Personal loan interest rates were unchanged in March after the Federal Reserve chose not to move rates and despite a rancorous primary season in the U.S. that is creating a lot of uncertainty about the economy.
“Rates haven’t moved since the 1st of the year, and there aren’t any near-term catalysts for rates going up,” says Greg McBride, CFA, chief financial analyst at Bankrate.com. “We’re probably a couple of meetings away from that.”
Earlier on Wednesday, the Federal Reserve chose not to raise interest rates at its Federal Open Market Committee meeting.
In Bankrate’s national survey of interest rates for March 16, 2016, the rate on personal loans didn’t move at all. It remained at 11.35%, the same as the previous week, but 0.05% from a month ago.
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The economy has been humming along, unemployment is at an 8-year low of 4.9% and workers around the country are seeing their wages tick upward. That is resulting in a lot of demand for personal loans, whether it’s to consolidate debt, purchase a high-ticket item or use it for travel or a wedding.
“The economy is doing decent, delinquencies are fairly low and there is plenty of available credit,” says McBride. “Demand is always there. People live beyond their means.”
While the improving economy is giving borrowers other options, particularly with a home equity line of credit, Alan Donner, product marketing director at lender Social Finance, or SoFi, says the arduous process is resulting in consumers choosing personal loans over home equity lines of credit.
“A personal loan is much simpler and faster. You don’t have to get your home appraised. If you need money quickly it’s a good route, especially where interest rates are,” he says.
With delinquency rates hoovering at lows, all signs point to a good personal loan market with people with good credit having a lot of options in terms of lenders. According to Donner, for consumers who are looking for money for home improvements, to pay down debt or make a purchase they don’t have the money for, there are a lot of options. It’s particularly attractive for people with good credit because of they have a lesser tendency to default.
“It’s a very good time for borrowers,” says Donner.
What could cause personal loan rates to move higher in the near term? By most estimates, the election process won’t have much of an impact until a president is chosen.
With expectations that the Federal Reserve won’t raise rates in the near term, the only thing that could derail the low-rate environment is a worsening economy.
“If the economy slows suddenly and delinquencies take off, that could push rates higher,” McBride says. “It all boils down to the supply of credit, and the willingness of the lender to lend.”