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What is the Average Personal Loan Interest Rate?

A personal loan interest rate refers to the percentage of the loan amount that a lender charges the borrower as the cost of borrowing.

It is the additional amount that borrowers must pay in addition to the loan principal when repaying the loan. The interest rate is typically expressed as an annual percentage rate (APR) and is calculated based on various factors, including the borrower's creditworthiness, loan amount, loan term, and prevailing market conditions.

The interest rate on a personal loan determines the total amount of interest you will pay over the life of the loan.

A higher interest rate means higher monthly payments and a greater overall cost of borrowing. Conversely, a lower interest rate reduces your monthly payments and saves you money in interest charges.

Lenders assess the interest rate based on the risk they perceive in lending to a particular borrower.

Borrowers with excellent credit scores and a strong credit history are generally offered lower interest rates as they are considered less risky to lend money to.

Fixed vs Variable Personal Loan Interest Rates

Fixed and variable interest rates are two common types of interest rates offered on personal loans. Understanding the differences between them can help you make an informed decision when choosing a loan. Here are the key distinctions between fixed and variable personal loan interest rates:

Fixed Interest Rate:

Some of the features of a fixed interest rate include:


A fixed interest rate remains the same throughout the entire loan term. This means your monthly payments and the total interest paid over the life of the loan will remain unchanged.


With a fixed rate, you have the advantage of knowing exactly how much you need to budget for your loan payments each month. This can provide stability and predictability in managing your finances.

Rate Lock

When you choose a fixed interest rate, you lock in that rate at the time of borrowing. This protects you from potential increases in interest rates in the future.

Potential Trade-Off

Fixed interest rates tend to be slightly higher than the initial rates of variable interest loans. This is because they offer the benefit of rate stability and protection against rate hikes.

Variable Interest Rate

The situation is however different with variable interest rates. Some of its key features include:


A variable interest rate can change over time, typically in response to changes in the benchmark interest rate set by the Central Bank of Nigeria or other market conditions. As a result, your monthly payments and the total interest paid can vary throughout the loan term.

Initial Savings

Variable interest rates often start lower than fixed rates, which can result in lower initial monthly payments and interest costs.

Risk and Uncertainty

The variability of variable interest rates introduces a level of risk and uncertainty. If interest rates rise, your loan payments and the overall cost of borrowing may increase.

Potential Benefits

In certain situations, variable interest rates may decrease, leading to lower monthly payments and potential interest savings. However, the timing and extent of these decreases are not guaranteed.

Deciding between fixed and variable interest rates depends on your personal circumstances, risk tolerance, and market conditions.

If you prefer stability and predictability, a fixed interest rate might be more suitable. On the other hand, if you are comfortable with potential fluctuations and initial savings, a variable interest rate could be considered.

It's important to carefully review and understand the terms and conditions associated with any loan, particularly regarding interest rate adjustments, rate caps, and potential fees, to make an informed decision.

The truth about personal loan interest rates in Nigeria

Personal loan rates can vary widely depending on various factors, including the borrower's creditworthiness, the loan amount, the loan term, and the lender's policies.

These rates can change over time and may differ based on the specific circumstances of the borrower.

The average personal loan interest rates in Nigeria ranges from around 7% to 36%. However, it's important to understand that these rates are just averages and individual rates can be higher or lower than the average based on the factors mentioned earlier.

Generally, borrowers with excellent credit scores (typically considered above 750) and a strong credit history tend to qualify for the lowest interest rates.

On the other hand, borrowers with lower credit scores or less favourable credit profiles may be offered higher interest rates to compensate for the perceived risk.

Loan terms can also affect the interest rate. Shorter-term loans, such as those with a repayment period of one to three years, often have lower interest rates compared to longer-term loans. Lenders may charge higher rates for longer-term loans to mitigate the risk associated with a more extended repayment period.

It's worth noting that the lending landscape can change over time, and interest rates may fluctuate due to market conditions and other factors.

nairaCompare has tools that can show you the most accurate and up-to-date information on personal loan rates. Visit nairaCompare to compare interest rates of personal loans and apply for a loan that suits you.

Average Personal Loan interest rate by credit score

Lenders will consider a variety of factors when determining your interest rate, including your credit score, income, and employment history.

Here are some average personal loan interest rates in Nigeria by credit score:

It is important to note that these are just averages and the actual interest rate you are offered may vary depending on your individual circumstances.

Average Personal Loan interest rate in Nigeria by banks

Personal loan interest rates in Nigeria also vary depending on the bank.

Here are some average interest rates for personal loans from some of the leading banks in Nigeria:

Average Personal Loan interest rate by digital lenders

Because of their mode of operations, digital lenders in Nigerian are known to have lower lending rates for personal loans.

Lending platforms in Nigeria offer loans at an average monthly interest rate of 5%.

Expectedly, the loan rates vary depending on the lender, the amount of the loan, and the borrower's credit score.

Here are some average interest rates for personal loans from some of the leading digital lenders in Nigeria:

Tips for lowering your personal loan interest rate

Lowering your personal loan interest rate can help you save money over the life of the loan.

Here are some tips that may help you achieve a lower interest rate:

Improve your credit score

Lenders often offer better interest rates to borrowers with higher credit scores. To improve your credit score, focus on paying your bills on time, reducing your overall debt, and maintaining a low credit utilization ratio.

Shop around and compare lenders

Different lenders may offer varying interest rates and terms for personal loans. Take the time to research and compare offers from multiple lenders to find the most favourable rate. Consider both traditional banks and online lenders. Visit nairaCompare to compare rates and select the one that’s best for you!

Consider a secured loan

Personal loans can be either unsecured or secured. Secured loans are backed by collateral, such as a savings account or a vehicle. By offering collateral, you may be able to secure a lower interest rate.

Shorten the loan term

Opting for a shorter repayment period can lead to a lower interest rate. While your monthly payments may be higher, you'll end up paying less interest over the life of the loan.

Review your debt-to-income ratio

Lenders consider your debt-to-income ratio when determining loan terms. Lowering your overall debt or increasing your income can help improve this ratio, potentially leading to a better interest rate.

Automatic payment discounts

Some lenders offer interest rate discounts if you set up automatic payments from your bank account. This can be a simple way to lower your interest rate.

Remember, while these tips may help you lower your personal loan interest rate, the final rate will ultimately depend on various factors including your creditworthiness and the lender's policies.

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