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5 Simple Ways To Take Advantage Of Low Interest Rates

Many people are disappointed because of the low interest rates available today. They look at the fact that their bank accounts are paying pennies per year in interest, and conclude that they cannot get ahead financially. However, there are things that you can do to take advantage of low interest rates.

Refinance Your Mortgage With Low Interest Rates

This is one of the most common ways to take advantage of low interest rates. This is because most mortgages involve hundreds of thousands of dollars and span across multiple decades. Even a small change in the interest rate of your loan can have drastic effects on your monthly payments.

The best time to refinance your mortgage is when you owe at least 20% less than the appraised value of your home. This way, you won’t have to worry about private mortgage insurance when you refinance.

If you do decide to refinance, make sure you perform an analysis to see if the expected savings outweigh the points, fees, and other expenses associated with the refinance to make sure it is actually going to save you money.

A great way to pay off your mortgage early is to refinance at a lower rate, secure a lower monthly payment, but continue to pay the higher amount. This way you will be able to pay a few hundred dollars extra on your mortgage each month, without having to change your current budget. Just make sure that your additional payments are applied to the principle of your loan.

Negotiate Lower Rates

When you notice that interest rates are going lower, that should be a signal to you that it’s time to negotiate lower rates with your creditors. Give your credit card companies a call and ask them to lower your interest rate.

If you have an excellent payment history with that company and you have good credit, you should be able to get them to lower your interest rate. In fact, even if we aren’t in a low-interest-rate environment, you should be able to secure a lower rate if you have those credentials!

Consolidate High-Interest Debt

If your individual credit card companies and banks aren’t willing to give you a lower interest rate, a consolidation may be in order. Actually, depending on my situation, I may try to consolidate my debt first!

When dealing with high-interest credit cards, there are typically two ways in which you can consolidate your debt. First, you can apply for a consolidation loan. This is usually an unsecured, personal loan that you use to pay off all of your debt. The main benefit here is – hopefully – a lower interest rate, and only having to worry about making one payment each month.

The second way to consolidate your debt is to move all of your debt onto a single credit card. If you can find a card that has a balance transfer offer – such as 0% for the next year – then this can be a great move. Usually, you will have to pay a fee in order to process a balance transfer – just make sure that this fee is less than the money you plan to save by the reduced interest rate.

Refinance Your Car Loan

Many people only think of refinancing a mortgage when faced with low interest rates. However, with the price of a new car easily exceeding $30,000, you can save thousands of dollars by refinancing your car loan!

I would make the same recommendation to pay it off early. Refinance the loan in order to have a lower mandatory monthly payment, but continue to pay the same amount that you are paying today. If this amount is going directly toward the principle of the loan, you will finish paying it off much faster!

Make Prepayments To Secure A Lower Purchase Price

There are a number of financial agreements which we enter into, that will allow us to pay a reduced price if we pay the bill in full up front. The most common charge that I can think of which fits this description is car insurance. Most companies charge a fee for breaking your premium up into monthly payments; thus giving you a discount for paying the full charge up front.

Sometimes landlords will be willing to give you a discount on your rent if you pay up front. The discount may increase as you add more months to your initial payment. Paying your rent a year in advance can lead to real savings.

The same is true for many other arrangements where there is an option to pay over a long period of time versus paying the entire amount due in the beginning of the agreement.

You may be thinking to yourself, “I can make prepayments at any time! This has nothing to do with interest rates”. However, the reason why this is tied to low interest rates is because you have less incentive to put out $15 – $20,000 all at once, if rates are high.

If you can earn a high interest rate by putting your cash in a savings account or CD, then you will not be inclined to pay your rent a year in advance, unless the savings in rent are more than what you would earn in interest. Therefore, low interest rates make it financially feasible to make prepayments in order to secure a reduction in your purchase price!

photo by jscreationzs

A Few Questions About Low Interest Rates

Do you take advantage of low interest rates to reduce your debt payments?
Have you ever taken out a consolidation loan?
Do you feel more justified in living above your means (borrowing money to pay for expenses) in a low interest rate environment?

Seven Dangerous Signs that Show your Debts are Out of Control

By // by guest

[The following is a guest post by Elaine McPartland showing common signs of out of control debt.]

Its 2013, yet Americans are having a hard time saving enough for unforeseen emergencies and even their retirement. Factors like increasing fuel prices, food costs, and other expenses do come into play, but a lot of this has to do with rising credit card debt. As the expenses of the average American household increase over time, people are finding it hard to keep track of their debts.

Here are 7 things that signal that your debts are getting out of control.

1. High Mortgage or Debt Payments

Experts state there is a certain percentage (usually 30%) of your income that determines whether your debts pose a serious threat. If your mortgage or debt payments comprise of 30% or less of your income, you don’t need to worry that much. But once this limit is crossed, you will eventually have to face a financial crisis.

When it comes to credit card payments, they should not even exceed 15% of your gross income. In this way you can still manage other expenses quite well, but once your credit card payments begin to exceed 15% of your gross monthly income, it is a surefire warning sign.

2. You Don’t Know How Much You Owe

A common, guaranteed way of driving anyone towards financial disaster is losing track of how much you owe. If you are in a tight situation, do not avoid your problem and go for consolidated credit counseling. Helpful services from Consolidated Credit include free debt consolidation.

If you are trying to run from your debts, that means you realize that they have exceeded your repayment capacity. Such an attitude can take your situation from bad to worse in no time.

3. You Are Constantly Anxious

In line with the previous point, a clear indicator of uncontrolled debt is your inability to get a good night’s sleep. However, this is only one aspect of the problem, for debt-related stress, for it causes people to become anxious and even paranoid. When you start worrying about how to pay your bills, get help immediately. Otherwise along with your finances, you will lose out on your health as well.

Some people under the yoke of credit card debt resort to using many things to in order to escape from the pressure, but such habits only makes matters worse in the long run.

4. You Can’t Get Credit

Since 2010, the credit CARD Act prohibited banks from increasing your interest rate just because you defaulted on another creditor who is not related to the bank in any way.

However, banks can reduce the credit they offer you even if you make payments on time. The serious problem lies beneath, and as your credit card balances rise, you will soon cross your optimum credit utilization ratio. Your credit score will drop drastically and eventually you will end up with maxed out cards and 0 credit.

5. You Are Out of Savings

As mentioned at the opening, credit card debts have drained up most people’s savings whether it is for emergency or retirements. If you find yourself drawing more from your savings accounts, become alert and find the root of the problem. If you let this go on, you will find yourself without any funds in case of a serious illness or accident.

And even if you are able to repay your debts, you may never be able to retire comfortably.

6. You Are Trying to Avoid Creditors

When creditors or collection agencies start to call you, you should come to terms with the fact that your debts are no longer affordable. Most people start avoiding calls, much to their own peril.

Creditors do not go away, and they can even take serious measures like harassment and litigation if you try to avoid them.

7. You Are Constantly Taking Payday Loans

Payday loans are a practical option for customers to take care of their short term expenses in times of emergency. However, if you are constantly taking out such loans to meet your monthly bills, then you have already jumped in quicksand. Get out before you sink in all the way!

So, if you find one or more of these signs in your life, it is time to get serious about your credit card debt. The longer you delay the worse the situation will become.

About the Author

This article is composed by Elaine McPartland who is associated with “Consolidated Credit” as their community writer. In the above article, She has mentioned worst dangerous signs that shows your debts are out of control. You can add her at her google+ profile.

photo credit: Freedigitalphotos.net

Why Debt Consolidation May Help You

By // by guest

The following is a guest post about debt consolidation and home loans.

Many people try to tackle their debt once the idea of purchasing a home enters their mind. They then realize how a few bad financial decisions in the past, can have such a huge impact on their ability to get a mortgage.

A good home loan comparison along with a sensible debt repayment plan may free you from your current financial problems. Nothing is more stressful than being in debt and knowing that you have the pressure of paying for something which puts you at risk because of your lack of creditworthiness!

Before you even consider making another big purchase, you need to take care of your debt problems.

The question is where do you begin? It all starts by finding out and asking yourself: how much can I borrow? You must follow your debt reduction plan without exceptions.

Use Debt Consolidation With Caution

The additional benefit that you get by consolidating debt and being firm with your financial decisions is that you can live with less stress. The most important criteria of any debt consolidation plan is that the refinanced loan repayments will be lower than the existing loan.

Remember that this rule applies to all levels of debt. You have to make sure that the terms of your consolidation put you in a better place than you are now. Sometimes the fees that you pay are more than the money you stand to save by consolidating your debt.

Sometimes it may be better to simply go to your creditors and negotiate better terms. It can save you time and money, and also give you more control over your financial situation.

Debt Consolidation – Only After Your Spending Is Under Control

When you decide to get out of debt by using a consolidation loan, you have to first discipline yourself to control your spending.

It doesn’t make sense to free up all of this credit, if you are just going to go on future spending sprees. First, get your spending under control, and then try to attack your current debt. If not, you will end up with twice as much debt, and less resources with which to gain financial freedom.

You need to take care of your assets. In short, experts recommend people begin by consolidating small loans including car and or credit card loans.

photo by renjith krishnan

Why A Consolidation Loan May Be Worth Considering

By // by Khaleef Crumbley

I know that many of you may think I’ve gone crazy with the title of this article – especially since I am trying to pay off debt myself – but I can assure you that I have not.

With interests rates being as low as they are right now, this may be a perfect opportunity to take out a loan in order to refinance debt or start up a business.

Don’t get me wrong, I still despise being in debt bondage, and I would still advise all of my clients, family, and friends to avoid debt whenever possible; but I also understand that taking out a loan isn’t always the worst option.

Here are a couple of situations for which getting consolidation loans might be the answer.

High Interest Credit Card Debt

Some people get into credit card debt because they decided to live above their means. For others, it may have been due to a few acts of desperation. Some may have even tried to take advantage of credit card benefits, and for some reason, were not able to pay off their debt.

No matter what the reason, if you are stuck with high-interest credit cards, it’s time to take action. First, call your bank(s) and try to negotiate a lower rate. If that doesn’t work, see if you have a card with a zero balance and a balance transfer offer. If your savings are higher than the transfer fee, do it!

If none of these options work, it may be best to take out a loan – be sure to take advantage of a personal loans comparison first from sites like http://www.comparethemarket.com/loans/ – and consolidate your credit card debt.

Student Loans

There are a growing number of people who are financing their higher education with the help of student loans. Unfortunately, many of those former students are then put into a difficult financial situation because of their high monthly student loan repayments.

Depending on whether you took out subsidized versus unsubsidized Stafford Loans (or some other instrument), you may end up owing a lot more than you realize once you’re out of the grace period.

Sometimes, the only option in these cases is to secure another loan, which will help you to lower your interest rate and/or extend the amount of time that you are given to pay back the loan – lowering your payments in the process.

Of course, your goal should always be to pay back any debt as quickly as possible, so don’t use your lower payments and a license to go wild with your spending!

Consolidation Loans For Your Car Note

Most people only think about refinancing their mortgage when overall interest rates in the economy drop. However, you can still save yourself thousands of dollars if you can get a new loan for your vehicle.

Don’t forget to compare any fees that you might have to pay with the amount of money you stand to save by refinancing.

The same exact things can be said about refinancing your mortgage – besides, people write about that so often that it gets boring! 😉

photo by Omar Omar

Reader Questions

Have you ever had to take out consolidation loans for one or more of the reasons listed above?
Do you think it’s a bad idea to try to fix a debt problem with more debt?