Finance

This week’s personal loan rates rise for 3-year terms, while 5-year terms fall

Published

4 months ago

August 29, 2024

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The latest trends in interest rates for personal loans from the Credible marketplace, updated weekly. (iStock)

Borrowers with good credit seeking personal loans during the past seven days prequalified for rates that were higher for 3-year loans and lower for 5-year loans when compared to fixed-rate loans for the seven days before.

For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender between August 22 and August 28:

Rates on 3-year fixed-rate loans averaged 16.08%, up from 15.85% the seven days before and from 15.20% a year ago.
Rates on 5-year fixed-rate loans averaged 21.14%, down from 21.61% the previous seven days and up from 20.13% a year ago.

Personal loans have become a popular way to consolidate debt and pay off credit card debt and other loans. They can also be used to cover unexpected and emergency expenses like medical bills, take care of a major purchase, or fund home improvement projects.

Average personal loan interest rates

Average personal loan interest rates have increased over the last seven days for 3-year loans and decreased for 5-year loans. While 3-year loan rates jumped up by 0.23 percentage points, rates on 5-year loans plummeted by 0.47 percentage points. Interest rates for 3- and 5-year terms remain higher than they were this time last year, up 0.88 percentage points for 3-year terms and up 1.01 percentage points for 5-year terms.

Still, borrowers can take advantage of interest savings with a 3- or 5-year personal loan, as both loan terms offer lower interest rates on average than higher-cost borrowing options such as credit cards.

But whether a personal loan is right for you depends on multiple factors, including what rate you can qualify for, which is largely based on your credit score. Comparing multiple lenders and their rates helps ensure you get the best personal loan for your needs.

Before applying for a personal loan, use a personal loan marketplace like Credible to comparison shop.

Personal loan weekly rate trends

Here are the latest trends in personal loan interest rates from the Credible marketplace, updated weekly.

The chart above shows average prequalified rates for borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender.

For the month of July 2024:

Rates on 3-year personal loans averaged 23.60%, up from 23.02% in June.
Rates on 5-year personal loans averaged 25.06%, up from 24.81% in June.

Rates on personal loans vary considerably by credit score and loan term. If you’re curious about what kind of personal loan rates you may qualify for, you can use an online tool like Credible to compare options from different private lenders.

All Credible marketplace lenders offer fixed-rate loans at competitive rates. Because lenders use different methods to evaluate borrowers, it’s a good idea to request personal loan rates from multiple lenders so you can compare your options.

Current personal loan rates by credit score

In July, the average prequalified rate selected by borrowers was:

13.38% for borrowers with credit scores of 780 or above choosing a 3-year loan
32.38% for borrowers with credit scores below 600 choosing a 5-year loan

Depending on factors such as your credit score, which type of personal loan you’re seeking and the loan repayment term, the interest rate can differ.

As shown in the chart above, a good credit score can mean a lower interest rate, and rates tend to be higher on loans with fixed interest rates and longer repayment terms.

Where are interest rates headed?

The Bureau of Labor Statistics (BLS) reported that inflation slowed in May, raising hopes for multiple interest rate cuts in 2024. When the Fed concluded its June meeting, it signaled one cut by the end of the year while holding rates steady. As of now, we anticipate one 25 basis point (0.25 percentage points) cut this year, and a 100 basis point (1 percentage point) cut in 2025.

Currently sitting at 5.25% to 5.50%, the federal funds rate is the highest it’s been since 2001. Sticky inflation and low unemployment had made any cuts seem unlikely as of a week ago. But the news may deliver relief for borrowers burdened with high interest costs and those considering a loan. However, demand for personal loans has increased and all signs point to this trend continuing, while debt levels and delinquency rates have risen as well. This may indicate more consumers will struggle to be approved at low rates or at all — even if we see rates fall.

How to get a lower interest rate

Many factors influence the interest rate a lender might offer you on a personal loan. But you can take some steps to boost your chances of getting a lower interest rate. Here are some tactics to try.

Increase credit score

Generally, people with higher credit scores qualify for lower interest rates. Steps that can help you improve your credit score over time include:

Pay bills on time: Payment history is the most important factor in your credit score. Pay all your bills on time for the amount due.
Check your credit report: Look at your credit report to ensure there are no errors on it. If you find errors, dispute them with the credit bureau.
Lower your credit utilization ratio: Paying down credit card debt can improve this important credit-scoring factor.
Avoid opening new credit accounts: Only apply for and open credit accounts you actually need. Too many hard inquiries on your credit report in a short amount of time could lower your credit score.

Choose a shorter loan term

Personal loan repayment terms can vary from one to several years. Generally, shorter terms come with lower interest rates, since the lender’s money is at risk for a shorter period of time.

If your financial situation allows, applying for a shorter term could help you score a lower interest rate. Keep in mind the shorter term doesn’t just benefit the lender – by choosing a shorter repayment term, you’ll pay less interest over the life of the loan.

Get a cosigner

You may be familiar with the concept of a cosigner if you have student loans. If your credit isn’t good enough to qualify for the best personal loan interest rates, finding a cosigner with good credit could help you secure a lower interest rate.

Just remember, if you default on the loan, your cosigner will be on the hook to repay it. And cosigning for a loan could also affect their credit score.

Compare rates from different lenders

Before applying for a personal loan, it’s a good idea to shop around and compare offers from several different lenders to get the lowest rates. Online lenders typically offer the most competitive rates – and can be quicker to disburse your loan than a brick-and-mortar establishment.

But don’t worry, comparing rates and terms doesn’t have to be a time-consuming process.

Credible makes it easy. Just enter how much you want to borrow and you’ll be able to compare multiple lenders to choose the one that makes the most sense for you.

About Credible

Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options – without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 7,500 positive Trustpilot reviews and a TrustScore of 4.8/5.

Finance

Fed Governor Bowman says December interest rate cut should be the last

Published

16 hours ago

January 9, 2025

Business Finance News

Michelle Bowman, governor of the U.S. Federal Reserve, speaks during the Exchequer Club meeting in Washington, D.C., on Feb. 21, 2024.

Kent Nishimura | Bloomberg | Getty Images

Federal Reserve Governor Michelle Bowman said Thursday she supported the recent interest rate cuts but doesn’t see the need to go any further.

In a speech to bankers in California that was part monetary policy, part regulation, Bowman said concerns she has that inflation has held “uncomfortably above” the Fed’s 2% goal lead her to believe that the quarter percentage point reduction in December should be the last one for the current cycle.

“I supported the December policy action because, in my view, it represented the [Federal Open Market Committee’s] final step in the policy recalibration phase,” the central banker said in prepared remarks. Bowman added that the current policy rate is near what she thinks of as “neutral” that neither supports nor restrains growth.

Despite the progress that has been made, there are “upside risks to inflation,” Bowman added. The Fed’s preferred inflation gauge showed a rate of 2.4% in November but was at 2.8% when excluding food and energy, a core measure that officials see as a better long-run indicator.

“The rate of inflation declined significantly in 2023, but this progress appears to have stalled last year with core inflation still uncomfortably above the Committee’s 2 percent goal,” Bowman added.

The remarks come the day after the FOMC released minutes from the Dec. 17-18 meeting that showed other members also were concerned with how inflation is running, though most expressed confidence it will drift back towards the 2%, eventually getting there in 2027. The Fed sliced a full percentage point off its key borrowing rate from September through December.

In fact, other Fed speakers this week provided views contrary to that of Bowman, who is generally regarded as one of the committee’s more hawkish members, meaning she prefers a more aggressive approach to controlling inflation that includes higher interest rates.

In a speech delivered Wednesday in Paris, Governor Christopher Waller had a more optimistic take on inflation, saying that imputed, or estimated, prices that feed into inflation data are keeping rates high, while observed prices are showing moderation. He expects “further reductions will be appropriate” in the Fed’s main policy rate, which currently sits in a range between 4.25%-4.5%.

Earlier Thursday, regional presidents Susan Collins of Boston and Patrick Harker of Philadelphia both expressed confidence the Fed will be able to lower rates this year, if it a slower pace than previously thought. The FOMC at the December meeting priced in the equivalent of two quarter-point cuts this year, as opposed to the four expected at the the September meeting.

Still, as a governor Bowman is a permanent voter on the FOMC and will get a say this year on policy. She is also considered one of the favorites to be named the vice chair of supervision for the banking industry after President-elect Donald Trump takes office later this month.

Speaking of the incoming administration, Bowman advised her colleagues to refrain from “prejudging” what Trump might do on issues such as tariffs and immigration. The December minutes indicated concerns from officials over what the initiatives could mean for the economy.

At the same time, Bowman expressed concern about loosening policy too much. She cited strong stock market gains and rising Treasury yields as indications that interest rates were restraining economic activity and tamping down inflation.

“In light of these considerations, I continue to prefer a cautious and gradual approach to adjusting policy,” she said.

Finance

Slower pace ahead for rate cuts

Published

2 days ago

January 8, 2025

Business Finance News

Federal Reserve officials at their December meeting expressed concern about inflation and the impact that President-elect Donald Trump‘s policies could have, indicating that they would be moving more slowly on interest rate cuts because of the uncertainty, minutes released Wednesday showed.

Without calling out Trump by name, the meeting summary featured at least four mentions about the impact that changes in immigration and trade policy could have on the U.S. economy.

Since Trump’s November election victory, he has signaled plans for aggressive, punitive tariffs on China, Mexico and Canada as well as the other U.S. trading partners. In addition, he intends to pursue more deregulation and mass deportations.

However, the extent of what Trump’s actions will be and specifically how they will be directed creates a band of ambiguity about what is ahead, which Federal Open Market Committee members said would require caution.

“Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes said. “As reasons for this judgment, participants cited recent stronger-than-expected readings on inflation and the likely effects of potential changes in trade and immigration policy.”

FOMC members voted to lower the central bank’s benchmark borrowing rate to a target range of 4.25%-4.5%.

However, they also reduced their outlook for expected cuts in 2025 to two from four in the previous estimate at September’s meeting, assuming quarter-point increments. The Fed cut a full point off the funds rate since September, and current market pricing is indicating just one or two more moves lower this year.

Minutes indicated that the pace of cuts ahead indeed is likely to be slower.

“In discussing the outlook for monetary policy, participants indicated that the Committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” the document said.

Moreover, members agreed that “the policy rate was now significantly closer to its neutral value than when the Committee commenced policy easing in September. In addition, many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters.”

Those conditions include inflation readings that remain above the Fed’s 2% annual target, a solid pace of consumer spending, a stable labor market and otherwise strong economic activity in which gross domestic product had been growing at an above-trend clip through 2024.

“A substantial majority of participants observed that, at the current juncture, with its policy stance still meaningfully restrictive, the Committee was well positioned to take time to assess the evolving outlook for economic activity and inflation, including the economy’s responses to the Committee’s earlier policy actions,” the minutes said.

Officials stressed that future policy moves will be dependent on how the data unfolds and are not on a set schedule. The Fed’s preferred gauge showed core inflation running at 2.4% rate in November, and 2.8% when including food and energy prices, compared with the prior year. The Fed target’s inflation at 2%.

In documents handed out at the meeting, most officials indicated that while they see inflation gravitating down to 2%, they don’t forecast that happening until 2027 and expect that near-term risks are to the upside.

At his news conference following the Dec. 18 rate decision, Chair Jerome Powell likened the situation to “driving on a foggy night or walking into a dark room full of furniture. You just slow down.”

That statement reflected that mindset of meeting participants, many of whom “observed that the current high degree of uncertainty made it appropriate for the Committee to take a gradual approach as it moved toward a neutral policy stance,” the minutes said.

The “dot plot” of individual members’ expectations showed that they expect two more rate cuts in 2026 and possibly another one or two after, ultimately taking the long-run fed funds rate down to 3%.