The Federal Reserve raised interest rates for the fourth time this year, and more rate increases may be expected next year.
If you have student loans or credit card debt, here is what you can do to protect yourself.
1. Determine if you have a variable rate
If you have variable rate debt, then you will be impacted by any rise in interest rates. The net impact is that your debt will become more expensive, and you will pay more each month.
While federal student loans are fixed-rate debt, private student loans have either fixed or variable interest rates. If you borrowed private student loans, you can check with your lender or student loan loan servicer to confirm whether you have variable rate student loan debt and what is the interest rate.
If you have credit card debt, your interest rate is most likely variable.
2. Refinance your student loans
One move to protect against rising interest rates is to refinance your student loans.
Why? Student loan refinancing can lower your interest rate.
Student loan refinancing enables you to combine your existing federal student loans, private student loans or both into a single, new, private student loan with a lower interest rate.
A lower interest rate can save you substantially each month on your student loans. Let's assume you have $100,000 of student loan debt at an 8% interest rate and 10-year repayment term. With strong credit and income and a history of financial responsibility, let's assume you refinance your student loans to a 3.89% fixed interest rate and 10-year repayment term. You would save $206 per month and $24,725 over the life of your student loan.
You can check your own potential savings with this student loan refinancing calculator.
With student loan refinancing, you can also change your loan term to a shorter or longer time period. For example, the standard repayment period is 10 years, but many lenders allow you to choose a 5 year, 15 year or 20 year repayment plan. The shorter your loan term, the more money you will save in interest.
Student loan refinancing may not be right for you if you want access to federal repayment programs and other protections from federal student loans such as deferment and forbearance. However, many private lenders now offer types of deferment programs for economic hardship for borrowers who refinance student loans. Also, the Public Service Loan Forgiveness program may not exist in its current form or at all, so student loan refinancing may be one, viable alternative.
3. Refinance student loans to get a fixed interest rate
You can also refinance your student loans to swap a variable interest rate for a fixed interest rate.
Refinancing your student loans from variable rate debt to fixed rate debt can protect you from interest rate increases.
If your student loans have variable interest rates, the cost of your student loans likely will rise each time that the Fed raises interest rates. However, you can use student loan refinancing to protect yourself with a fixed interest rate. With a fixed interest rate, the interest rate on your student loans will not rise (regardless of how many times the Fed raises rates).
You can also apply for student loan refinancing with a creditworthy cosigner such as a parent or grandparent, who can help you get approved with a lower rate (so long as they are able to be financially responsible with you for the loan). Many lenders will release a cosigner after you are approved once you meet certain requirements.
4. Get a 0% APR Credit Card
A 0% APR credit card can help you when you have credit card debt.
With a 0% APR credit card, you can transfer your existing credit card balance to a new 0% APR credit card. Many 0% APR credit cards enable you to receive 0% interest on your existing balance and any new purchases for a set period of time (such as 12-18 months, for example).
During the period of 0% APR, you will not pay any interest on your credit card debt. During this time period, you can organize your finances and determine the best way to get out of credit card debt.
You want to repay your credit card debt in full before the time period expires, or you will be back to paying high variable interest rate.
5. Consolidate credit card with a personal loan
If you have credit card debt, you can use a personal loan to consolidate your credit card debt.
With a personal loan, you can transform your variable rate credit card into a fixed, rate personal loan. The interest rates for personal loans can vary, but if you have strong credit, you potentially could receive a fixed interest rate which is up to 50% lower than the interest rate on your credit card debt.
So, in addition to protecting your money from rising interest rates, you also can save money on interest.
Does all of these seem too complicated but you still need help refinancing your loans? Call us at 1-833-240-1503 today!
Source: https://www.forbes.com/sites/zackfriedman/2018/12/20/student-loans-credit-cards-interest-rates/#4b8ad92745f5
If you have student loans or credit card debt, here is what you can do to protect yourself.
1. Determine if you have a variable rate
If you have variable rate debt, then you will be impacted by any rise in interest rates. The net impact is that your debt will become more expensive, and you will pay more each month.
While federal student loans are fixed-rate debt, private student loans have either fixed or variable interest rates. If you borrowed private student loans, you can check with your lender or student loan loan servicer to confirm whether you have variable rate student loan debt and what is the interest rate.
If you have credit card debt, your interest rate is most likely variable.
2. Refinance your student loans
One move to protect against rising interest rates is to refinance your student loans.
Why? Student loan refinancing can lower your interest rate.
Student loan refinancing enables you to combine your existing federal student loans, private student loans or both into a single, new, private student loan with a lower interest rate.
A lower interest rate can save you substantially each month on your student loans. Let's assume you have $100,000 of student loan debt at an 8% interest rate and 10-year repayment term. With strong credit and income and a history of financial responsibility, let's assume you refinance your student loans to a 3.89% fixed interest rate and 10-year repayment term. You would save $206 per month and $24,725 over the life of your student loan.
You can check your own potential savings with this student loan refinancing calculator.
With student loan refinancing, you can also change your loan term to a shorter or longer time period. For example, the standard repayment period is 10 years, but many lenders allow you to choose a 5 year, 15 year or 20 year repayment plan. The shorter your loan term, the more money you will save in interest.
Student loan refinancing may not be right for you if you want access to federal repayment programs and other protections from federal student loans such as deferment and forbearance. However, many private lenders now offer types of deferment programs for economic hardship for borrowers who refinance student loans. Also, the Public Service Loan Forgiveness program may not exist in its current form or at all, so student loan refinancing may be one, viable alternative.
3. Refinance student loans to get a fixed interest rate
You can also refinance your student loans to swap a variable interest rate for a fixed interest rate.
Refinancing your student loans from variable rate debt to fixed rate debt can protect you from interest rate increases.
If your student loans have variable interest rates, the cost of your student loans likely will rise each time that the Fed raises interest rates. However, you can use student loan refinancing to protect yourself with a fixed interest rate. With a fixed interest rate, the interest rate on your student loans will not rise (regardless of how many times the Fed raises rates).
You can also apply for student loan refinancing with a creditworthy cosigner such as a parent or grandparent, who can help you get approved with a lower rate (so long as they are able to be financially responsible with you for the loan). Many lenders will release a cosigner after you are approved once you meet certain requirements.
4. Get a 0% APR Credit Card
A 0% APR credit card can help you when you have credit card debt.
With a 0% APR credit card, you can transfer your existing credit card balance to a new 0% APR credit card. Many 0% APR credit cards enable you to receive 0% interest on your existing balance and any new purchases for a set period of time (such as 12-18 months, for example).
During the period of 0% APR, you will not pay any interest on your credit card debt. During this time period, you can organize your finances and determine the best way to get out of credit card debt.
You want to repay your credit card debt in full before the time period expires, or you will be back to paying high variable interest rate.
5. Consolidate credit card with a personal loan
If you have credit card debt, you can use a personal loan to consolidate your credit card debt.
With a personal loan, you can transform your variable rate credit card into a fixed, rate personal loan. The interest rates for personal loans can vary, but if you have strong credit, you potentially could receive a fixed interest rate which is up to 50% lower than the interest rate on your credit card debt.
So, in addition to protecting your money from rising interest rates, you also can save money on interest.
Does all of these seem too complicated but you still need help refinancing your loans? Call us at 1-833-240-1503 today!
Source: https://www.forbes.com/sites/zackfriedman/2018/12/20/student-loans-credit-cards-interest-rates/#4b8ad92745f5
How To Protect Your Student Loans And Credit Cards Against Rising Interest Rates
Reviewed by Student Loans Center
on
December 20, 2018
Rating:
Reviewed by Student Loans Center
on
December 20, 2018
Rating:
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