Are Interest Rates Up, Up and Away?

Interest rates have been at their lowest levels in over 40 years. U.S. consumers have been able to purchase previously unaffordable homes, cars and other toys. Many have used cheap home equity loans to remodel, take vacations and pay off credit cards. Students have taken advantage of the rock-bottom student loan rates.

But, interest rates look to be headed up. Recently, Alan Greenspan and the Federal Reserve escalated the Fed funds rate from 1% to 1.25%. So, what does that mean to you and me?

The increase in rates is important if you have variable (not fixed) loans. For example, if you have adjustable rate mortgage or home equity lines of credit, the interest rates will probably go up (as well as the payments) in the next few months. Each time the Fed increases the Fed funds rate, it will roll down onto your adjustable rate loans and your payments will go up. The speed of increase and the amount of the increase will depend on what index your loan is based on ? check with your lending institution for more information on that.

If you have high credit card debt, the situation may be even more bleak because credit card rates remained high while other rates have been incredibly low. The Fed increases are a good excuse for your credit card company to hike your rates even higher.

So, what can you do if you're looking at rates and payments going up, up and away?

* Your payment increases may be fairly gradual. Depending on the economy, the Fed will continue to increase rates although they have signaled that the increases are likely to be very gradual. If the economic or political situation changes, they always have the ability to lower rates again. The Fed's rate-setting committee is scheduled to meet again Sept. 21, Nov. 10 and Dec. 14, and they may skip a rate increase at one of those meetings if inflation is subdued.

* Check with your student loan lenders to see about consolidating and locking in rates. Good news: interest rates on savings are also likely to increase! So, if you have CD's coming due, check with different financial institutions before automatically rolling them over. If you have money stashed in savings accounts, the rates are probably starting to creep up. I highly recommend ING savings for the highest rates around (www.ingdirect.com). They also give great service, have no fees or hidden costs and are FDIC insured. You can also name your accounts at ING to make it easy to identify what you're saving for.

* If you've been thinking about re-financing, there are still some good deals out there and there's no sense in procrastinating any longer. Contact me for some excellent resources for re-financing.

* What if a new house isn't in your plans for a couple of years? When rates go up, it often cools off real estate prices and balances out the higher rates. Continue to save money in the highest interest short-term accounts you can find (no stocks or other long-term investments). Rates will probably not take huge leaps in the short term.

* If you have an adjustable rate (home or home equity or car loans), you will see higher payments so call your lender to find out what the new payment is "likely" to be. They'll probably put all kinds of disclaimers out about not really knowing, but try to get a worst case scenario and then start pretending you really do have that new payment. Put the extra into a special savings account so you'll have a "slush" fund to cover if you run short one month. At the same time you are building up a cushion for the future, you'll have a good idea of whether or not you can handle the new payment. If not, now's the time to start looking at other alternatives like cutting back, increasing income or even refinancing.

Remember, if you refinance your existing term to a new 30 year term, you'll have lower payments, but you'll pay a lot more for your house because of the additional interest.

* Call your credit card companies and see if they are willing to lower your rates (not all are). Look for good, permanent credit card interest rates that you can transfer higher rate balances to. For example, if most of your cards are 18% or higher, find a good 12% card or lower and transfer as much as you can to that. Playing the 0% credit card shuffle is a dangerous game and can hurt your credit score.

* Reduce credit card debt now! Stop using your cards and pay more than the minimums. If you pay off one card, take that payment and put it on another card. If you receive a pay increase, put it on the cards. The sooner the cards are paid off, the more flexibility you'll have!

All in all, we're quite likely to enjoy reasonable interest rates for some time to come. However, make preparations now and you'll be able to handle whatever comes your way.

If you need help, I'm the one to call -- 541-387-2995!

Cindy S. Morus (www.phelps-creek.com) is a Certified Financial Recovery Counselor specializing in showing women and their families how to achieve financial well-being and peace of mind. She is also a Certified Credit Report Reviewer and Get Clients NOW!? licensee. Contact her at 541-387-2995 or cmorus@phelps-creek.com She is also the publisher and editor of "Financial Fitness", an internet gazette dedicated to helping people improve their financial fitness no matter what decisions were made in the past.

Attention Ezine editors/Site owners: Feel free to reprint this article in its entirety in your ezine or website as long as you leave all links in place, do not alter the content and include our resource box as listed above. If you do use the material please send us a note (cmorus@phelps-creek.com) so we can take a look. Thanks.

---

Dos and Donts: Student loans

Parents should begin saving money early for their children's college... Read More

Benefits of a Home Improvement Loan

Some of the many benefits of a Home Improvement Loan... Read More

No Income Verification Home Equity Loan

A no income verification home equity loan is a second... Read More

A Guide to Debt Consolidation Loans

Should you find yourself overcome by debt, you might want... Read More

Cash Advance Payday Loans

The ads are on the radio, television, the Internet, even... Read More

A Look at the Origins of Online Lending

You might find yourself wondering about the origins of online... Read More

The Average Profile of Customers Opting for a Payday Loan Cash Advance

Payday loans are loans of a small amount, taken for... Read More

Bad Credit Loans

Obtaining bad credit loans can be a real challenge. If... Read More

Student Loans Are The Life Preserver Of The Education System

A loan is the reason many students are able to... Read More

When the Bank Says NO!

Factoring has been practiced for centuries. The Romans sold promissory... Read More

Small Business Loans Can Help You Write Your Success Story

Scene one: you are sitting on your office desk surrounded... Read More

Instant Car Loan - Get an Approval Online Quick

Your car loan is now less than an hour away... Read More

Are You In The Market For a Car Loan?

Car loans are a tempting way to purchase a new... Read More

Finance Your Home Business: Six Ways Under Your Nose

There are lots of ways to get additional capital to... Read More

Should You Get A Pay Day Loan?

Whether you have good credit, bad credit or no credit,... Read More

Beware of some Get Cash Now Vendors

Some weeks it feels like you're living hand to mouth.... Read More

Motorcycle Loans For Military With Bad Credit

Motorcycle loans for military with bad credit aren't hard to... Read More

Guide to Bridging Loans

Here is a useful guide to bridging loans. This is... Read More

Compare Payday Loan or Cash Advance Lenders Online Before You Borrow

Comparing payday loan lenders, also called cash advance lenders, online... Read More

Online Loans Made Easy

What will it take for you to get a low... Read More

Secured Loans ? Filling the Void Created by the Deficiency of Resources

"Money is like a sixth sense without which you cannot... Read More

Payday Loan Qualifications - What to Expect

Payday loan qualifications are different from other types of short-term... Read More

8 Point Checklist: Evaluating Online Vendors

Here are 8 things to consider, when evaluating lenders online:Website... Read More

Information About Adverse Credit Homeowner Loans

While looking for adverse credit homeowner loans it can seem... Read More

Finding Good Loans for Bad Credit

When looking for loans for bad credit, many people find... Read More

What is a Tenant Loan?

Ever wondered what is a Tenant Loan? A tenant loan... Read More

Financial Aid Options

Before entering college, you may find yourself pondering exactly how... Read More

Bad Credit Wedding Loans in Case You want to Race Towards the Altar with Bad Credit

So you are engaged. Congratulations. It was not easy. What?... Read More

Easy Cash Advance - Payday Loans Online are Quick

Cash advances have become quicker to process with online payday... Read More

What is a Car Loan?

A car loan is a type of credit offered by... Read More

What is a Title Loan?

A title loan is a loan of money secured by... Read More

Zero Zero Financing on Automobiles in Retrospect

Some say that the automobile industry saved the economy during... Read More

PayDay Cash Advance Loans - The Benefits of Using the Payment Protection Plan

Payment protection plans are offered by payday companies to protect... Read More