When lenders look at a loan application, they assign the borrower an annual percentage rate, or APR, based on the type of loan, the applicant's credit score, and other factors. The better your credit, income and borrowing habits, the lower your APR is likely to be.
Many people confuse APRs with interest rates and while the two are closely related, there are key differences.
Here's what to know about APRs, including how banks set them and how you get approved for a lower one.
What is an APR?
An APR, or annual percentage rate, is the yearly cost of borrowing money, expressed as a percentage. Because it typically includes both the interest rate and certain lender charges, like an origination fee, it gives you a more complete picture of what a loan or credit card costs than just the advertised interest rate.
A loan with a lower interest rate may come with higher fees, making it more expensive overall than a loan with a higher advertised APR.
When deciding what APR to charge, banks start with the prime rate, which is determined by the Federal Open Market Committee and is about the lowest rate you can expect to get on mortgages and some other types of loans if you have a good or excellent credit score.
How do banks decide your APR?
Financial institutions determine your APR based on several factors, including your credit score, income, debt-to-income ratio, the loan amount and repayment terms. They also consider the type of loan, current market interest rates and any applicable fees.
In general, borrowers with higher credit scores and lower debt levels qualify for lower APRs, while applicants who are considered higher-risk borrowers face a higher rate.
How to get a lower APR
If you are planning to apply for a loan or credit card, there are several ways you can improve the chances of being offered a lower APR.
Improve your credit: Look at your credit score and credit reports from all three reporting bureaus. A FICO score of 740 or higher is considered "very good" or "excellent" and will typically qualify for lowest personal loan APRs. If there's room for improvement, work to raise your score: Make sure you are making bill payments on time, since payment history accounts for 35% of your credit score.
Look at your credit utilization rate, which is the amount of credit you're using compared to your overall limit across all your accounts. Paying down your debts until your rate is below 40% can help you earn a more favorable APR, while a utilization rate of 10% is often considered ideal.
Take out a secured loan: You can often get a lower APR by securing your loan with collateral , like your house, car or savings. Because you're offering something of value to guarantee you'll make payments, lenders are taking on less risk.
With an auto-secured loan, you pledge your car, truck or other vehicle as collateral and the lender places a lien on the title until you pay off the balance. OneMain Financial and Upgrade allow borrowers to use their vehicle as collateral.
We like that Upgrade considers borrowers with fair credit and allows you to apply with a co-borrower, which can improve your odds of approval and receiving favorable rates. The maximum interest rate is on the high side, however.
- Accepts applicants with fair credit
- Approves loans of up to $75,000
- Discount for having creditors paid directly
- Funding in as little as one day
- Accepts co-borrowers
- High maximum interest rate
- Origination fee of up to 9.99%
- No physical branches
Why Upgrade is the best for financial literacy:
- Free credit score simulator to help you visualize how different scenarios and actions may impact your credit
- Charts that track your trends and credit health over time, helping you understand how certain financial choices affect your credit score
- Ability to sign up for free credit monitoring and weekly VantageScore updates
We like that OneMain accepts borrowers with bad credit and offers secured loans and fast funding. However, its minimum APR is on the high side and the $30,000 financing maximum may be too low if you need a larger loan.
- Approves applicants with bad/fair credit
- Same-day funding available
- Can apply with collateral
- Co-applicants allowed
- High origination fee
- High minimum interest rate
- No autopay discount
- Co-signers not allowed
*You must complete a loan application and continue to meet any criteria used to select you for a loan offer. Not all applicants are approved. Loan approval and actual loan terms depend on applicant's state of residence and ability to meet OneMain Financial credit standards such as a responsible credit history, sufficient income after monthly expenses, and if applicable, availability of eligible collateral.
Not all approved applicants qualify for larger loan amounts, lower APRs, or the most favorable loan terms. For example, larger loan amounts typically require a first lien on a motor vehicle that is no more than ten years old, meets our value requirements, and is titled in applicant's name with valid insurance. APRs are generally higher on loans not secured by a vehicle.
Example Loan: A $6,000 loan with a 24.99% APR that is repayable in 60 monthly installments would have monthly payments of $176.07.
OneMain charges origination fees allowed by law. Depending on the state where the loan is opened, the origination fee may be either a flat amount or a percentage of the loan amount. Flat fees vary by state, ranging from $25 to $500. Percentage-based fees vary by state, ranging from 1% to 10% of the loan amount subject to certain state limits on the fee amount.
For information about these fees and minimum and maximum loan sizes available in certain states, visit omf.com/loanfees.
Current OneMain Customers: Loan offers presented to a consumer assume the individual has no active loan with OneMain or one of its affiliates. If a customer applies for a new loan offer, a OneMain representative will discuss available options.
Active-duty military, their spouse or dependents covered by the Military Lending Act (MLA) may not pledge any vehicle as collateral. If you are covered by the MLA, you are not eligible for secured loans.Loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB's Regulation Z such as college, university or vocational expense; for any business or commercial purpose; to purchase cryptocurrency assets, securities, derivatives or other speculative investments; or for gambling or illegal purposes.
Time to Fund Loans: Funding within one hour after loan closing through SpeedFunds® must be disbursed to a bank-issued debit card. Disbursement by check or ACH may take up to 1-2 business days after closing.
First Tech Federal Credit Union approves secured loans starting at $500, using your savings account balance as collateral. U.S. Bank allows you to secure a personal loan with a CD., with no origination fee and same-day funding available for eligible borrowers who already have a U.S. Bank account.
We like that secured loans can be approved for up to $500,000 and that borrowers are able to defer their first payment for up to 45 days. It also offers optional loan payment protection, which lets you pause or cancel payments if you face a major life hardship
- No origination fee.
- Co-signers are allowed.
- Funds often available the same day.
- Up to $500,000 available for secured loans.
- Membership only requires joining the Financial Fitness Association, with fee waived.
- Unsecured loans are capped at $50,000.
- Physical branches are limited to a few states.
U.S. Bank's Simple Loan is a great option for existing customers who want a small loan with no origination or late fees.
- Funds are deposited within minutes of approval
- No origination fee or late fee
- Instead of an interest rate, loans have a low borrowing fee of $6 per $100
- Must have a U.S. Bank checking account
- Low loan cap of $1,000
- Must wait 30 days between loans
Add a co-applicant: Another applicant with good credit can improve your chances of getting a lower APR. Both SoFi and Happen Bank accept co-borrowers and claim loans can be funded as quickly as 24 hours after signing.
We like that SoFi has high loan caps and doesn't charge any origination fee, so borrowers get the full amount funded. The credit requirements can be stringent, however, and interest rates for weaker applicants are on the higher side.
- Loans approved for up to $100,000
- No origination fee or late fee
- Next-day funding available
- Accepts co-borrowers
- Minimum loan amount is $5,000
- High APR for fair/low credit
Fixed rates from 8.74% APR to 35.49% APR. APR reflect the 0.25% autopay interest rate discount and a 0.25% SoFi Plus interest rate discount. SoFi Platform personal loans are made either by SoFi Bank, N.A. or, Cross River Bank, a New Jersey State Chartered Commercial Bank, operating from its Delaware branch, Member FDIC, Equal Housing Lender. SoFi may receive compensation if you take out a loan originated by Cross River Bank. These rate ranges are current as of 02/23/26 and are subject to change without notice. Not all rates and amounts available in all states. See SoFi Personal Loan eligibility details at https://www.sofi.com/eligibility-criteria/#eligibility-personal. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors.
Formerly LendingClub, Happen Bank offers competitive rates on a wide range of loan amounts, with funds available in as little as 24 hours after final approval.
- Accepts borrowers with fair credit.
- High loan limit of $75,000.
- Funds may be available in as little as 24 hours.
- Repayment terms range from two to seven years.
- Co-borrowers are permitted.
- Origination fee of 2% to 6%.
- No autopay discount.
- No physical branches
FAQs
What affects your APR?
Your credit score, debt-to-income ratio and income can all affect your APR, as can the loan type, amount and repayment terms. Lenders also consider market interest rates and applicable fees when setting borrowing costs.
Why is my APR higher than the advertised rate?
Advertised rates are often the lowest rates available to borrowers who meet specific credit and eligibility requirements. Your APR may be higher based on your credit score, the loan terms and applicable fees.
Is an APR the same as an interest rate?
No, an interest rate is only the cost of borrowing the principal, while APR generally includes the interest rate and certain fees, expressed as an annual percentage. An APR can better help you compare the overall cost of similar loans.
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