The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
The interest rates for different types of debt vary widely. What is considered “good” for one would be considered exorbitant for another—and vice versa.
A “good” interest rate for you is the lowest one you can get with the most favorable terms. But what is good for you might not be good for someone else. Ultimately, a good interest rate for you will come down to factors that include your credit score, income, and total debt.
If you’re wondering, for example, if 3.5% is a good mortgage rate, the answer is that it depends. Find out more about what a good interest rate might look like below.
Many loan interest rates are based on the prime rate, which is essentially the rate that banks charge their preferred customers and those with the best credit scores. This rate is largely determined by the federal funds rate, which is the rate banks charge each other. They use this as the basis for their prime rates in order to cover their costs and balance their other lending risks.
Prime rates are set individually by banks, but the most commonly used prime rate is the one that the Wall Street Journal publishes daily. The WSJ prime rate is based on the average of the 30 largest banks’ prime rates. Most banks use this rate to then determine their own prime rates.
The prime rate at any given time is generally the best possible rate you can get, though lenders may offer rates below prime. It’s most often given to large organizations—not individuals—and only those who are extremely well-qualified. If your credit score is anything less than perfect, it’s unlikely you’ll qualify for the prime rate.
Mortgage rates are typically based on the prime rate. The prime rate set on March 16, 2020, for example, was 3.25%. That rate for a mortgage right now would be considered a good mortgage interest rate.
However, if a lender is using the prime rate as an index, it would add on fractions of percentage points or more based on factors in your specific credit profile. Those factors can include your credit, how much you are borrowing, the value of the home, and other data.
The prime rate—and mortgage rates in general—can rise or fall on average for many reasons. At one point during the COVID-19 pandemic, for example, the Federal Reserve lowered the federal funds rate to 0 to 0.25%, which could have impacted mortgage loans issued during that time.
The Consumer Financial Protection Bureau provides a tool that lets you explore what the average lender is offering at various times. You enter a credit score range, state, home price, down payment amount, and terms of the loan. The CFPB uses its database of lenders to let you know what rates banks are offering on those loans at that time.
Car loan interest rates vary widely—often more than mortgage rates do. Lenders are more likely to take a chance on someone with poorer credit buying a car because the amount is much less than a typical mortgage. But those lenders hedge their bets by charging higher interest rates.
According to data published by the Federal Reserve, 48-month new car loans through commercial banks had an average 5.21% interest rate in the first quarter of 2021. From 2017 through 2020, the average ranged from as low as 4.42% to 5.5%.
If your interest is around those averages or lower, then it’s probably a good rate. However, you can always check current Federal Reserve averages or shop around to find a better APR if you think an offer isn’t ideal.
The Federal Reserve’s data also included average credit card interest. For the first quarter of 2021, the average was 14.575%. From 2018 through 2020, that number fluctuated between 13.63% and 15.13%, so it’s a good bet anything below 15% is average or better.
Credit cards that were assessed interest had higher average APRs—15.91% was the average in the first quarter of 2021 and got as high as 17.14% between 2018 and 2020.
Personal loans are typically unsecured. That means there’s nothing the creditor can repossess and sell to make back some of its loss if you don’t pay the loan. Because of that, the interest rates on these loans are typically higher than those on an auto or mortgage loan might be. They do tend to be lower than credit card rates, though.
The National Credit Union Administration publishes average rates for different types of investments and loans periodically. On March 27, 2020, the average rates for unsecured loans with a term of three years were published. The average rate for loans from credit unions was 9.28%. The average for loans from banks was 10.21%.
Again, with excellent credit and a strong income, you may be able to get rates better than this. However, if your rates are at or lower than these amounts, they may be “good.”
What you pay in student loan interest rates depends heavily on the type of loan you have. Federal student loan rates are often set without regard to the borrower’s credit, for example.
From March 13, 2020, through at least September 30, 2021, the interest rates on many federal student loans have been set to 0% due to COVID-19. This was one of the economic provisions of the CARES Act.
Barring another federal stimulus package that makes changes to student loan interest rates, loans distributed between July 1, 2021, and July 1, 2022, have the following rates.
Private student loans are often based on credit scores and other factors. If you’re eligible for federal student loans, the only private student loan rates that are “good” could arguably be those that are lower than the federal rates at that time.
It’s important to understand interest rates, because they are a major determining factor in how much your debt will cost you. The right rate for you depends on your credit history and goals.
Before you apply for loans or settle for what might seem like a high rate, ensure you know what your credit score is. You can sign up for ExtraCredit to get access to 28 of your FICO® scores. These are often the types of scores mortgage lenders, auto lenders, and credit card lenders look at, so you’ll be better prepared to understand the offers you’re being made.