The U.S. Federal Reserve has not raised interest rates recently, but is expected to late this year. What does this mean for consumers? Enterprises TV offers an action plan to tackle before interest rates rise.
Home equity lines of credit and credit cards both have interest rates set by the Federal Reserve. Chances are payments may be higher for both of these later in the year. If a homeowner has a low fixed-rate mortgage, there is nothing to worry about. But it makes sense to use a payment calculator to see what might happen to the interest rate on a loan.
Keep paying down the balance on the home equity loan until it is affordable.
The same applies to credit cards. The usual rule of thumb is to pay off as much of the credit card balance as possible, and utilize 10 percent of the credit line. When the Federal Reserve raises interest rates, open balances will go up, thus putting more pressure on the card holder to pay it off. The action plan for this is to pay off small card balances first, then chip away at the larger ones. Use cash or debit cards for holiday shopping. Avoid using credit cards for major purchases.
Auto loan may also be affected if interest rates go up. Most loans carry a fixed interest rate but some have a variable rate. If shopping for a new auto, be sure to know which kind of interest the loan carries. Also note that auto sales are going well now and dealers don’t want to see another downward slide. Work with the loan company, your bank or credit until to get the best possible deal on the loan.
The Enterprises TV show also notes that the consumer’s credit score plays the most important role in what interest rate they are offered. Stay on top of yours.