Top 5 Ways To Prepare Your Finances For Rising Interest Rates

Follow these simple steps to lower your monthly debts before interest rates rise. Included are important tips on refinancing mortgages, vehicles, and credit cards.

Rising interest rates can cost individual consumers hundreds, or even thousands of dollars if the appropriate means to reduce these debts are not taken. Most consumers have one or more credit cards with a balance that generates a monthly debt that never seems to decrease. This is especially true if new liabilities are accumulated on a regular basis. Making minimum payments while incurring new debts will never put a dent in the balance owed, let alone eliminate it.

To help put an end to the cycle of debt, begin by paying down your credit account with the smallest balance and highest rate of interest. Smaller credit card accounts can be easily managed, and debt can be eliminated if no additional charges are incurred.

Shop around for a credit card with a low rate of interest. Many companies offer credit card accounts with no yearly fees and no charges for balances transferred from other companies. Before accepting a new card, be sure to read the fine print. Many offers promising great rates are only temporary. After a set period of time, rates can rise to amounts that aren't such a good deal.

Before making the decision to transfer credit card balances to a lower rate account, contact the credit card companies you are currently doing business with. Ask if you are getting the lowest available rate. Many times companies will lower your rate to avoid losing you as a customer.

If the lowest possible rate can be secured by obtaining a new credit card, open a new account and transfer higher rate balances to that account. Just a small difference in percentage can add up to a substantial savings.

Consider refinancing your vehicle loan when interest rates fall below your current rate. For example, a five-year loan for $20,000 at 7% interest will cost you $396.02 per month, with $3,761.44 in interest paid over the life of the loan. Refinancing a five-year loan for $20,000 at a rate of 5% will cost you $377.42 a month, and you will have paid $2,645.48 in interest over the life of the loan. Refinancing at a 2% lower interest fee will have saved you $1115.96 total.

Refinancing your home can save thousands of dollars and possibly decrease the length of time required to pay off the loan. An interest rate change of just 3% can make a big difference in how much you will pay over the life of a mortgage loan. For example, a 30 year loan for $150,000 at a rate of 8.5% with a will cost you $265,213.28 in interest by the time the loan is paid off. Refinancing the same amount with an interest rate of 5.5% will cost $156,606.06 in interest. Refinancing this particular loan will have saved you $108.606.68 over the life of the loan.

Another option is to decrease the amortization length of your home loan. Using the above figures with a 20-year loan, you would be paying $97,639.43 in interest over the course of the loan. Your house payment minus taxes and insurance would be $1,153.37. You would only be paying $121.54 more than your original monthly imbursement to eliminate ten added years of expense.

Use these strategies to lower your debts before interest rates rise. Monitoring interest rates and protecting your credit are important steps in improving your overall financial situation.

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