Since the great recession of 2007-2008 interest rates have been historically low, and then during the Covid-19 outbreak they were dropped to zero, so it has been easy to ignore the debt side of your balance sheet. But with Fed raising rates again yesterday the trend of higher rates continues. Paying attention to what you owe and how much you are paying on your debt has become really important. Here are some steps to take to improve the health of your debts:
- Review all the rates you are paying – some of them a likely floating rate that have increased lately.
- Opt for fixed rates on any debt if you can get it. Variable rates are likely to continue to rise.
- Consider paying off anything with a rate higher than 5% if you can.
- If you can’t pay them off, make extra payments where possible, this will reduce the amount you have to pay in interest costs over time.
- Do not take out new loans right now if you can help it. This may be a tall order given high inflation and a looming recession, but try your best to be cash only for the time being. Car loans are especially high, so you might better off keeping the old jalopy going for a few more years if you can.
- Do not incur credit card debt if at all possible. This is a better year to go a little light on the holiday spending, or scale back that vacation plan, and not run up the credit card.
- If your payments get uncomfortably high due to rising rates contact your creditors right away. Often, they will work with you to reduce your payments. It is hard to get debt completely forgiven, but if you can make an agreement for lower monthly payments it will save your credit rating.
- Remember that high rates won’t last forever. Interest rates are cyclical and then next trend in late 2023 or 2024 will likely be down. So, if you need to take out loans now, you can probably refinance them in a few years to more reasonable rates.
If you are already in a pickle with high debt payments consider working with Consumer Credit Counseling to get going in the right direction. But be careful there a lot of scams out there.
Here is link to the real deal http://deal https://www.consumercredit.com/consumer-credit-counseling-services/