If You're Thinking of Getting a Personal Loan, You May Want to Apply ASAP

Waiting could mean having to pay a lot more interest.

It's hardly a secret that inflation has been raging for well over a year now, putting a massive burden on consumers. And in January, inflation unfortunately did not slow down by any means, at least on a monthly basis.

Last month, the cost of consumer goods rose 0.5% compared to the month of December. And on an annual basis, inflation was up 6.4% in January. That's a lower reading than what we were seeing in mid-2022, but a high reading nonetheless.

Not only is continuing inflation bad news for consumers due to affordability issues, but it could also end up being bad news from a borrowing perspective. And so if you've been thinking about taking out a personal loan, you may want to get moving sooner rather than later.

Aggressive interest rate hikes could be on the way

The Federal Reserve has been trying to bring down inflation since early 2022. To that end, it's implemented several aggressive interest rate hikes.

The goal there is specifically to make consumer borrowing more expensive. If it becomes too costly for consumers to borrow, whether in the form of a personal loan, a home equity loan, or carrying a credit card balance, they're apt to start cutting back on spending. And that's what the Fed wants.

Rampant inflation is generally the result of a disconnect between supply and demand. If the demand for consumer goods declines due to higher borrowing rates, supply should get a chance to catch up. And that could allow inflation levels to drop -- and give cash-strapped consumers some much-needed relief.

Meanwhile, January's 0.5% rise in inflation compared to December could be enough to spur another aggressive interest rate hike on the part of the Federal Reserve. The Fed is next scheduled to meet in late March. And it won't be surprising if that meeting results in a larger rate hike -- so you may want to apply for your personal loan before that happens.

To be clear, the Federal Reserve is not responsible for setting personal loan rates. Those are set by individual lenders. But when the Fed raises its benchmark interest rate, the cost of consumer borrowing tends to increase, too. So it's best to get ahead of that if you're looking to take out a personal loan -- or any sort of loan for that matter.

It pays to shop around

Applying for a personal loan sooner rather than later could help you save some money by virtue of locking in a lower interest rate on the sum you end up borrowing. But it's also important to shop around for a personal loan and compare the rates and fees different lenders are looking to charge you.

Even though a personal loan can be an affordable means of borrowing (especially compared to a credit card), it's still essential to do your research and try to eke out as much savings as possible. This especially holds true these days, since borrowing costs are already higher on the heels of last year's Federal Reserve rate hikes.