The Federal Reserve’s latest interest rate hike will make it even harder for those in debt, says financial planner :: WRAL.com
Raleigh, North Carolina — The Federal Reserve announced its third interest rate hike on Wednesday aimed at curbing inflation. But before prices start to fall, consumers will likely feel the pain of higher borrowing rates.
Credit card debt, home and auto loans, and even your savings account are all affected.
“We at the Fed understand the difficulties caused by high inflation,” said Jerome Powell, Chairman of the United States Federal Reserve. “We are firmly committed to bringing inflation down, and we are moving quickly to do so.”
Rising interest rates mean that anything you currently have with a variable interest rate will go up and new loans, including mortgages, will have higher starting rates.
“It may not seem like a big percentage because it’s isolated, but if you have revolving or variable debt, it could have a huge impact on your financial situation,” said LaTonya Parsons, financial planner at Wake Technical Community. Middle School.
Although it is beyond your control, you have more power than you think. Parsons recommends sitting down and getting organized and spending time reviewing your finances, if you’re not already doing so.
Advice for those with credit card debt
“Now is the time to cut the fat,” Parsons said. “Find out where you can cut, consider subscription services and frequently take-out. Determining what those needs and wants are going to be very important.”
According to data from Lending Tree, the average North Carolina has more than $6,000 in credit card debt.
Use all the money you can save right now to pay off your credit card debt. For example, if you have credit card debt of $5,500, at a rate of 17% right now, it would take you 23 months to pay it off if you pay $100 a month. With the Federal Reserve interest rates rising 0.75%, that debt would take you an extra month to pay off.
A dvice for homeowners
If you own a home and have a fixed interest rate, the latest hike won’t affect you. But, if you own a home and have an adjustable rate, now is the time to talk to your lender and get the lowest possible refinance.
Remember that interest rates will affect your monthly payment: if you bought a $450,000 home with a 20% down payment at 3% interest earlier this year, your monthly bill before taxes and insurance for a 30-year mortgage would be $1,500.
If that interest rate goes to 5%, the house at the same price with a 30-year mortgage will cost you $1,900 per month.
Advice for those with a student loan
If you have a government-issued loan, the amount of interest you pay on your loan will not change.
However, if you have a private loan, your interest rate will increase. Work on paying off your private student loans as soon as possible and talk to your lender about getting a lower interest rate.