The Hidden Cost of Waiting: How Delaying a Personal Loan Can Impact Your Financial Goals

In our fluctuating economy, now more than ever, consumers must be conscious of the mindset of 'striking while the iron is hot,' a colloquial phrase for the financial concept of opportunity cost, which takes into account the benefits or detriments of choosing one investment or decision over another. 

Your current savings hold a potential value much higher than their current monetary amount. You just have to know how to access this opportunity. 

 Interest Rates Won't Wait for You

Unfortunately, the Fed doesn't operate with you in mind. The general population and economy? Yes, but you and your unique financial situation and needs? No. Understanding this, you must work to keep track of fluctuations in interest rates and pick the opportune moment to take out a loan. 

In short, the Federal Reserve, or the Fed, meets eight times a year to adjust federal interest rates. They will increase loan interest rates if consumer products are higher. This high interest rate helps fight inflation. Conversely, the Fed will lower interest rates in an economic slowdown where consumer products hit a low. Since August of 2024, the Fed has been steadily lowering interest rates. There's no telling for sure if this is going to continue, but potential borrowers should consider the implications of waiting or buying.

Let's look a scenario that an uninformed borrower might face.

Let's say you borrow $10,000 to help with a home down payment.

• At 8% interest, you might pay around $800 in interest over the course of the loan.
• But if rates rise to 12%, that same loan could cost you $1,200 or more - that's $400 you could have saved just by locking in a lower rate sooner.

Delaying Can Damage Your Credit Strategy

If your ultimate goal is making a big purchase, say, a car or house, your credit should be in tip top shape at the time of the purchase. However, if you are already battling lingering debts, it can be nearly impossible to increase your credit enough to fulfill such a large purchase. One strategy is to consolidate your debt. If you are facing high credit card debt payments and car payments, taking out a loan with a lower rate can help you pay off these items and consolidate your debt payments into a single place, and notably, one that won't fluctuate. Acting while the Fed rates are low can be the best way to handle lingering debts, improve credit and open the door to homeownership. The issue many people face is that they are nervous and hold off, ultimately settling for a worse deal or finding themselves deeper in debt.

How Modern Loans Makes Timely Borrowing Easy

Modern Lending's signature 21-day loan makes for a timely application and payout process. We are committed to competitive rates so that our partners get the best deals. We encourage you to talk to our team of financial advisors to see what type of loan is best for you. Let's get in touch today.