What kind of interest rate you receive for your personal loans is going to be determined by three major variables. Having knowledge about these factors will not only save you money and time, you will avoid frustration of applying for loans that you do not qualify for.
The Federal Reserve Discount Interest Rate
Lending institutions and banks borrow money from the Federal Reserve Bank. The rate that the Federal Reserve Bank charges financial institutions for borrowing funds on a short-term basis is called the ‘discount rate’. The more money available, the more likely inflation will occur. Raising the rate makes it more expensive to borrow from the Fed. That lowers the supply of available money, which increases the short-term interest rates. Lowering the rates has the opposite effect, bringing interest rates down. The discount rate is established/set by the board of directors of the Reserve. Discount rates have an immediate impact on the ‘Prime Interest Rate’. Prime interest rate is the rate banks charge consumers on short-term personal loans. The prime changes daily and can be obtained in real time by visiting fedprimerate.com.
Of all the major influences of interest rates, this is the factor that you will have the smallest amount of control over.