After several Federal Reserve interest rate hikes, prospective borrowers now could face higher monthly payments and may qualify for lower loan amounts compared to earlier this year.
Personal loan rates from banks, credit unions and online lenders are up after repeated interest rate hikes from the Federal Reserve this year, the latest of which came last week.
People are also reading… Personal loan rates are somewhat tied to supply and demand, which is why they don’t follow the Federal Funds rate as closely as other financial products like mortgages do, says Werner Loots, U.S. Bank’s executive vice president of direct consumer lending. “If you’re not making as many loans and your cost of borrowing is going up, there’s no incentive for you to keep rates down and try to get as many consumers through the door,” Chand says.
Rising delinquency rates are one signal lenders use to decide whether to tighten approval standards, Chand says. If they do, consumers with fair or bad credit scores could struggle to qualify. Higher personal loan rates mean higher monthly payments, so a lender may approve you for a smaller loan to avoid overextending you, she says.
“It’s either act fast or be totally flexible because that rate drop might come sooner than any of us think it will or it might take longer,” she says.
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