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.

---

Alternative Ways to Avoid Payday Loan

If you spend more than you earn on a regular... Read More

A Beginners Guide to Low Interest Debt Consolidation Loans

Looking for low interest debt consolidation loans can sometimes seem... Read More

Holiday Loans Can Expand The Horizon Of What You See

Why do kids get all the breaks? Winter-weary adults, fed... Read More

Everything You Need to Know About a Secured Loan

If you're not familiar with the term, a secured loan... Read More

Finding the Right Online Loan for You

If you're looking for an online loan, you might be... Read More

How to Get a Secured Loan UK

Living in the United Kingdom, you might find yourself in... Read More

Unsecured Loans

The term unsecured loan relates to a loan which is... Read More

Locating Cheap Personal Loans

Locating the cheap personal loans that you're looking for isn't... Read More

A Guide to Finding Home Owner Loans

If you're in the process of trying to find home... Read More

5% Down Vs. 10% Down - A Comparison

It has always been an issue for home buyers to... Read More

Where to Look for a Cheap Personal Loan

Looking for a cheap personal loan can sometimes be a... Read More

SBA Loan: Options, Benefits, and Lenders Part 2 of 2

In this second installment, we will further examine what kinds... Read More

A Guide to Looking for Cheap Online Loans

Cheap online loans may seem hard to come by, but... Read More

Do You Qualify for a Loan?

Like most people, you will probably wait until submitting a... Read More

Bad Credit Loans

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

Getting That Car Loan: Simple Interest Is The Best

So here's the situation: you are buying a car but... Read More

What is a Commercial Business Loan?

A commercial business loan is designed for a wide range... Read More

Faxless Payday & Cash Advance Loans - Fast Cash, No Faxing Loans, The Easiest Payday Loan Process

If you are in a hurry for a payday loan,... Read More

If You Consider To Get a Quick Cash Loan Then Reconsider It

A quick cash loan also called payday loan, cash advance... Read More

Why Payday Loans Should Be Avoided

If you are considering getting a payday loan for the... Read More

A Look at the Origins of Online Lending

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

Fast Cash Advance Payday Loans - Convenient to Use Online

Online cash advance companies offer a convenient and speedy application... Read More

Factoring vs. Bank Loans

Is factoring a type of loan?No. Even though invoice factoring... Read More

Where to Look for Bad Credit Loans

When trying to locate bad credit loans, many people find... Read More

Car Loans - Shop Around, Compare Offers, and Watch The Small Print

Getting a loan to buy your new car is, you... Read More

It Only Takes a Few Simple Steps To Avoid Student Loan Debt

Student loan debt is a problem that affects many former... Read More

Is Getting A Personal Loan With Bad Credit Impossible? Think Again

A bad credit history is like having contracted an infectious... Read More

How To Apply For a Business Loan

Worried about how to apply for a business loan? Although... Read More

Do Payday Loans Deserve a Bad Rap?

We have all heard the stories about cash advance lenders... Read More

Applying For a Student Loan

Studying at college can be an expensive business and you... Read More

Student Loans Are The Life Preserver Of The Education System

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

Bank Auto Loans ? Best Loans for Stretch Commuters?

People have to work to survive. The desire to maintain... Read More

Payday Loans And Pawnshops: Comparing Two Popular Ways Of Getting Cash Quickly

I remember years ago growing up when you needed some... Read More