With lenders anticipating increases in interest rates over the coming months, it’s important that everyone carefully examines their debt load to determine how any increase in interest rates charged will impact them.
Since different types of debt will almost certainly experience increases, those carrying those types of debt should carefully consider how they’ll deal with an increase in the amount they are expected to pay.
Mortgages are Not All the Same
While mortgages with fixed interest rates won’t be impacted by the anticipated increase in interest rates, homeowners with variable rate mortgages should carefully explore what their exposure is likely to be.
Although a small increase might be acceptable, even a one percent increase in the interest rates charged will amount to a significant change in a mortgage payment, especially when that increase must be paid over many years.
Those with variable rate mortgages may want to consider refinancing, if possible, to avoid negative long-term consequence.
Personal Loans May Experience Changes
Again, many personal loans enjoy a fixed interest rates, but not all do. Look carefully at the terms of any personal loan to determine if the interest rate will be allowed to go up when the rates change.
Depending on the amount and term of the loan, a small increase may be affordable. However, if the loan is larger, leaving the loan in place as it is may be detrimental to a family’s budget.
A debt check up will help anyone owing money to determine how seriously increasing interest rates will impact their budgets.
Credit Card Interest Rates Can Be Volatile
The vast majority of credit card companies automatically raise rates when the market allows. That means those carrying high balances are very likely to be assessed additional charges every month just to cover the interest on that debt.
Virtually every financial expert recommends reducing credit card debt to avoid those charges, as the rates may increase substantially.
No matter what type of debt is being carried, it’s important to review the amount of debt and how any change in interest rates will impact the borrower. A debt check up is the first step everyone should consider to protect their financial well-being when interest rates are expected to increase.
Contacting a professional for help in determining how debts can be adjusted is a good first step to remaining financially healthy.