You keep hearing that interest rates are at an all time low, but what does that really mean? Simply put, it means that right now is a great time to borrow money if you have the right qualifications. The federal government wants to give a shot in the arm to the economy so they are keeping interest rates low. When rates are low, businesses borrow from banks to expand their business. Right now, rates are super low for anything from cars to houses to student loans.
Read on to discover five ways to take advantage of today’s historically low interest rates.
1. Buy a home or rental property
Take advantage of the low rates to make one of the biggest purchases of your life. By locking in a low interest rate for the next 30 years, you can save tens or hundreds of thousands of dollars in interest payments over the life of your loan.
If you are a renter, now is a great time to move into home ownership. If you’re a home owner and have the available funds, you can easily pick up a great rental property that will generate extra income.
2. Refinance your home
If you’re a homeowner you should take a look at what your interest rate is. Taking advantage of low rates and refinancing your current mortgage could shave hundreds of dollars off each month.
Refinancing could also let you pay off your current mortgage sooner. Many people who bought their homes just 5 years ago are paying twice the current interest rates on their mortgages. Many people could refinance their loan into a 15-year mortgage at current rates and pay their homes off faster with adding only a minimal amount to their monthly payments. Shaving off years of repayment will save thousands of dollars in interest payments and could even let you retire early.
3. Buy a car
Home loans aren’t the only things that are made more attractive by lower rates. Any large purchase can be made more affordable when the interest rates drop and that includes a new car. You’ll see the greatest difference in used car loans, since those rates tend to be the highest.
4. Lock in student loan rates
Many people don’t realize that they have variable interest rates on their student loans. During a low economy when interest rates are low, it’s a great time to shop around for a consolidation program that will let you combine your student loans into one payment at a locked rate. You’ll save money on your payments by consolidating several high-rate loans into one payment at a significantly reduced interest rate.
5. Pay off credit card debt
During a bad economy, interest rates on houses and cars drop, but the same is not true of credit cards. Financial instability pushes lenders to bump up their rates, which can increase your payments. Work to pay off your highest interest rate card first and work your way from there.
Taking advantage of low interest rates is a great way to save yourself hundreds or thousands of dollars over the life of your loans. Making major purchases when rates are low is essential in stretching your money and making it do more work for you.