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With Personal Loan Rates in Steep Decline, Here’s How to Take Advantage

Financial industry data shows that personal loan interest rates are at a year-long low, which should spur interest from cash-minded Americans.

Exhibit “A” is Wells Fargo, which is offering a personal loan rate at 5.74% for consumers with good credit scores. That’s for the week of October 12-16.

The banking giant is offering personal loans not only at bargain-basement rates (for personal loans, at least), but with some nice amenities, too. That includes no origination fee or pre-payment penalty, loans up to $100,000, and with funds available the day after the borrow is approved.

Compare the 5.74% figure to the 10.35% personal loan rate most big banks were offering in May, 2020, according to the Federal Reserve.

Why are personal loan rates so low? Financial experts point to U.S. fiscal policy during the pandemic.

“U.S. interest rates are at historic lows because the Federal Reserve slashed rates in March to encourage people to continue taking out loans in hopes of keeping the economy going,” said Jake Hill, chief executive officer at DebtHammer, a personal financial content site.

Getting a Good Deal on a Personal Loan Right Now

U.S. borrowers looking for cash to consolidate debt, help cover a child’s college tuition, or to fund some needed house upgrades can get a good personal loan package – if, that is, they have all their financial ducks in a row.

Here are several action steps to take to land the best personal loan, at the lowest rate possible.

Compare loan prices online. “To find the best rates available, go to an online marketplace to compare loan options from multiple lenders at once,” said Justin Nabity, founder of Physicians Thrive, a financial advisory platform geared to medical professionals. At, for instance, borrowers can choose from multiple personal loan lenders in a matter of minutes.

Boost credit scores. Your credit score helps lenders assess risk and is based on a number of factors such as your outstanding balances, repayment record, and account length. “Higher credit scores are considered better – credit scores above 800 are excellent,” Nabity says. “Improving your credit can also mean paying a smaller origination fee or none at all.”

Leverage low rates. When you do shop around for good personal loan deals, don’t be shy about leveraging the lowest rates you fund. “Go ahead and use low rates from a lending service as a negotiation tactic to your personal loan lender of choice,” says Nishank Khanna, chief financial officer at Clarify Capital in New York City. “After all, that’s the beauty of a competitive market.”

Watch out for scams. Don’t engage with financial fraudsters, who are increasingly active during the financial pandemic, as borrowers tend to get distracted by external events. “Personal loans are subject to fraud,” says Karen Condor, a finance expert with “Warning signs include the promise of a guaranteed loan (i.e., an approval that doesn’t involve checking your credit), calls coming from 1-900 phone numbers, a loan company with no physical address, high-pressure sales tactics, and offers coming to you from unsolicited phone calls and spam emails.”

The Rate Look Going Forward

By and large, the interest rate environment should remain low for financial consumers looking for personal loans for the rest of 2020.

“We think the federal government plans to keep these rates low to help stabilize the economy,” Khanna said. “Thus, we can expect these rates to remain relatively low for a long stretch of time, with the federal government pledging to keep rates near zero until 2023.

However, rates could creep up from their present historical lows.

“So long as the economy continues to recover, expect a slow and gradual rate increase over time because rates are tied to the economy at large,” Khanna says. “When consumers spend and borrow more, the Fed typically responds by raising borrowing costs for financial institutions.”

Loosely translated, that means taking the bull by the horns and grabbing that low-interest personal loan deal right now – before it’s too late.

RELATED: What to Know Before You Apply for a Personal Loan

Watch out for a sense of urgency. Bogus communications from fraudulent consumer lenders will include persuasion tactics.

“Basically, the fraudster is trying to make the consumer believe the only deal must happen right now,” says Schumacher. “The message will also likely have some very broad promise but not have disclosures such as interest rate specific or any particulars regarding repayment that a consumer should expect from a potential creditor.”

Know what loan fraudsters want. Financial loan scammers are looking for anything and everything from a borrower.

“Most people have some level of compromised information in the hands of fraudsters,” Schumacher said. “The usability of that information (called Personal Identifying Information or PII) increases with every other tidbit a scammer can obtain. That includes everything from your address, to your mother’s maiden name, your credit card number, and the name of the city where you were born. All of the above can be used to flesh out your compromised PII and make off with your money.”

What to Do If You’re Contacted by a Loan Fraudster

If you believe a consumer loan scammer has reached out to you, take immediate steps to eliminate any engagement.

“Don’t respond to any contacts via email, snail mail or over the phone,” says Gabe Turner, chief editor at, a personal security web site. “Reputable lenders will advertise in more traditional ways rather than contacting the potential loanee directly, so there’s no need to respond to any direct contact from a loan provider online.

If you’re actually scammed by an online load fraudster, the best course of action is to gather all the documentation you have regarding the fraud, including evidence and a timeline of the events.

“Then, report the fraud to the proper agency, which might be the U.S. Federal Trade Commission as well as a state agency (check with your secretary of state’s office to find the right agency. “Also, report the fraud to law enforcement and put a freeze on your credit with all three credit-reporting bureaus,” said Turner. “You could also begin a civil suit once the perpetrator has been identified.”

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Brian O'Connell
Brian O’Connell

Brian O'Connell has been a finance writer at TheStreet, TheBalance, LendingTree, CBS, CNBC, WSJ, US News and others, where he shares his expertise in personal finance, credit and debt. A published author and former trader, his byline has appeared in dozens of top-tier national publications.

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2020-10-13T18:29:53-07:00October 13th, 2020|Personal Loans|
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