When the Federal Reserve decides to raise rates, we’re all affected by it.
Recent economic projections show that interest rates will continue to be on the rise in the upcoming years. Here’s how it will impact you and your loans in key areas such as credit card interest, mortgages, and car loans.
Why the increase?
During periods of economic recession, the Federal Reserve typically increases rates to help stimulate the economy. Economists predict rates to rise over the next few years as we strive for lower unemployment and a healthier economy.
In what ways will you be impacted?
Credit Card Rates
If you have credit card debt, the rise in interest rates will hurt more. Here’s why: the interest compounds. You’ll start paying interest on what you already owe plus what you’ve been accruing.
Mortgages
The good news here is that the Fed’s decision to raise rates does not have a major direct impact on a long-term mortgage. Most home buyers opt for a 30-year, fixed-rate mortgage, and those loans are still incredibly attractive because they’re set for the long term. However, an anticipated increase can factor in—and even a seemingly small increase in your monthly payment adds up over the duration of that 30-year loan.
Car Loans
Are you thinking about buying a new car? You might want to consider doing that sooner rather than later.
With a predicted steady climb in rates, a loan you take out today will be more attractive than one you are saddled with down the road.
