Borrowing money is a necessity for nearly everyone, even those who may be considered affluent need to establish a credit history. From the lender’s vantage point, different types of borrowing have varying degrees of risk no matter what level of income the applicant has. Unsecured lending is riskier with no collateral to collect, if the account goes into default; while a secured loan is less risky for lenders. This is one reason why interest rates fluctuate; the others being inflation, monetary policies and economic forces in the market place that impact the bottom line, requiring an increase to recoup lost or dwindling revenues.
With the tightening of lending restrictions, consumers of all income levels may find it more difficult to secure the money they need. The smart consumer knows in advance of applying for a loan the average lending rates for that particular need. With the information in hand, they will be able to recognize a good loan offer from one that will cost more. Here are the most recent average rates for various types of lending.
- Mortgage rates are at an all-time low, making it the perfect time to buy or refinance to reduce your current mortgage payment. Fixed rates are the standard term for most lenders. As of August 16, the average rate for a 30-year fixed was 3.56%; while a 15-year fixed-rate mortgage stood at 2.88%.
- Auto loans are the second largest debt for most consumers after mortgages. The rates fluctuate from seller to seller, depending on whether the dealer is taking the risk of lending you the funds or they bundle multiple accounts and sell them to an investor. The current average rate for a 48-month new car loan is at a record low of 2.25%, with the longest available loan of 72 months at 3.74%. In the market for a used car for model years 2005-2008, the average for a 36-month loan is currently 2.25%.
- Student loans backed by the Fed (Stafford loans) are fixed at 3.4%; while private institutions with variable interest rates traditionally are higher but currently range from 3.25% to 9.25%.
- Credit cards have maintained a consistent interest rate during the last few months, with the average rate of just short of 15 percent at 14.97%. In addition, current offers include generous long-term introductory rates of up to 21 months that can save consumers hundreds of dollars in interest.
The Wall Street Journal’s Market Data Center posts the prime rate for 30 financial institutions. Mortgages, auto loans and credit card rates adjust in step with changes in this rate. To track current rates for mortgages, auto loans and market funds, check your local newspaper; most publish a list at least weekly. Another online source that may help consumers who are looking to borrow is Forecasts.org, a website that projects future rates.