Need a personal loan ? You might want to sign one ASAP

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Lock in that loan before borrowing rates start to skyrocket.


Key points

  • One of the advantages of personal loans is that they come with fixed interest rates.
  • But those rates could soon spike, so if you need a loan, you better act fast.

When you need money, it’s usually a good idea to borrow in a way that gives you predictable monthly payments. In most cases, this means avoiding credit card debt, as credit card interest can be both expensive and variable.

Even HELOCs (home equity lines of credit) can be dangerous from a borrowing perspective. While they are certainly flexible, they also come with variable interest rates, which makes them harder to repay.

Personal loans, on the other hand, offer the advantage of fixed interest rates. So when you take out a personal loan, you don’t have to worry about your monthly payments increasing over time. It could make managing your loan easier and help you avoid a world of stress.

But if you’re going to take out a personal loan and take advantage of a borrowing option with a fixed interest rate, you might want to do it fast. There’s reason to believe that personal loans are about to get more expensive, so the sooner you act, the less risk you have of ending up with a rate that just isn’t affordable.

Borrowing rates are rising overall

Inflation has wreaked havoc on consumers for months. And now the Federal Reserve is doing what it can to break this cycle.

Specifically, the Fed is implementing interest rate hikes in an effort to make borrowing more expensive. The logic is that if it becomes too expensive to finance purchases or go into debt, consumers will start spending less. And once they do, the demand for goods will not exceed the available supply as it is now, allowing inflation levels to subside.

Now, to be clear, the Fed does not directly set consumer borrowing rates. Instead, it oversees the federal funds rate, which is what banks charge each other for short-term borrowing. But when it becomes more expensive for banks to borrow, they tend to pass those costs on to consumers. And so it’s fair to say that the Fed is indirectly raising consumer borrowing rates and making loans more expensive.

That’s why it’s important to act quickly if you’re interested in a personal loan. If you wait a month or two, you could end up with a higher interest rate on that debt — and higher monthly payments to go along with it.

Is the personal loan your best bet?

If you own a home in which you have equity, you may get a lower interest rate on a home equity loan than a personal loan. And like personal loans, home equity loans offer the advantage of fixed interest rates and predictable monthly payments.

But if you don’t own a home or don’t have any equity to tap into, a personal loan could be a good way to borrow, especially if you have a solid credit score. Don’t put off this request for too long, because if you do, you might end up unhappy with the monthly payments you’re stuck with.

The Ascent’s Best Personal Loans for 2022

Our team of independent experts have pored over the fine print to find the select personal loans that offer competitive rates and low fees. Start by reviewing The Ascent’s best personal loans for 2022.

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