The Federal Reserve Could Raise Interest Rates Again This Month. Here's How It'll Impact Your Personal Loans

The Federal Reserve has been trying its best to slow the pace of inflation. The cost of goods has been elevated since mid-2021, and that's put a strain on many people's finances. So the central bank is committed to getting inflation back down toward the 2% mark. It's this level, the Fed feels, that's most conducive to long-term economic stability.

Meanwhile, there was a point last year when annual inflation, as measured by the Consumer Price Index (CPI), was a whopping 9.1%. May 2023's CPI had a more encouraging annual inflation reading of 4%, though. As such, after 10 consecutive rate hikes, the Fed opted to pause that practice last month.

But that doesn't mean more rate hikes aren't on the way. And when the Fed meets in late July, it could opt to raise interest rates once more.

That shouldn't impact current personal loan holders. But if you're thinking of signing one of these loans, you may want to get your application in before the Fed's next meeting.

Personal loans could get more expensive

There's a reason so many consumers are drawn to personal loans. Not only can they be a fairly inexpensive way to borrow, but they're quite flexible. You can use your proceeds from a personal loan to do anything from furnish your home to make repairs to your car -- the choice is yours.

Another benefit of borrowing via a personal loan is getting to lock in a fixed interest rate on your debt. That's important at a time when interest rates are rising.

Right now, credit card borrowers, for example, risk seeing their monthly payments go up if the Fed raises interest rates yet again. That's because credit card interest can be variable, but that's not the case with personal loans. And so if you're in the process of paying off one of these loans, you can rest assured that even if the Fed implements another rate hike this month, it shouldn't make your existing loan cost more.

The same can't be said for future personal loans, though. If the Fed raises rates, those could get more expensive to sign. And that's why it could pay to apply sooner rather than later if you need to borrow money.

Shop around for your next loan

Personal loan rates are higher across the board these days on the heels of the Fed's recent interest rate hikes. So if you're looking to sign a loan before the next rate hike, you may be eager to get it done quickly.

However, it pays to take at least a few days to do some rate shopping. It may be that one lender is able to offer you a more competitive personal loan rate than another, so compare a few offers before making your loan official.

You should also be sure to check your credit report before applying for a personal loan. Credit report mistakes can happen, and they can drag your credit score down needlessly. Correcting an error that works against you on your credit report could be your ticket to snagging an even more favorable personal loan rate -- and locking in payments you can more easily afford.