Money Management

The Fed has opted to raise interest rates once more. Read on to see how that might affect current and future personal loan borrowers. 

The Federal Reserve has been working to cool inflation since early 2022. In March of last year, it began to raise its benchmark interest rate and continued to do so in the course of 10 consecutive meetings.

Last month, however, in response to cooling inflation, the Fed hit pause on its interest rate hikes. And that no doubt allowed consumers to breathe a sigh of relief.

But on July 26, the Fed announced that it would be raising interest rates once again by 0.25%. And that’s not the best news for those needing to borrow money in pretty much any shape or form.

Bad news for personal loan borrowers

Personal loans are often hailed as a relatively affordable way to borrow money, and consumers tend to like them because they’re flexible in that they can be used for any purpose. Want to renovate your home? You can take out a personal loan to finance your next project. Need to repair your car? A personal loan can help there, too.

But in light of the Fed’s most recent interest rate hike, consumers looking to sign a personal loan in the near term may be unpleasantly surprised at how expensive it is. Borrowing costs are already up across the board. But the Fed’s latest rate hike will only pile onto that, making a new personal loan more expensive.

Current borrowers should not be affected

While the Fed’s latest rate hike could make it more expensive to put a new personal loan into place, it shouldn’t have an impact on existing loans. The nice thing about signing a personal loan is that you lock in a fixed interest rate with predictable monthly payments. So changes in market conditions won’t change the amount of money you have to send your lender each month.

How to snag the most affordable personal loan possible

Personal loans became expensive to sign even before this latest interest rate hike. So at this point, if you’re looking to borrow, you should do what you can to keep your costs to a minimum. And one good way to lock in a lower interest rate on a personal loan is to come in with a great credit score.

Because personal loans are unsecured and aren’t backed by a specific asset, lenders take on a lot of risk in the course of giving them out. So having a higher credit score sends the message that you’re a less risky borrower who can be trusted.

If your credit score isn’t so great, you may want to hold off on getting a new personal loan until it’s in better shape. But if you can’t wait, a good way to raise your credit score quickly is to correct errors on your credit report that may be painting you in a less favorable light. Pull up a copy of your credit report from each of the three major bureaus — Experian, Equifax, and TransUnion — and address any inaccuracies you see.

You can also boost your credit by paying all incoming bills on time. But to be clear, that’s a process. So if you need to borrow money now, your credit score may not improve by the time you put in your loan application.

All told, the Fed’s latest move isn’t a great one for consumers looking to take out personal loans. But if you have one of these loans in place already, rest assured that there shouldn’t be an impact on your current monthly payments.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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The latest rate hike has the potential to hurt consumers who are looking to borrow or who owe money on credit cards and HELOCs. Read on to learn more. 

Inflation has been a persistent problem since 2021, and the Federal Reserve has been committed to bringing inflation levels down. Beginning in early 2022, it began raising its benchmark interest rate in an attempt to cool inflation. It then continued to raise interest rates in the course of its next 10 consecutive meetings before taking a break from rate hikes in June in response to cooling inflation.

But on July 26, the Fed announced it would be raising interest rates once again, this time by a quarter of a point. And while that’s not a particularly drastic rate hike on its own, it could be enough to wreak havoc on consumers.

Why is the Fed continuing to raise interest rates?

The Federal Reserve feels strongly that 2% inflation is an ideal level to target, since it lends most naturally to long-term economic stability. In June, annual inflation was measured at 3%, per that month’s Consumer Price Index (CPI). So clearly, we’re headed in the right direction. But the Fed isn’t satisfied with 3% inflation, which explains why its rate hike pause was just a temporary one.

How will the latest rate hike impact consumers?

When we talk about the Fed raising interest rates, we’re referring to the federal funds rate, which is what banks charge each other for short-term borrowing purposes. However, when the cost of borrowing rises among banks, it tends to trickle down to consumer products, like auto and personal loans. So those looking to borrow in the near term could see higher interest rates attached to their loans as a result of the Fed’s latest move.

Meanwhile, credit card and HELOC borrowers could see the interest rate on their debt rise in the near term, since these products commonly come with variable interest that changes with market conditions. That could cause already struggling borrowers to fall behind on their payments.

That said, the Fed’s latest rate hike isn’t all doom and gloom for consumers. The one silver lining is that rate hikes on the part of the Fed tend to lead to higher savings account and CD rates. So consumers with money in the bank are in a good position to capitalize on higher interest rates.

Will the Fed continue to raise interest rates beyond this point?

It’s likely that we’re in for at least one more interest rate hike before 2023 comes to a close. That said, we may get a pleasant surprise out of July’s CPI, which is scheduled to be released in August. If that report shows a further cooling of inflation, then the Fed may decide to let things be and not raise rates again.

All told, the latest interest rate hike could make borrowing more expensive, so if you’re able to hold off on signing a loan for now, that might work in your favor. And if you’re carrying a credit card or HELOC balance that’s becoming more and more unmanageable by the week, you may want to look at consolidating that debt via a personal loan with a fixed interest rate so you can at least benefit from predictable monthly payments.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Some Amazon products could change your life for the better at a very low price point. Read on to learn about these great bargains that cost less than $20. 

Many people routinely rack up giant credit card tabs in the course of their Amazon shopping. But if you’re trying to save money, you may need to be more judicious about the items you purchase.

The good news is that Amazon’s inventory is truly massive, so you can browse the site and find plenty of useful items at a very reasonable price point. Here are a few bargains you might find this week for less than $20.

1. DaCool Insulated Lunch Containers

Bringing lunch in from home is generally a far less expensive option than buying it at a restaurant or cafe near your office. And even if your office doesn’t have a fridge or microwave, this insulated container will prevent your lunch from getting warm or cold. It features a 16-ounce capacity and is available in pink or blue. The price point for the former is $16.99, while the blue version will cost you $15.99.

2. Mindfulness Coloring Book For Adults

These days, coloring books aren’t just for kids. For many adults, they’re a way to relax, de-stress, and keep your fingers busy so you’re not biting your nails, picking away at your cuticles, or engaging in other such nervous habits. This mindfulness coloring book costs just $6.99, and it features 50 animal and flower mandalas to color in.

3. Apetpup Dog Toys for Aggressive Chewers

Have you ever brought home a toy for your dog, only for your furry friend to rip it to shreds within minutes? If you’re tired of throwing your money away on dog toys, try this one from Apetpup. At a price point of $13.99, it may cost a little more than what you’d normally spend on a chew toy. But if it lasts 10 times as long, it’s worth the money.

4. Smart Planner Pro

Many of us opt to organize our lives electronically these days. But if you prefer to take an old-school approach, and your “stick a Post-It everywhere” method just isn’t cutting it, then it may be time to upgrade to an actual planner where you can write down your appointments. You can buy an 8.6 x 5.7-inch Smart Planner Pro for just $17.99, and it could be your ticket to mapping out your days in a stress-free manner.

5. EINSKEY Sun Hat for Men/Women

If you’ve spent the better part of July nursing a sunburned face, then it’s time to break that pattern. And a good way to do so is to invest in a wide-brimmed bucket hat that will give you all of the sun protection you need. Enter this unisex EINSKEY hat, which comes in a variety of colors. It’s foldable, so you can stick it in your bag and bust it out as needed. An investment of $17.99 might spare you a world of actual hurt.

One thing you should know is that if you’re not an Amazon Prime member, your order will need to total $25 for you to avoid a shipping charge. But if you’re already signed up for Prime, you get fast free shipping on orders of any size. So if any of the above items sound appealing to you, you may want to scoop them up before they sell out, or before their prices increase.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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