10 Things to Do In a Low Interest Rate Environment

January 5, 2021 - by featured, Grow
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File May 10, 11 09 03 PM

Ramona Ortega

Interest rates are at an all time low, 10 ways to beat inflation.

Most of us don’t follow the Federal Reserve and interest rate changes but actually we should, here’s why

Most of us don’t follow the Federal Reserve and interest rate changes but actually we should, here’s why. 

In sum, interest rates affect the ability of consumers (me and you) and businesses to access affordable credit and loans like mortgages, student loans, business loans, personal loans and credit cards. Higher interest rates means less loans (or more expensive loans) so lower interest rates are generally good for the economy because money is cheap to borrow.  The flip side of low interest rates, means you are making very little money on your savings. So if you have a well funded emergency fund sitting in a savings account, it is probably making little to no money and perhaps, losing money since inflation is 1.2%.  

Ok, we are in a “low-interest rate environment,” what should I do? 

📌 Take advantage of getting access to lower interest rates on your loans and put the excess cash to work in the stock market.

Now is the time to buy a house and lock in low interest rates. Instead of an Adjustable rate mortgage (which usually starts with a low interest rate and goes up), lock in a 30 year fixed-rate mortgage.

Refinance your mortgage. The average 30-year fixed mortgage rate has been about 3.75% in recent months, according to the Federal Reserve. Obviously, the interest rate you qualify for will be determined by your credit score, debt ratio and other variables. If your mortgage is 6% or higher you might be able to save some real money by refinancing. Be aware of closing costs and make sure the long term savings outweigh the initial costs. The typical closing costs range of 1 to 1.5% of the loan. Remember you can also refinance your adjustable rate mortgage to a fixed-rate in order to lock in the lower rate.

Refinance your student loans, there are a lot of new options available. Refinancing your student loans gives you the opportunity to extend the terms at a cheaper rate, giving you the flexibility to use more of your cash to invest for retirement.

Should you refi? Take a look at your loans (here)  and check the interest rates on your current loans. 

If your loan interest rates are high (say over 5%) you might qualify for a lower interest rate with our partners over at Juno. They are in the bizness of getting you a better interest rate and some cash, so head over and see if you qualify.

Get a low interest personal loan and pay off your car loan. You could give yourself a lower monthly payment so you can put the cash to work.

Get matched personalized loan offers with rates as low as 4.99% (depending on creditworthiness) with no impact to your credit score.

Consolidate your debt with a personal loan. Pay off lingering debts and possibly improve your credit score.

Pay off high interest credit card balances with a personal loan or take advantage of balance transfer cards, with an introductory 0% interest. This involves moving debt from a high-interest credit card to a new card with a lower interest rate. Make sure to pay off the debt before the introductory period ends and watch out for any hidden fees.

Get matched with personalized credit card offers

Invest rather than pay down low-interest debt. I know it feels good to pay off debt, but sometimes you run the risk of losing the opportunity to make more money by investing. This advice only makes sense if you have low-interest rate debt under 5%, since the stock market is returning on average 8-10%. 

Get started with a no-free brokerage account today.

Move your emergency fund to a high yield savings account (see our recommendation below) or perhaps a no-penalty CD (unfortunately most CD’s are under 1% interest right now).

EARN 3.00% APY** in your auto-save pocket with a One account.

If you have a large amount of cash, consider moving some of it to a ROTH IRA (since you can always withdraw the principal without penalty) and still put it to work in low-risk ETFs or fixed-income ETFs.

Get started with as little as $5 with a Roth IRA

Negotiate with lenders, let them know you know that money is cheap right now and that you would like a lower interest rate too!

Are you ready to start?
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