.
Homeowners with superb credit may want to consider a personal loan for home improvement to take advantage of rates that may be lower than home equity loans. However, the decision between the two loan types often depends on how much your upgrade costs.
“If you need an appliance, and you need $3,000 fast, that certainly suggests a personal loan,” McBride explains. “If you’re going to upgrade your kitchen and need $40,000 over the next six months, that’s more conducive to a home equity line of credit.”
The ease and speed of personal loans is increasing demand
The total balance of unsecured personal loans set a new record of $253 billion in the first quarter of 2025, according to recent TransUnion data. Volume has remained steady for fair- and bad-credit borrowers, with significant growth in good to excellent credit lending.
Fintech companies increased their share of personal loan origination, accounting for just over a third of the total volume in the last quarter of 2024. That may bode well for consumers with poor credit who don’t meet the stricter standards usually found at credit unions and banks.
The direction of lending standards for the rest of 2025
President Trump’s tariff policy has led to economic uncertainty, as Americans await the impact of tariff-related costs on their budgets. If the economy weakens, it may become more challenging to obtain a personal loan.
However, McBride advises against any major spending changes based on the potential effects of tariff policy. He recommends focusing more on beefing up emergency savings and paying off credit card debt as a better path to financial security.
Next steps for consumers seeking personal loans in 2025
Before you borrow, evaluate your financial goals and work on your credit scores. Borrowing with a clear purpose that supports your overall financial journey — and fits your monthly budget — will take you further than a snap decision.
Consider debt consolidation, with a caveat
With average credit card rates still significantly higher than personal loan rates, it’s easy to wonder why more people don’t choose debt consolidation loans if they have too much credit card debt. The answer may lie in spending habits and budgeting challenges.
From a credit card perspective, if money is tight, you can dial down and make a minimum payment. With a personal loan, the monthly payment is the monthly payment.— Greg McBride, CFA | Bankrate chief financial analyst
That may be too much of a strain on U.S. households struggling to cover their monthly expenses. “I think the reality of a lot of households is that most are trying to make ends meet from one month to the next, whereas debt consolidation comes more into play once you’ve solved that problem and have a handle on your expenses,” says McBride.
Improve your credit scores
“Improving your credit will do more to get you a better rate than anything the Federal Reserve does with short-term rates,” McBride explains. He also suggests that paying bills on time and paying down debt are the biggest ways to improve the rate.
But he also suggests that consumers make sure errors on their credit reports aren’t pushing down their credit scores. “Studies have shown that an eye-popping percentage of consumers have errors on their credit report,” says McBride. “Check your credit score to make sure there isn’t any inaccurate information that could be torpedoing your score.”
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