Manage Debt

4 Ways To Take Advantage Of Falling Interest Rates

With the Federal Reserve trying to bolster the United States economy, interest rates are close to an all time low. Banks are able to borrow money from the Fed at just 0.25%. Since rates are so low, banks have dropped interest rates on all deposit and investment products. A standard savings account is yielding just 0.10%. Low interest rates are not just terrible for savings accounts. They hurt certificates of deposits, bonds, and other investments linked to current interest rates. Low rates may be bad news for your assets but it is great news for your loan products. You can use dirt cheap rates to help lower your monthly expenses.

Here are 4 areas where low interest rates can actually benefit you.

1. Refinancing your home loan

There has never been a better time to refinance your existing home loan. Interest rates on home loans are near historic loans. Homeowners with equity in their homes and a high interest loan can benefit the most. You can refinance your home and get a rate below 4.5%. This is a rare opportunity to lock in a low interest rate for the next 30 years. Interest rates at this level may not be available for the next few decades.

2. Transferring your credit card balance.

Credit cards have APR’s directly tied to the prime rate. Since the prime rate has been falling, you may have noticed that you credit card’s APR has actually been going down over the past few years. You can benefit from these lower rates by transferring your balance to a new card. Turn your interest accruing loan into an interest free loan.

3. Apply for an auto loan.

Have you been waiting for the right time to buy a new automobile? Well, this is a great time. Right now auto loan shoppers with excellent credit can get zero percent financing. A zero percent interest loan makes perfect financial sense for any new car shopper. Individuals with good credit have been able to get loans at 3%.

4. Pay off your outstanding debts.

Do you want to get a 10% return on your money? Use your extra savings to pay off any outstanding debts. You are effectively earning a 10% interest rate if you use your savings to eliminate a debt with a 10% interest rate. It doesn’t make sense to invest $1,000 and earn 0.10% if you owe $1,000 at a double digit interest rate. Low interest rate environments give you the best chance to get out of debt and stay out of debt.

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