Consumer Alert: These are the two things you need to finance before rates go up
ROCHESTER, N.Y. (WHEC) — Are you looking for a house? Do you need to refinance your student loan? Personal finance experts say the time to act is now. We’ve enjoyed historically low interest rates. But that’s about to change.
Fixed-rate mortgages are tied directly to the rate set by The Federal Reserve. So let’s put this in perspective. Someone borrowing $300,000 at a 30 year fixed rate of 3.5% will pay $1,347 a month. If rates go up to 5%, that same mortgage will go up by almost $300 a month. And if you have an adjustable-rate mortgage, you may want to consider refinancing to a fixed rate.
And how about that student loan? If you’re thinking about refinancing it, lock in that fixed rate now. I checked Bankrate.com.
The best student loan rate I found on Monday for those with excellent credit is 1.99%. There are great rates are still out there. But refinancing a student loan does come with a few potential downsides. If you go with a private lender, you will lose certain federal protections, like a mandatory forbearance period which allows you to temporarily lower your monthly payment. And there’s always the possibility of lump-sum debt forgiveness from the Biden administration which would not be available to you if you refinance your debt with a private lender.
As for that new car loan, there’s not as much to worry about there. Car loans will increase as The Fed increases rates, but it has a limited impact on monthly car payments. And experts point out that as rates increase, demand will likely decrease bringing down car prices. So if you’re waiting for car prices to come down, that’s likely a safer bet.
So it’s time to check your credit score. Annualcreditreport.com is providing free credit reports through the end of this year.
If you see anything that shouldn’t be there, get on it. Contact Experian, Equifax and TransUnion and dispute it.
Interest rates are still low, at least for now.