Interest rates are rising, and if you’ve got debt, you know it. But rising interest rates aren’t all alarming: they can be a blessing in disguise. You may have to pay more for loans and credit cards. However, there are plenty of ways to take advantage of this phenomenon by changing your finances and lifestyle. If you don’t want your interest rate hike to turn into an emergency—and who does?—here are some tips for finding ways out of debt and keeping up with rising rates.
Look into refinancing
When paying off multiple debts, it’s essential to figure out which ones are the most expensive. This can be difficult if you have several different loans and credit cards.
In such a situation, Debt Consolidation Loans can help to pay off various debts in a single lump sum payment. Not only will this save time, but it also saves money because you no longer have any interest payments on those accounts. That means more money in your pocket.
If there’s one downside to Debt Consolidation Loans, they typically come with higher interest rates than regular personal loans or credit cards. But these days, who doesn’t want a little extra cash with their monthly payments? In fact, many who take out debt consolidation loans end up saving themselves money by lowering their overall interest payments each month thanks to lower rates than what they were cumulatively paying.
Balance transfer credit cards
One of the best methods to tackle rising interest rates is to pay off your debt. If you have credit card debt and want to minimize how much money you end up paying in interest, a balance transfer credit card can be an ideal option. Balance transfer credit cards allow users to transfer balances from their existing high-interest cards to new low-interest ones with 18 months or longer of 0% interest. As long as you can afford the monthly payments on both cards, this is a great way to repay your credit card debt and evade paying higher interest rates in the future.
On top of saving money on interest payments, balance transfer offers often come with rewards programs like cash back or travel miles when used responsibly. This gives users even more incentive to make sound financial decisions to reap maximum value from their new low-cost options.
Increase your emergency fund
An emergency fund is a cushion of money you set aside in a savings account to cover unexpected expenses, such as car repairs or medical bills. As you’re building your emergency fund, keeping all the money in one place is unnecessary. You simply need to have enough cash to cover any sudden costs without borrowing from friends or family members.
In addition to saving up for emergencies, an emergency fund can help you get out of debt faster (the less money you owe, the less interest you’ll pay). If you don’t have an adequate amount saved up yet but are still carrying high-interest debt like credit cards or student loans, consider paying off your smallest debts first with extra cash from each paycheck until there’s nothing left but the biggies like mortgages and auto loans.
Once those are paid off completely (or at least down significantly), put more money toward building up your emergency fund again to cover six months’ worth of expenses at the minimum recommended levels (which varies depending on where you live).
Once all debts are paid off, and there’s plenty left over after covering monthly living expenses such as rent/mortgage payments and other utility bills every month, then take some time before making any major purchases such as cars or furniture.
Rising interest rates can be a real challenge, but this article was intended to give you some ideas on handling them. With proper planning and budgeting, you should be able to enjoy the benefits of rising interest rates while still staying on top of your finances.