About Interest Rates on Personal Loans

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Interest rates on unsecured personal loans are often higher than on secured loans due to the higher amount of risk associated with the loan. Find out how the interest rates on personal loans are not tax deductible with information from a financial adviser in this free video on personal loans.

Part of the Video Series: Credit Cards & Personal Loans
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Video Transcript

Hi. This is Matt McKillen with Innovated Financial Group. A question posed to me today was, what type of interest rates are available on personal loans? Well, first off I want to explain that a personal loan is a loan where someone applies for a certain sum of money, generally it's no more than maybe five to ten thousand dollars and it's based only on a signature. There's generally no collateral involved. It's not a car secured loan. It's not a home equity loan secured by property. So you're basically asking the bank to give you a loan with no type of collateral based on a signature and maybe your credit history. On average the personal loan rates are generally higher than the rates that are available on a secured loan because it is a riskier loan for the banks to take. The other difference about interest rates on personal loans is that they're not tax deductible. For example, a loan that is taken out on a signature to purchase a car or do some home improvements, that interest is not deductible per the IRS on your tax return. Whereas, you take a home equity loan which is a loan secured by your property which is generally a better rate, that interest is usually 95% of the time deductible. So that's another difference between interest rates on personal loans. Again, my name is Matt McKillen and I'm with Innovated Financial Group.

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