Last Changes For Debt Consolidation?
With the Federal reserve’s final meeting Today it is predicted interest rates will be raised. Currently at 2.25% prime rate. If they continue the same pattern, we can expect a .25% rise. This means we could experience several adjustments from mortgage rates to inflation. The reason the federal reserve is likely to raise rates is due to the increase prosperity in our economy. It is because of this prosperity that many Americans have taken to spending more money on a variety of items, increasing their personal debt.
Why Could It Be Your Last Chance to Consolidate?
That is why applying for a debt consolidation loan might be in many Americans best interest. We have experienced low mortgage rates for the last 10 years, many have bought homes or refinanced to capitalize on this financial benefit. With rates now on the rise it will be more difficult for people to find a benefit in consolidating their debt into their home loans, if you are currently at a 4% interest rate you will likely not refinance to a 5% rate right? Even if you could combine a large amount of high interest credit card debt into the mortgage, you would be hesitant to give up that low interest rate.
It’s Not Only Mortgage Rates
Mortgage rates are not the only thing that we may see rise, credit card interest rates (many of which are variable), car loan interest rates and personal loan rates. These things are all affected by the Federal Reserve’s monetary policy. When we see this type of rise in rates, we can expect inflation. This increases the cost of everything we purchase and use daily.
How to Find the Financial Benefit in Consolidating Your Debt
It could be difficult to give up that low interest rate, but that doesn’t mean you will necessarily pay more. It depends on your debt and where it’s coming from. When interest rates rise most credit cards have a variable feature, which means the interest on your credit cards will rise as well. Inevitably costing you more, (you can use our debt consolidation calculator to find out more.) If you have a significant amount of credit card debt that you may find difficult to pay, it may be in your best interest to eliminate that high interest debt for a lower one; even if the mortgage rate is higher than your current.
Benefits of Rising Interest Rates
Rising interest rates are not always a bad thing, there are some positive aspects to this. You might find the following useful:
Higher Returns for Savers:
Higher interest rates mean higher returns on Certificate Deposit accounts, savings accounts and bonds.
Inflation:
You will find inflation is curbed by a sudden rise in interest rates. It takes time for the market to adjust to the increase cost in money.
Lending:
Financial institutions love to make money, and an increase in rates will do just that. You will see larger promotions and new products become available to draw more consumers in.
The Dollar:
We will see an increase in the strength of our American dollar.
Conclusion
If you are on the fence about consolidating your debt and utilizing your equity, it may be time to talk with a qualified loan officer and assess your situation. It’s important to predict the foreseeable future as best you can to avoid any financial downfalls. If you think you can readjust your financial portfolio to make more sense, and a mortgage refinance can play into that, contact me at the information below.
Thank you,
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Justin Scott
Loan Officer
NMLS 878581
- C) 920-530-4484
- O) 920-490-8823
- F) 920-490-8967
Executive Mortgage
NMLS 271650
909 . E Walnut Street
Green Bay WI 54301