If you’re unfamiliar with the term “inflation,” you’re probably starting to learn about it now. That word has been in the headlines a lot lately, and it likely will be for some time to come.
What exactly does inflation mean? And is now the time to compare personal loans as a way to potentially protect you from it? We’ll tackle both of those questions in the following article.
What is Inflation?
We’ll start by explaining what inflation is, so you understand the word when we use it. Inflation is a term that means the price of services and goods is going up. If the price level for things you need starts rising, your dollars don’t stretch as far.
In other words, when you start seeing inflation’s impact, you can’t get as much for the same amount of money. You might notice the effect of this in the grocery store, when you’re trying to rent an apartment, at the gas pump, and elsewhere.
What is a Personal Loan?
As for personal loans, they’re loans you can get from a lending entity such as a credit union or bank. When you secure one, you generally agree to pay it back in monthly payments that you might hear referred to as installments.
Lending entities offer personal loans because they know they can collect interest on them. Banks and credit unions are for-profit companies, and they make money off the cash they lend out.
Can a Personal Loan Help You Now?
You’ve probably heard about inflation lately because the rate it’s rising is the highest it has been in the past 40 years. There’s no single reason for that. Economists mostly point to Russia invading Ukraine and pent-up consumer demand following the COVID-19 pandemic.
If you’re attempting to figure out whether a personal loan can protect you from inflation, the short answer is no. The reason is that when inflation slows, it favors borrowers. If you get a loan during a time when inflation is at a crawl, it probably means you can pay it back faster.
On the other side of that, if inflation causes prices to rise, as is happening right now, the demand for credit goes up. This, in turn, raises interest rates. That benefits lenders, such as credit unions and banks.
What Else Can You Do to Protect Yourself?
If you need money urgently, you might still have to get a personal loan, regardless of whether now’s the ideal time to do it. Inflation means you’re not likely to get the best interest rate, but you can still often find a reasonable one if you shop around and have at least decent credit.
You can also look for a better-paying job because most experts feel it’s a job-seekers market. If you feel like selling your home and moving into a smaller living space, you’re liable to get a very good price for it since the housing market is sky-high. You might also move your credit card balances to a zero-rate introductory balance card if you can find one.
You Can Take Steps to Combat Inflation
Inflation might seem intimidating, but you can take some common-sense steps to combat it. Now probably isn’t a great time to seek a personal loan, but you can still get one if you need cash and take the time to compare all available offers. You’ll do better in this area if you have good credit.
You might think about selling your home and moving into an apartment because it’s a seller’s market. You can look for better-paying jobs since there are many out there. You may also transfer any credit card balances to a zero-rate introductory balance one if a company offers it to you.
These moves should put you in a better position to ride out the storm until the inflation rate levels off again.