Interest rates have never been lower. It seems that just about every week mortgage rates set a new low. And this week the Fed is expected to undertake a second round of quantitative easing, QE2 for short, by buying up more government debt. As a result, incredibly low interest rates may go even lower.
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But low rates don’t do us any good if we fail to take advantage of them. So we’ve put together a list of five ways that you may be able to enjoy the benefits of low interest rates.
1. Buy a home
The combination of low rates (current mortgage interest rates on a 30 year fixed are about 4.3 percent) and falling real estate prices make for a perfect time to buy a home. Particularly for first time buyers, there may never be a better time to take the plunge into homeownership than over the next year. Some say home values may still fall over the next year, so knowing exactly when to buy can be a bit of gamble. But locking in incredibly low rates on a 30-year mortgage is a great way to reap the benefits of the current interest rate environment.
2. Get free money from your credit cards
Today, the best balance transfer offers give you interest free money for 21 months. Just a year ago, the best deal was for just 12 months. And on top of the longer transfer period, balance transfer fees on these offers are down to 3 percent from what use to be 5 percent. These deals offer a great way to pay off high interest credit cards, and they can enable you to climb out of credit card debt faster while paying no interest.
3. Refinance your car loan
While most think of refinancing a mortgage, many can save a substantial amount of money by refinancing an auto loan. With online tools, it’s easy to compare rates and apply for refinancing loan entirely online. In fact, you never have to even go into the bank. And if your current car loan is charging a high interest rate, refinancing can easily save several hundred dollars a month.
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4. Refinance your mortgage
Refinancing a mortgage is of course a well known way to save a lot of money over the life of your home loan. In addition to the interest rate, there are two key considerations when deciding whether to refinance. The first is whether you have enough equity in your home to qualify for refinancing. As a general rule of thumb, you want at least 20 percent equity in your home. That can be a real stumbling block for some as home values have fallen so much over the last few years. But it also underscores the importance of refinancing before home values fall further. The second consideration is your credit score. To qualify for the best rates, your FICO score should be 720 or higher.
5. Consolidate your debt
Finally, debt consolidation can be a great way to take advantage of low rates. By combining high interest car loans, school loans, credit cards, and other debt into a single low interest loan, you can not only save money, but also reduce the number of payments you make each month. One option is to consolidate high interest debt into a home equity line of credit. If that option is not available, you may consider a bank loan or other line of credit, so long as you can qualify for an interest rate that makes sense.