The Federal Reserve raised the fed funds rate a quarter point to 1.5 percent on December 13, 2017, marking it the third increase in 2017 and the fifth increase since the market crashed in 2008-2009. The intention behind the original cuts to the federal funds rate after the market crashed was to increase liquidity, boost employment, and spark inflation. The Federal Reserves has come too close to what they set out to accomplish within the American economy, so now they have begun raising rates.
While the economy hasn’t reached the feds stated target of 2 percent of inflation yet, we are pretty close and it can be too dangerous to wait too long to raise rates because if inflation takes off it is hard to get a handle on it. The Federal Reserves insinuated there will be two to three more rate hikes this year. When the Federal Reserve increases interest rates, your credit card debt becomes more expensive. Since these rate increase real-world effects on consumers and businesses it’s important to stay on top of your finances. However, there are ways to reduce or eliminate credit card interest.
If you are faced with the burden of credit card debt like so many other Americans, one way to deal with rising rates is personal loans. More and more, I have been seeing people borrowing (personal loans) with lower rates to deal with their credit card debt. In other words, they are using the borrowed money to avoid paying high interest on their credit cards, even though the borrower will still have to pay back the personal loan rate. Dependent upon what credit card rate you have and what personal loan rate you can get and the terms of the loan, this can be an effective way to avoid skyrocket credit card interest. Personal loans come with fixed interest rates, which means if the Federal Reserves does another hike in interest rates, you will not be subjected to paying a higher rate, unlike most credit card contracts.
So, what will be an indicator of how good of a rate you will get on a personal loan? Drum roll, your credit score. Your credit score is essential in determining if you are a trustworthy borrower or not. Since, personal loans are unsecured debt the loan doesn’t require you to use an asset as collateral.[thb_image full_width="true" alignment="center" image="9774" img_size="full"]
However don’t be fooled, if you go into default the lender can take legal actions against you. It’s also important to watch out for scams, especially if someone approves you with a bad credit score or someone who approves you without checking your credit history. It also may be easier to get approved for a personal loan from a bank you already have accounts with.
"It’s important to watch out for scams, especially if someone approves you with a bad credit score or someone who approves you without checking your credit history."
Balance transfers, if done carefully, can be a successful way to eliminate high-interest rate credit card debt. Overwhelming credit card debt can disgruntle consumers which may lead to people choosing options which may appeal to them at first, but if they didn’t fully research only end up hurting them in the long run. Moving your credit card debt from a high-interest rate to a lower one can be appealing and effective for some but not everyone. Transferring your balance is only worthwhile if you can pay off the debt within the introductory low-interest rate window. Many time people transfer their balances to 0 percent interest rate cards but you have to be extremely dedicated to paying off your debt, with one missed payments some creditors can take away the promotional rate and they can charge you with retroactive interest.
If you decide to do a balance transfer paying down your debt has to be a priority otherwise your financial situation can spiral out of control.
Negotiating For a Lower Rate
Ask and you shall receive; sometimes just calling your credit card company and simply asking for a lower rate can work in your favor. Inform your credit card company that you have been exploring lower interest rate credit cards and are struggling to meet your monthly payments. Sometimes companies can be willing to work with you especially if you have some sort of hardship (illness, sudden loss of a job, etc.) If you are heavily buried in credit card debt, you may be able to negotiate a settlement to a lesser amount than your original balance.
Try to negotiate for new (lower) monthly payments over a longer term; offer to pay some of your bills in cash so they know you are good for the money.
Financial negotiating is a skill everyone should consider learning being that it gives you the potential to save a decent amount of money. If you make timely payments, have been a loyal customer, or have great credit use this as an edge in your negotiation. Keep in mind that you are giving your provider business- you are the customer. This can help when trying to reach a better rate, it can’t hurt to try.
When looking for ways to eliminate interest rates to pay down your debt, be cautious certain get-out-of-debt options could have you paying more. Regardless of the above-mentioned strategies, as rates rise, being in debt will cost more and more so consumers should do their best to adjust their budgets and avoid taking on more debt. Getting out of debt means coming to the realization that you need to make changes.
It isn't always easy to stay on top of your finances, especially when you have developed unhealthy spending habits over the years. However, as you begin to realize the many benefits of having healthy finances, it can become something you want to make a conscious effort to improve. When your finances are in a good place, you often have access to better opportunities whether it be a mortgage loan, greater credit line or business loan. On that note, here is how you can become an expert at managing your finances in case you need a few tips.
Learn to Use Technology
The good thing about managing finances in the technological age is that you don't have to do it alone. There are so many apps available that will help you pay bills on time and track your expenses. For instance, some apps force you to live within your actual income and tell you what to do when you need to balance your budget.
If you need an app that will help you get better at saving, then some will set aside your spare change for you. Also, don't be afraid to use more simple tools such as your smartphone calendar to set reminders about payments if you don't automate them.
Seek Legal Advice
Sometimes, being an expert at something means understanding that you can't possibly know it all. This is why you have professionals around you that can help fill in the gaps where you're lacking. Consider hiring a legal firm to help with any challenges that are beyond you. Lexington Law is a good firm as they could help remove negative items from your credit report. Read this Lexington Law Review (Our #1 Credit Repair Service of 2019) to find out more about how they could help improve your finances.
You can't do better than what you know when it comes to managing finances. You should, therefore, invest your time in learning more about finances and how to manage them. Think about what your goals for your finances are and what knowledge gaps you need to fill.
For example, if you want to invest in the stock market so that you can improve your net worth, then you may need to learn more about investing to do so successfully. To boost your knowledge, try reading articles on credible blogs that share finance information from professionals. Also, be weary of content from finance-driven companies as it could be biased.
Work on Growing Your Income
As a self-proclaimed finance guru, you know that the more sources of income that you have, the better. Work on increasing your streams of income so that you have more money to meet your targets whether it's to save for a property or put larger sums towards retirement. One way to do so would be by getting extra income by doing social media marketing for businesses or creating tutorials on YouTube. If you own a property, renting out rooms is a great way to make passive income.
Live Within Your Means
It can be difficult to live within your means when you live in a society that is always presenting you with things to buy. However, being more conscious about the things that you purchase could help you realize that most are wants rather than needs. To live within your means, always take time to think about a purchase as opposed to impulse spending. You should always get good at bargain hunting as many times you can find items of similar quality at a cheaper price.
Learn How to Manage Debt
Debt doesn't have to be a bad thing if you understand how it works and how to manage it. It can be a tool for credit building when you understand the fundamentals. For instance, if you take out a loan or credit card, always be mindful of your interest rates.
By paying the amount of money you borrowed back in full before the due date, you won't have to pay interest on what you borrowed. If you can't pay back in full, paying more than the minimum payment will ensure you incur less interest. For the most part, the secret to good debt management is never spending more than you can afford to pay back.
Managing finances is a life skill that can help improve your quality of life. By following the mentioned tips and taking your finances more seriously, you're more likely to master the art of healthy finances.