The COVID-19 pandemic has had a massive economic impact on the US. One of the biggest results of this impact has been historically low-interest rates. As banks and other financial institutions have dropped interest rates like never before, people are looking into how they can take advantage of this.
Depending upon your financial goals, low-interest rates could be good or bad for you. If you are looking to open a savings account, low-interest rates may not be ideal for you since you won’t get higher returns. However, if you are looking to take out a loan the low-interest rates could help you prevent paying a higher sum of money.
Taking advantage of low-interest rates can pay-off in the near future. It’ll not only help you save on monthly interest payments but also provide you with peace of mind and better financial standing in the future.
To help you take advantage of low-interest rates (before they go up), here are several strategies worth exploring.
Refinance your mortgage
One of the most obvious tips during a period of low-interest rates is to refinance your mortgage. Since you took a home loan when the interest rates were high, refinancing your mortgage will help you save money on the interest that you’ll pay in the future. This is crucial if you don’t plan on selling your house any time soon.
You might also want to consider getting a mortgage with a shorter payment timeline. Instead of a 30-year mortgage, opt for a 15-year mortgage. While this may not lower your monthly interest payments, you will still be able to save thousands of dollars in interest payments because of the low-interest rates.
Refinance your other loans
You may have other debts such as car loans, student loans, or other personal loans. With lowered interest rates, refinancing these loans is a smart decision. However, a very important factor that plays a role in deciding your interest rate is your credit score.
There is a high possibility that when you took a car or student loan, your credit score wasn’t exactly amazing. Now, with several years passed and an improved credit score, refinancing your loan to a lowered interest rate won’t be difficult. Other than reducing monthly payments, you might also be able to pay off the debt faster.
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Buy a house
Whether you were looking to buy your first house or second, buying a house currently might be very beneficial for you financially. Buying a house has always been a costly venture. These costs are not only because of the current rates but also the interest payments that people have to pay to the bank.
However, with reduced interest rates, there may not be a better opportunity to buy a house that won’t cost you an arm and a leg. Plus, if you have a good credit score, you might be able to lock in an even lower interest rate. The key is to find a bank that would allow you such flexibility.
You could also explore taking out a fixed-rate mortgage. Since the current interest rates have never been lower, the only way to go from here is up. If you choose a variable rate mortgage, you will most likely have to pay a higher monthly payment in the future.
By choosing a fixed-rate mortgage, your low-interest rate will stay fixed for the entirety of your pay-off period.
Pro tip: Using the above logic, you might also want to consider buying a new car. Choose to go for a dealership sale since car sales have recently been low, and dealers are desperately trying to make new sales.
Consolidate your high-interest debts
If you have several debts, especially unsecured ones, it might be the perfect time for taking out a new loan to pay off these financial obligations. This is also referred to as consolidating your debts.
While banks provide the option to transfer your credit card balances to a new one with no or low-interest balance, there might be a chance that you do not qualify for it.
A Home Equity Line of Credit or HELOC loan is the best option to go for in these scenarios. With current lowered rates, you might be able to save thousands of dollars as well as pay off a number of credit loans and debts. Check with your bank and talk to them about their policies on taking out a HELOC loan.
If you can secure a HELOC loan, we also recommend investing in home improvement projects. If you cannot take care of the cost of a remodeled kitchen or new floorings upfront, having a HELOC loan will enable you to finance the project easily.
You wouldn’t need to pay any large sums of money in one go and will be able to pay off the costs over several years.
Financial instability is one of the leading causes of stress. Not being able to pay for essentials can be very difficult, overwhelming, and problematic. So, when there’s an opportunity for improving your financial future it can pay off very well.