Should You Wait Until 2024 to Sign Your Next Personal Loan?

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Personal loan rates are up. Will things change in 2024? Read on to find out. 

More than 5 million borrowers put a personal loan in place during the third quarter of 2023, reports TransUnion. And you may be interested in signing one of these loans, whether to renovate your home, fix up your car, or start a new small business.

But as eager as you may be to put a personal loan in place, you may be better off holding out until the new year. Here’s why.

Borrowing is expensive right now

The Federal Reserve has been working hard since early 2022 to cool inflation and bring living costs down across the board. To that end, the central bank implemented a series of interest rate hikes. And that’s made many forms of borrowing more expensive.

Now, the Fed doesn’t set personal loan rates, or any consumer borrowing rates, for that matter. Rather, it oversees the federal funds rate, which is what banks charge each other for short-term loans. But when the federal funds rate rises, it tends to drive up the cost of consumer borrowing.

Right now, personal loans are very expensive. So are auto loans, mortgages, and just about anything with an interest rate attached to it.

But as inflation continues to cool, the Fed is likely to not only stop raising interest rates, but start cutting rates. Once that happens, borrowing costs could come down broadly.

There’s a good chance the Fed will seek to cut rates at some point in 2024. So if you can hold off on signing a personal loan for the time being, you might benefit by waiting in the form of a lower interest rate on your debt.

Another good reason to wait

Personal loans are unsecured, which means they’re not tied to a specific asset a lender can claim or repossess should you fall behind on your payments, like a car. It takes a good credit score to snag a competitive interest rate on a personal loan.

To be clear, there are lenders that write personal loans for borrowers with fair or poor credit. But in that situation, you’re generally looking at a much higher interest rate on the sum you borrow.

If your credit score is poor — or if it’s okay but not awesome — then waiting on a personal loan gives you an opportunity to work on boosting it. That could set you up for a more affordable interest rate on your loan.

There are a few different steps you can take to boost your credit score. These include:

Paying all incoming bills in a timely mannerKeeping credit card balances as low as possible, and chipping away at existing balancesReviewing your credit report for errors and correcting mistakes that reflect poorly on you as a borrower

We can’t say with certainty what personal loan rates will look like in 2024. But there’s a good chance they’ll be more favorable than what rates look like today. For that reason, holding off on a personal loan could be a smart move — one that ends up saving you quite a bit of money.

Our picks for the best personal loans

Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing our picks for the best personal loans.

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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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