For the first time in four years, the Federal Reserve has announced it is raising interest rates on borrowing. Fed Chair Jerome Power has recently sent consumers a bit of a warning that it will soon cost more to take out a loan or obtain a mortgage or line of credit.
He says the FED will raise its short-term interest rate faster than previously expected, with the goal of slowing down the raging inflation pressures we are seeing throughout our economy. He’s hoping the slight uptick won’t slow growth and hiring, but will somehow tackle the rising costs of just about everything we buy nowadays.
Generally speaking, if you are in favor of raising rates, you are “hawkish” because you hope to reduce inflation. If you are in favor of lowering rates, you are “dovish” because this move typically encourages job growth.
So, we are living in a hawk’s economic world right now. But for you and your family or business, what’s the best approach to avoiding these increases costs?
The key is to be patient and shop around. Rates are changing almost daily, so look for a good opportunity to lock in a credit rate that works for your budget.
For example, there are places to go to find lower rates for a home mortgage, for example. And depending on how much money you can afford to use for a down-payment, you can also side-step pricey mortgage insurance requirements. I would be remiss as a former Credit Union CEO if I didn’t at least mention that you should check out your local credit union for a good deal. Typically for nothing more than the cost of an annual membership, you can save thousands on interest rate fees.
Credit cards are another great place to save
Consumers can review different interest rates and explore cash back on purchases, which acts as an automatic discount depending on what credit card you have. Just keep in mind, if you apply for a bunch of credit cards, you could do harm to you credit score, which is another factor in your ability to borrow at a lower interest rate.
Check out that score when you have a moment. Perhaps close a couple of dormant credit accounts, pay off a few smaller bills, so a little financial spring cleaning and that effort can qualify you for lower interest rates.
Car loans… look for the deals
Zero percent financing is obviously attractive, just remember that deal is usually in place of any other incentives a dealership will offer. That said, it can save plenty each and every month. Just pay attention to the fine print and the deadlines for payments.
These slight adjustments can mean more money in your pocket.
Wondering what the difference between Credit Unions and Banks? Visit this post.