How to lower your personal loan rate and total cost
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- Personal loans can help give you access to a lump sum of funding, but there is a borrowing cost involved.
- Finding and qualifying for a more favorable personal loan rate is one way to lower the cost of your loan.
- Some ways to reduce your loan rate or cost include improving your credit, refinancing, comparing lenders, and making additional payments to shorten your loan term and pay less interest.
If you are in the market for a personal loan, you may be wondering: how can you reduce your total loan cost? You’ve probably heard that getting a lower rate offer is one way to minimize your borrowing costs. There are a few things you can do to lower your personal loan rate or pay less over the life of the loan.
Learn how strategies such as improving your credit, comparing lenders, and refinancing can affect your loan costs.
Total loan cost is made up of the principal, interest, and any additional fees. Here’s a more in-depth look at the main components of your total loan cost.
- Principal: This is the sum of money you borrow, or the total funding amount that the lender deposits into your account.
- Interest: This is the cost of borrowing, or the amount charged to you by the lender. Personal loans typically have fixed interest rates that remain the same over the life of the loan.
- Fees: Some lenders charge fees to borrowers, including origination fees, application fees, or penalty fees (such as for late or missed payments).
The annual percentage rate (APR) reflects the annual cost of borrowing and may include certain fees in addition to interest.
The other important factor that impacts loan cost is the loan term, or the length of the loan. The longer the loan term, the higher your total loan cost will be because you will be paying interest for a longer period of time.
Lenders typically have an interest rate range for their products, with rates generally varying based on an applicant’s creditworthiness and other factors. Credit scores are one factor lenders may use to assess an applicant’s creditworthiness.
Credit scores can be affected by factors such as payment history, amounts owed, length of credit history, credit mix, and recent credit activity.
If you’re thinking of applying for a personal loan, tracking and understanding your credit score and improving your credit may help strengthen your application and could help you qualify for more competitive terms. Check your credit reports and correct any errors, continue paying bills on time, and work to reduce your outstanding credit card balances.
Another way to lower your personal loan cost is by shopping around to compare loan offers. Some borrowers skip this step and accept the first loan offer they receive, and they could be missing out on lower-cost loan options.
Many lenders allow you to explore personal loan offers or request quotes online. Some lenders offer prequalification using a soft credit inquiry, which generally does not affect your credit score.
Once you have a few loan comparisons in front of you, you can decide which one may best fit your needs.
Refinancing may be worth considering if you can qualify for more favorable loan terms. If you are able to qualify for a lower rate via a refinance, you may be able to lower your monthly payment and/or reduce the overall cost of your loan. For example, if you took a personal loan a couple of years ago when your credit wasn’t strong but now your score has improved, you might be able to find a lower rate by refinancing.
Compare the costs of refinancing with the potential savings to determine if refinancing makes financial sense for you. For example, if the interest rate drop isn’t significant enough to offset any fees, it may not be worth pursuing. Also, if refinancing extends the loan term, your monthly payment could decrease, though you may end up increasing your total loan cost.
The big question that most borrowers have is: How can you reduce total loan cost? One way is to pay down the loan faster by making extra principal payments. Here are a couple of reasons additional principal payments may reduce your borrowing costs.
- For loans where interest accrues based on the outstanding principal balance, reducing that balance faster may reduce the total interest you pay.
- Shortening your loan term by paying it off earlier means you may pay less interest overall.
First, check with your lender to understand how extra payments are applied to your loan balance. Second, confirm that your lender does not charge a prepayment penalty.
Get the funds you need with a personal loan
If you’re trying to keep your overall borrowing costs lower, then consider choosing a shorter loan term. The longer your loan term, the longer you’ll pay interest, which can increase your total borrowing costs.
However, you also need to balance potential savings against choosing a monthly payment you can comfortably afford. Longer terms are sometimes attractive because they reduce the minimum monthly payment required, which can mean less strain on your budget. Choose a term with a monthly payment that fits comfortably within your budget, including room for unexpected expenses.
When you take out a personal loan, enrolling in autopay may have several benefits. For example, some lenders offer an interest-rate discount for enrolling in autopay.
Autopay may also help reduce the risk of accidentally missing a payment, provided sufficient funds are available in the linked account. This can help you avoid late fees (if applicable) and potential negative effects on your credit history or score.
When comparing personal loans, consider the interest rate alongside fees, repayment terms, monthly payments, and total borrowing costs. In some situations, there may be limited opportunities to lower your personal loan rate. These can include:
- You were already offered the lender’s lowest available rate. If you qualify for the lender’s lowest available rate and have already used any available rate discounts, there may be limited opportunities to reduce your rate further.
- You don’t have time to make significant credit improvements. Changes to your credit profile can take time, and improving your credit doesn’t guarantee a lower loan rate.
If you are not able to get a lower personal loan rate, there are still strategies you can use to reduce your borrowing cost. For example, making additional payments when your budget allows may help you save on interest overall.
- Fixed-rate personal loans with terms from 12 to 84 months can help cover large expenses, consolidate eligible high-interest debt , or pay for emergency expenses
- Same-day credit decisions for some applicants, no origination fee, no closing fee, and no prepayment penalty
- Rate discounts with AutoPay from qualifying Wells Fargo accounts
- Most customers receive funds the same day they're approved
Representative example of repayment terms for an unsecured personal loan: For $15,000 borrowed over 48 months at 14.99% Annual Percentage Rate (APR), the monthly payment is $417. This example is an estimate only and assumes all payments are made on time.
Before you apply, we encourage you to carefully consider whether consolidating your existing debt is the right choice for you. Consolidating multiple debts means you will have a single payment monthly, but it may not reduce or pay your debt off sooner. The payment reduction may come from a lower interest rate, a longer loan term, or a combination of both. By extending the loan term, you may pay more in interest over the life of the loan. By understanding how consolidating your debt benefits you, you will be in a better position to decide if it is the right option for you. New credit accounts are subject to application, credit qualification, and income verification.
Late fees may still be assessed.
To qualify for a customer relationship discount, you must have a qualifying Wells Fargo consumer checking account and make automatic payments from a Wells Fargo deposit account. To learn which accounts qualify for the discount, please consult with a Wells Fargo banker or consult our FAQs. If automatic payments are canceled, for any reason at any time, after account opening, the interest rate and the corresponding monthly payment may increase. Only one relationship discount may be applied per application.
On average, 97% of customers received their funds the day they signed for their personal loan. (Based on data from July – September 2026).
You must be a Wells Fargo account holder of an eligible Wells Fargo consumer account with a FICO® Score available, and enrolled in Wells Fargo Online®. Eligible Wells Fargo consumer accounts include deposit, loan, and credit accounts, but other consumer accounts may also be eligible. Contact Wells Fargo for details. Availability may be affected by your mobile carrier's coverage area. Your mobile carrier's message and data rates may apply.
Please note that the score provided under this service is for educational purposes and may not be the score used by Wells Fargo to make credit decisions. Wells Fargo looks at many factors to determine your credit options; therefore, a specific FICO® Score or Wells Fargo credit rating does not guarantee a specific loan rate, approval of a loan, or an upgrade on a credit card.
Wells Fargo and Fair Isaac are not credit repair organizations as defined under federal and state law, including the Credit Repair Organizations Act. Wells Fargo and Fair Isaac don’t provide credit repair services or advice or assistance with rebuilding or improving your credit record, credit history, or credit rating.
FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.
Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.
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