The Federal Reserve’s quarter-point interest rate hike last month has not had a meaningful impact on personal loan rates.
While credit card rates have risen in step with the movement of the Fed’s benchmark interest rate, several lenders told Bankrate they have left their rates unchanged.
Consumers can receive “the same low rate that was available prior to the most recent Fed increase,” Dan Matysik, vice president of personal loans at Discover, wrote in an email.
Riverwoods, Illinois-based Discover offers personal loans starting at an annual percentage rate of 6.99 percent. Compare that with the minimum 11.49 percent the company charges on its Discover It credit card, up from 11.24 percent prior to the December meeting of the Fed’s rate-setting committee.
That card was among 14 credit cards we tracked before and after the Fed meeting; all 14 raised their rates following the meeting.
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Still, the average personal loan rate has increased since last month, but the Federal Reserve’s action might not be the major cause.
In Bankrate’s national survey of interest rates from banks and thrifts for Jan. 18, 2017, the rate on personal loans increased 2 basis points to 11.08 percent. A basis point is one-hundredth of a percentage point.
The average rate is slightly higher than it had been trending, but is likely because of annual adjustments Bankrate made to its survey group, says Greg McBride, CFA, a Bankrate senior vice president and chief financial analyst.
One lender, however, did raise interest rates this week in at least one market Bankrate tracks. BB&T boosted rates 70 basis points to 9.49 percent.
Even so, this week’s average rate is nearly one-third of a percentage point lower than the 2016 high. A year ago, interest on the average personal loan was 11.30 percent.
Personal loan as escape hatch
For the second consecutive week, the average annual percentage rate on a variable-rate credit card hit an all-time high, according to Bankrate’s latest survey. The average rate is up three basis points to 16.38 percent.
If you’re trying to get out of credit card debt, you may want to consider consolidating soon.
“While there isn’t necessarily an urgency, now is a good time to think about consolidating given that (benchmark interest rates) are expected to go up over the next year,” Mark Victoria, head of personal lending at TD Bank, said in an emailed response to questions.
Cherry Hill, New Jersey-based TD Bank also has not adjusted the price of its loans since the Fed raised interest rates. Its personal loan rates start as low as 8.99 percent.
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Taking out a personal loan can protect you from future rate increases, as well, because unlike credit cards, which offer variable rates, most personal loans lock in the rate at origination.
“If consumers are concerned about rising interest rates, a fixed-rate product could be a great option because it allows a consumer to lock in the rate for the duration of the loan,” Matysik said. “If the Fed continues to raise interest rates, a fixed-rate loan will not be affected; the rate will always stay the same.”
Consolidating also could help with your credit score, says Gerri Detweiler, a credit expert and head of market education for Nav, a San Mateo, California-based company that helps entrepreneurs manage their business credit.
A personal loan likely will be reported to the credit bureaus as an installment loan, which would lower your utilization rate on your credit cards. A low utilization rate could improve your credit score.
You’ll just need to make sure to prevent yourself from incurring new credit card debt.
“(Your credit cards) have to be hard for you to get to,” Detweiler says. “Can you put that card somewhere where it’s really hard to get at?”