The Federal Reserve’s meeting this week is almost certain to end with another large hike in a key interest rate. Meanwhile, rates on personal loans and mortgages – loans used by consumers – are falling.
Consumers with good credit scores received lower rates in the last seven days on both three- and five-year personal loans, according to financial website Credible.com. For example, consumers with a credit score of 720 or higher got a rate of 10.71% on a three-year personal loan, down from 11.01% a week earlier. Those applying for a five-year loan got an average rate of 13.59%, down from 13.81% the previous week.
Personal loans have become popular alternatives to credit cards because of their lower interest costs. The typical credit card carries an interest rate of around 20%, even for people with good credit scores.
Banks' lending costs rise every time the Fed raises its federal funds rate. Those costs are often passed along to borrowers – including those who carry a credit card balance.
Mortgage rates also fell
Mortgage rates are also trending lower. According to Forbes, the average 30-year fixed-rate mortgage rate started this week at 5.73%, down from 5.88% a week earlier. Mortgage rates are not influenced directly by the Fed’s action but by the yield on the 10-year U.S. Treasury bond. That rate, which spiked in recent months and nearly doubled mortgage rates, has declined in the last week.
Consumers who are seeking either a personal loan or a mortgage should shop carefully among lenders for the best terms. Fortunately, researchers at ConsumerAffairs have done a lot of the leg work to help you make your decision.
The right personal loan lender may vary based on your credit score and how much you need to borrow. ConsumerAffairs vetted 24 loan companies with annual percentage rates (APRs) of less than 36% to help you make a choice. Check out our guide, with thousands of verified consumer reviews, here.
We have also assembled a comprehensive guide for choosing a mortgage lender. The ConsumerAffairs Research Team vetted 66 mortgage companies that were reviewed by more than 5,478 people in the last year. To find the best lender for you, read our guide to compare loan types, eligibility requirements, rates, and terms here.