The type of loan that has the lowest interest rate is a mortgage, which usually charges 3% to 8%, depending on the overall economic climate and the borrower’s creditworthiness. Some other factors that influence your mortgage rate include your home’s location, your home’s price, your down payment and your loan term.
In general, a secured loan, like a mortgage, will have a lower interest rate than an unsecured loan, like a standard personal loan, because it is less risky for the lender. This is due to the collateral the borrower puts up to get the loan.
Typical Interest Rates by Loan Type
Note: The ranges in the table above reflect averages from the past 20+ years. Home equity loans reflect 2010-2019 data.
You can read more about these types of loans on WalletHub. Additionally, if you’re interested in a personal loan, you can estimate your potential rates with our free pre-qualification tool.
This answer was first published on 12/09/22. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
In general, a secured loan, like a mortgage, will have a lower interest rate than an unsecured loan, like a standard personal loan, because it is less risky for the lender. This is due to the collateral the borrower puts up to get the loan.
Which type of loan will have the lowest interest rate? ›
Secured loans typically offer some of the lowest interest rates due to the collateral provided by the property. The loan is secured by the home, gold, or any vehicle, which reduces the risk for the lender.
What is the lowest loan interest rate? ›
Compare the best low-interest personal loans
| INTEREST RATES | LOAN AMOUNTS |
|---|
| PenFed | 7.99% to 17.99% | $600 to $50,000 |
| Prosper | 6.99% to 35.99% | $2,000 to $50,000 |
| LightStream | 6.99% to 25.99% | $5,000 to $100,000 |
| U.S. Bank | 8.74% to 24.99% | $1,000 to $50,000 ($25,000 maximum for non-U.S. Bank customers) |
4 more rowsLoans with shorter terms usually have lower interest costs but higher monthly payments than loans with longer terms.
Which kind of loan generally charges the lowest interest rate? ›
You're looking for low rates: Home equity loan rates are typically lower than personal loan rates, meaning your monthly payment will be smaller and you'll pay less for borrowing money.
Is the lowest interest rate the best? ›
The lowest interest rate doesn't always get you the best deal, so don't get too excited about an interest rate before you do the math. It's important to take the time to talk to an actual human (who is a qualified home loan expert) to make sure you understand the options that benefit you most.
Which type of loan has a lower interest rate secured or unsecured? ›
Since secured loans have an asset attached to them that the lender can use for repayment if you default on the loan, they generally come with lower annual percentage rates (APRs) than you would find with unsecured loans.
How can I get the lowest interest rate? ›
To help get the best mortgage rate, you can work to boost your credit score, lower your debt and save up a sizable down payment. Getting the best mortgage rate can save you money on interest over the life of the loan. Shop around for the best mortgage rate with at least three lenders and compare quotes.
What is the easiest loan to get approved for? ›
Some of the easiest loans to get approved for if you have bad credit include payday loans, no-credit-check loans, and pawnshop loans. Personal loans with essentially no approval requirements typically charge the highest interest rates and loan fees.
Which type of loan has the highest interest rates? ›
Additionally, mortgages and federal student loans usually charge some of the lowest interest rates when compared to other types of debt. On the other hand, credit cards, private student loans and payday loans carry some of the highest interest rates of all debt types.
Best Personal Loans of May 2024
- SoFi – Best for High Loan Amounts.
- LightStream – Best for Low Interest Rates.
- LendingPoint – Best for Fast Funding & Below-Average Credit.
- Upgrade – Best for Bad Credit.
- Universal Credit – Best for Comparing Multiple Offers.
- Discover – Best for No Interest If Repaid Within 30 Days.
Secured loans normally come with lower interest rates because of their low level of risk. Since most borrowers do not want to give up the collateral—for example, their home or their car—they are more likely to keep up with their payments.
What is an example of an inexpensive loan? ›
Home equity loans
You receive funds upfront and repay the loan over the term with equal monthly payments, much like a mortgage loan. And, since the loans are secured by your home, home equity loans tend to offer lower interest rates than alternatives like personal loans or credit cards.
Can a loan have a 0% interest rate? ›
It is an additional charge you must pay to the lender apart from the borrowed principal amount. While many lending institutions charge hefty interest rates, some also offer zero interest loans. When we hear 'interest-free loan', it instantly becomes attractive because it has no interest charges payable.
How much would a $5000 loan cost per month? ›
What is the monthly payment on a $5,000 personal loan?
| Payoff period | APR | Monthly payment |
|---|
| 2 years | 15% | $242 |
| 3 years | 15% | $173 |
| 4 years | 15% | $139 |
| 5 years | 15% | $119 |
3 more rowsHow do you know if the interest rate you're offered is good for you? 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)
Who has the best low interest loans? ›
Low-interest personal loans can be a useful financial tool.
- Best for large loan amounts: SoFi.
- Best for rate shoppers: LightStream.
- Best for small loan amounts: PenFed Federal Credit Union.
- Best for Wells Fargo checking account holders: Wells Fargo.
- Best for debt consolidation: Happy Money.
