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Hoping to Get an Affordable Loan This Year? Here's Why You May Have to Wait a While


Many U.S. consumers have been struggling with their finances ever since inflation started surging in 2021. The Federal Reserve has been doing its part to manage that situation accordingly. Between March of 2022 and mid-2023, the central bank raised its benchmark interest rate 11 times to cool inflation.

And it worked. Inflation has eased notably over the past year, to the point where the Fed has been hitting pause on rate hikes in recent meetings. Inflation has cooled so nicely that many economists are anticipating interest rate cuts from the Fed this year.

Just as interest rate hikes have made borrowing more expensive across a range of categories, from auto loans to personal loans to credit cards, so too could rate cuts do the opposite — bring borrowing rates down. But when the Fed meets in March, it’s unlikely to cut interest rates. Here’s why.

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We’re not where we want to be on the inflation front

The Federal Reserve has long maintained that it likes to target an annual inflation rate of 2%. But the most recently released Consumer Price Index, which measures changes in the cost of common goods and services, showed annual inflation at 3.4%. That’s not so far off from the Fed’s goal, but it’s also a ways off.

In a recent 60 Minutes interview, Federal Reserve Chair Jerome Powell said, “We want to see more evidence that inflation is moving sustainably down to 2%. Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.” What this tells us is that the Fed is unlikely to cut interest rates at its March meeting — and that rate cuts may not happen until the second half of 2024.

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How to cope with today’s interest rates

Higher interest rates make borrowing more expensive. So if you’re looking to sign a loan and that loan can wait, sit tight.

Let’s say you need to borrow money to renovate your house. It may be something you want to do as soon as possible, but it isn’t an emergency. If you’re taking out a $20,000 loan you intend to pay back over five years, waiting a few months for rate cuts to happen could result in lower payments for 60 months.

Meanwhile, if you’re carrying a credit card balance, try your best to whittle it down. With interest rates still being high, chances are, you’re paying a small fortune on that balance for each month you carry it forward. You may be able to boost your income with temporary gig work to chip away at that balance and save yourself money on interest.

Finally, if you have spare cash, now’s a good time to put it into the bank. In fact, you may want to lock in a certificate of deposit while CD rates are still strong. Once the Fed starts cutting rates, CDs could start to pay a lot less.

It’s definitely too soon to give up on hoping for rate cuts in 2024. There’s a good chance the Fed will start to lower its benchmark interest rate at some point during the year. Unfortunately, we’re not there yet. And we’re probably not going to be there in March. So if you can wait on a loan, doing so could save you a lot of money.

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