Personal Loans Still Make Sense Even in a High-Rate Environment

By: Ryan Kelly February 27, 2023

Personal loans might not be the first option that comes to mind when interest rates are relatively high, but they can still fill an essential need for consumers in need of personal finance options. The reasons for this go far beyond the conveniences that are built into most personal loans, such as the ability to get rapid financing without paying any origination fees. Here’s a look at why you shouldn’t turn your back on personal loan options even if you feel that market interest rates are currently running too high.

Rates Are Likely To Continue Moving Higher

Trying to predict interest rate movements is generally a fool’s errand. Even the Fed itself doesn’t know when it’s going to stop raising interest rates in its ongoing battle against inflation, so that leaves little chance for the average American to decipher that either. However, one thing is clear for at least the near term: the Fed will continue raising rates in Dec. 2022 and into 2023. Whether the pace of rate increases slows or not, it appears nearly certain that rates will continue ticking up into 2023. If you’re in need of personal financing, this means that taking out a personal loan now, ahead of any further rate increases, may be a prudent move.

Personal Loans Beat Credit Card Rates Almost Every Time

Regardless of where market interest rates are, it’s a near-certainty that the rate you can get on a personal loan will be far below the rate your credit cards will charge you. Just as personal loan rates kick up every time the Fed raises rates – or when market rates move higher all on their own – credit card rates jump as well, oftentimes even faster. As long as your credit is not at the bottom of the barrel, your personal loan rate – even if it’s in the double digits – will likely be less than half of what you’d be paying on a credit card instead.  

Rates Are Likely To Fall Again in 2023 and/or 2024

Although it’s not entirely true that “what goes up must come down” when it comes to the interest rate market, there’s no denying that rates tend to move in cycles. Although rates are highly likely to go higher over the next few months, many economists feel that the Fed is closer to the end of its rate-tightening cycle than the beginning. If rates fall in late 2023 – or even if they don’t trend down until 2024 – there will likely come a time in the next year-plus that you’ll be able to refinance your personal loan at a lower rate.  

The Bottom Line

Regardless of where current market interest rates are, personal loans still have many built-in benefits that can make them a good personal finance solution. For starters, personal loans are extremely convenient. You can apply for a personal loan online and get approved – and even financed – in 24 hours or less. This makes them an indispensable option for immediate needs. Personal loan rates are also often far below those of high-rate options, such as credit cards. If you’re looking to knock down your outstanding debt, dropping your interest rate by 10% or more can both help you pay it off much faster and also save you hundreds or even thousands of dollars in interest. Perhaps best of all, personal loans are flexible, meaning you can refinance them in the future if rates fall lower.  

 To ensure that you’re getting the proper financing for your financial needs, be sure to speak with an expert trained in the various types of loan options available. Not only can a no-fee, unbiased expert provide you with the best solution for you personally, they can also offer other types of financing options that you may not be familiar with, perhaps even beyond the world of personal loans.  

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