If you’re planning to borrow or refinance a loan soon, you may be wondering what’s in store for 2026. While nothing is set in stone, experts expect loan rates to decrease slightly in 2026 — but not dramatically.
Interest rates are unlikely to return to the rock-bottom numbers of a few years ago, but even a modest decline could lower your borrowing costs. A rate decrease could save you hundreds or even thousands of dollars in interest charges on a personal loan, car loan, or student loan.
Understanding what drives interest rates — and where they might be going in 2026 — can help you time your next financial move, whether you’re looking to borrow a new loan or refinance existing debt.
Experts predict interest rates will decrease slightly in 2026, but they don’t expect major shifts.
“I believe that interest rates will decline modestly in 2026 as the result of both a slowing economy and expected Federal Reserve rate cuts,” said Dr. Robert R. Johnson, professor of finance at Creighton University’s Heider College of Business.
The Fed reduced rates three times in 2025, with the most recent decrease putting the federal funds rate in a range of between 3.5% and 3.75%. According to the Federal Reserve’s “dot plot,” which reflects the anonymous rate projections of 19 policymakers, the median forecast puts the federal funds rate at 3.4% by the end of 2026.
That estimate suggests members of the Fed expect only one small rate cut over the course of the year.
“Consumers can anticipate marginally lower interest rates on various types of loans in 2026,” said Johnson. “Those expecting major declines will likely be disappointed.”
Personal loan rates typically range from around 7% to 36%. According to the Federal Reserve, the average rate on a two-year personal loan was 11.14% as of August 2025, compared to 12.33% about a year prior.
If the Fed reduces rates in 2026, you could see personal loan rates become more attractive.
“Personal loan rates are typically affected by Fed rate cuts,” said Matthew Filepp, certified financial planner and owner of PB Wealth, LLC. “Expect a small, gradual decrease in personal loan rates.”
However, rates on unsecured personal loans will still likely be higher than on secured loans, such as car loans. Plus, the rate you get on a personal loan is heavily tied to individual factors like your credit and income.
Lenders offer their best rates to the most creditworthy borrowers, while those with weaker credit may be charged higher rates and fees.
Read more: Our list of the best personal loans
Car loan rates may not move in lockstep with the federal funds rate as closely. Since September 2024, average car loan rates only came down by about half a percentage point, while the federal funds rate dropped by 1.75 percentage points.
“Auto lenders are not typically directly impacted by fed overnight rates,” said Filepp. “Most lenders are more concerned and affected immediately by borrowers’ credit risk and employment levels.”
Car loan rates are also influenced by factors such as vehicle supply, manufacturer incentives, and dealership promotions. The rate you get also depends on whether you’re buying new or used.
Related: What credit score is needed to buy a car?
Rates for private and refinanced student loans could see a small dip in 2026. Most student borrowers apply for private loans with a co-signer, such as a parent, to increase their chances of approval and potentially access better interest rates.
Currently, private student loan rates range from around 2.85% to 17.99%; refinancing rates go from around 3.99% to 11.41%.
“If rates decline, shopping around to refinance an existing high-interest rate private student loan can result in thousands of dollars in savings,” said Filepp.
It’s a different story for federal student loan rates, which are set by Congress each year. Federal rates are based on the 10-year Treasury note and are currently some of the highest rates in over a decade.
If the Treasury yield drops, federal loan rates may decrease slightly. However, if it remains high, rates will likely be similar to their current levels — 6.39% for undergraduate loans, 7.94% for graduate loans, and 8.94% for PLUS loans.
Read more: Student loans will look different in 2026. Here’s what’s changing.
A variety of factors drive interest rates, including broader economic trends and individual borrower circumstances.
The Federal Reserve’s policies have a major impact on most loan interest rates. While the Fed doesn’t directly set rates, its Federal Open Market Committee (FOMC) does set a target rate known as the federal funds rate.
The federal funds rate influences the rates that banks charge to consumers. The FOMC meets several times a year to decide whether to increase, decrease, or hold the federal funds rate steady.
The FOMC adjusts rates in response to metrics like inflation, economic growth, and unemployment rates.
Your individual financial profile and loan type also play a major role in the interest rate you get on a personal loan, car loan, or private student loan. Some key factors include:
Credit score: The better your credit score, the better rate you can get on a loan. Making on-time payments and keeping your credit utilization low are two ways to build a strong score.
Income: Lenders also review your income to ensure you can afford payments on your debt. A high, stable income could result in more attractive loan terms.
Debt-to-income (DTI) ratio: This compares your existing monthly debt payments with your income. Lenders may offer better terms if you have a low DTI.
Co-signer or collateral: Adding a creditworthy co-signer or pledging collateral to your loan reduces the lender’s risk, which may result in better rates in return.
Type of loan: Unsecured personal loans, for example, may have higher interest rates than car loans, which are secured by your vehicle.
Repayment term: Lenders often charge higher rates on longer repayment terms to reduce their risk.
If you plan to borrow or refinance loans in 2026, there are steps you can take to put yourself in the best position — even if interest rates only move slightly.
Monitor interest rate trends: Keep an eye on updates from the Federal Reserve and lender offers so you can borrow when the time is right. At the same time, don’t hold your breath for a major decrease, since that’s unlikely to happen in the coming year.
Improve your credit score: Regardless of market conditions, your credit profile is one of the biggest factors in determining your interest rate on a loan. Work on improving it before you apply so you can access a lender’s best rates.
Reduce your debt-to-income ratio: Lowering your DTI can also help you score a competitive rate. You can reduce it by paying off debts or increasing your income.
Shop around with multiple lenders: Whether you’re pursuing a personal loan, auto loan, or student loan, comparison shopping is crucial. Take advantage of online prequalification, since it lets you review your estimated rates without dinging your credit score.
Compare different repayment terms: Your interest rate can vary depending on the repayment term you choose. If you can swing higher payments, a shorter repayment term could potentially save you money with a better interest rate and less time in debt.
Consider using a co-signer: Applying with a co-signer could get you a better interest rate, especially with private student loans or student loan refinancing. Ensure you understand the trade-offs; for instance, your co-signer’s credit will be affected by how you repay the loan.
Weigh the pros and cons of refinancing: Refinancing has the potential to save you money and simplify debt repayment, but you could lose certain borrower protections in the process, especially if you’re refinancing federal student loans with a private lender. Consider all the pros and cons, and be aware of any fees that could cut into your savings.
Since interest rates may only decrease slightly in 2026, waiting for a significant drop probably won’t yield a substantial return. If you can find a competitive rate and a loan offer that fits your budget, it may make sense to lock it in rather than waiting for a major shift.
