Is a 5.99% APR a Good Rate for a Loan?

The Annual Percentage Rate (APR) represents the true cost of borrowing money, encompassing the interest rate and certain associated fees. This article evaluates whether a 5.99% APR is a favorable rate for various loan products.

Understanding Annual Percentage Rate

Annual Percentage Rate (APR) reflects the total yearly cost of a loan, expressed as a percentage. It includes the nominal interest rate charged on the principal amount, plus additional fees that a borrower pays to obtain the loan. This comprehensive calculation provides a more complete picture of borrowing costs than the interest rate alone.

The calculation of APR annualizes these costs over the loan’s term, allowing for a standardized comparison between different loan offers. Fees commonly included in APR calculations are loan origination fees, underwriting fees, and document preparation fees. However, some fees, such as credit report fees, appraisal fees, title fees, and certain prepaid expenses like property taxes or homeowner’s insurance, are generally not included in the APR. While APR offers a broader view than the interest rate, it does not always capture every single cost associated with a loan.

Factors That Influence Your APR

Several factors determine the Annual Percentage Rate a borrower receives. A borrower’s credit score is a significant determinant, as a higher score indicates lower risk to lenders and often translates into a lower APR. The type of loan also influences APRs, with secured loans like mortgages and auto loans typically carrying lower rates than unsecured options such as personal loans or credit cards due to the collateral involved.

Broader economic conditions and market interest rates, influenced by central bank policies, also play a role in setting APRs. Lender-specific policies mean that different financial institutions may offer varying APRs for similar loan products, even to borrowers with comparable credit profiles. This highlights the benefit of comparing offers from multiple lenders.

Benchmarking 5.99% APR

Evaluating whether a 5.99% APR is a good rate depends heavily on the specific loan type and current market conditions. For new auto loans, the average APR in the first quarter of 2025 was around 6.73%. A 5.99% APR for a new car loan would be considered competitive, especially for borrowers with excellent credit, who might see rates around 5.18%. For a used car loan, where the average APR was 11.87% in the first quarter of 2025, a 5.99% APR would be an exceptionally favorable rate.

For personal loans, the average interest rate for a two-year loan in late 2024 was approximately 12.32%. While personal loan APRs can range widely, from under 6% to 36%, a 5.99% APR would be at the lower end of this spectrum, often reserved for borrowers with excellent credit. Some lenders offer personal loan rates as low as 6.74%.

For a 30-year fixed-rate mortgage, the average APR as of August 30, 2025, was about 6.61%. A 5.99% APR for a mortgage would be considered a good rate, especially for a fixed-rate product, as it falls below the average. For credit cards, the average APR in August 2024/2025 ranged from approximately 20.12% to 24.35%. A 5.99% APR on a credit card would be an extraordinarily rare and low rate, indicating an exceptional introductory offer.

Comprehensive Loan Evaluation

Beyond the Annual Percentage Rate, a comprehensive loan evaluation considers the total cost of borrowing over the loan’s lifetime. While APR standardizes certain fees, the cumulative amount of principal, interest, and other charges paid ultimately determines the overall expense.

The loan term, or repayment period, significantly impacts both monthly payments and the total interest accrued. A longer term can lead to lower monthly payments but typically results in more interest paid over the life of the loan, even with the same APR. A shorter term usually means higher monthly payments but less total interest. Other fees not always included in the APR, such as late payment charges or prepayment penalties, can also affect the overall financial outlay. Borrowers should also assess their personal financial situation, including their budget and debt-to-income ratio, to ensure that the proposed monthly payments are manageable and align with their financial goals.