It’s no secret that rates have been hovering at record lows for the past several years – even before the pandemic hit. In fact, it’s probably been close to a decade since there’s been a significant increase in loan rates. However, that trend may soon be coming to an end.
Recently the Federal Reserve announced that it is open to possibly enacting three rate hikes in 2022 due to inflation. These increased rates could directly affect your finances and your budget. So, now’s the time to take advantage of these low rates while they are still around.
Review Your Current Loans
Since record-low rates could soon be a thing of the past, now’s the time to review your current loans. You’ll want to compare your current rates to today’s rates. If you can obtain a lower rate than what you currently have, you may want to consider refinancing your loans. By refinancing your loans to a lower rate, you’ll not only save on your monthly payment, but you could save significantly over the life of the loan.
Or, if you’re considering making a major purchase, such as a new car or home, now is the time to act before rates begin to rise. It may be years before you see rates as low as they are now.
Loans to Consider Refinancing:
While all loans provide opportunities to save, some areas you’ll want to consider are:
Credit Cards: These days, most credit cards offer variable rates. That means that the rate you receive can increase as rates fluctuate in the market. This year that means your rate could potentially go up three times. So, now’s the best time to review your current credit card rates and consider consolidating them to a lower-rate credit card. While fixed-rate credit cards are becoming rare, they are an excellent opportunity to lock in low rates that will not increase with the economy.
Auto Loans: Most auto loans are fixed-rate – meaning once the rate is locked in, it will remain that way for the life of your loan. It’s in your best interest to review and compare your current auto loan rates. By refinancing your auto loan at a lower rate, you’ll not only save monthly, but you could save significantly in interest over the life of your loan.
Student Loans: Refinancing student loans is the process of replacing one or more existing federal or private student loans with a new one through a private lender. This is only worthwhile if the new private lender offers a lower interest rate than your current lender. It may even be best to opt for a shorter repayment term to further lower your overall interest cost.
Mortgages: Your mortgage can provide you with the most significant savings in a low-rate environment. If you haven’t refinanced your first mortgage at these historically low rates, you’ll want to seriously consider doing so. Dropping your mortgage rate by as little as 1% could mean saving tens of thousands of dollars over the life of your loan.
If you currently have an Adjustable-Rate Mortgage (ARM), you should think about switching to a fixed-rate mortgage. By switching to a fixed-rate option, you’ll lock in record-low rates for the life of your loan, which, for mortgages, could be up to 30 years.
Home Equity Loans: If you have a Home Equity Line of Credit (HELOC), you should review your current rates. Since HELOCs are variable rate loans, the interest rates may increase in the coming year. Review the current rates available from the credit union to see if you could reduce your rate. Since home equity loans are longer-term loans, even a minor decline in your current rate could translate into significant savings.
We’re Here to Help!
Between inflation and the inevitable rate hikes this year, it’s more important than ever to take advantage of the low rates offered right now. While refinancing your loans may seem complicated, our financial experts are on-hand to help make it as easy as possible. We’re happy to review all of your loans and find ways for you to save.
To take advantage of low rates while they’re still around, please stop by any of our convenient branch locations or call 800-782-4899 today.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.