Personal loan interest rates have fallen. Is it the right time to borrow?

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If you’re considering a personal loan, now might be the time to see what lenders have to offer.

Key points

  • This year marks the first time personal loan interest rates have fallen below 9% since the Fed began tracking 50 years ago.
  • Used wisely, a personal loan can help you get out of debt faster and save money.
  • The best personal loans are available to those with the highest credit scores.

Personal loan rates fell to 8.73% during the second quarter of 2022 (April to June). It’s the first time personal loan rates have fallen below 9% since the Federal Reserve began collecting data 50 years ago. Now that interest rates are relatively low, is it a good time for you to borrow money? Here we take a look at what lower rates can mean for you.

Is it time for you to borrow?

Whether or not this is a good time to borrow depends on what you plan to do with the money. One of the things about personal loans is that most can be used however you want. Want to get away to a tropical island for a while, buy a classic car or renovate your house? A personal loan can make it possible.

With interest rates hitting record highs, now might be the time to take out a personal loan to meet your financial goals. Here’s what you need to know about personal loan rates today.

Discover: These personal loans are the best for debt consolidation

More: Prequalify for a personal loan without affecting your credit score

If any of these situations sound familiar, it might be a good idea to apply for a personal loan:

You have high interest debt

The average interest rate on credit cards this week is over 18%, and some personal loan rates are as high as 36%. If you find yourself with high-interest debt, a new personal loan can help you consolidate them and make a payment at a lower interest rate.

Not only does debt consolidation reduce the time it takes to pay bills, but it’s also likely to save you a lot of money.

You juggle your debts

If you spend too much time each month paying all your bills or if bills sometimes fall through the cracks and you end up with late payment charges, using a personal loan to pay off your debts can make your life easier. The wise move is to sign up for autopay to ensure your loan payment is never late. Additionally, some lenders offer a discount to borrowers who sign up for autopay.

There’s a financial obligation hanging over your head

Some debts hang in the air like a black cloud. For example, if you owe money to a friend or family member, you might want to consider borrowing enough to pay it back.

you’re starting again

Starting over requires money (sometimes more than we plan to spend). If your life has taken a surprising turn, a personal loan can provide you with the funds you need to settle down and start afresh.

Isn’t 8.73% still high?

Given that mortgage interest rates have fallen below 3% during the pandemic, 8.73% seems high in comparison. Here is the difference, however: a mortgage loan is secured by a guarantee. This means that if you miss payments, the lender can repossess your home, sell it, and recover their losses.

The risk of lending someone money to buy a house is lower than the risk of lending a personal loan. This is because the majority of personal loans do not require collateral. If you fail to make the payments, the lender has no way of getting their money back.

The lender is the one who takes all the risk. Seen in this light, an interest rate below 9% is quite impressive.

Who can benefit from the best rates?

It is important to note that the lowest interest rates are granted to borrowers with the highest credit ratings. If you’re not quite there, there’s no shame in taking the time to boost your credit score.

Personal loans aren’t for everyone, and if you decide not to borrow money, boosting your credit score will benefit you in countless other ways.

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.

About Judith J. George

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