Are you living paycheck to paycheck? Does the burden of debt weigh on your shoulders heavily? If you have a lot of debt, you know how hard it can be just to survive. You need to look for ways to reduce your debt burden and to find financial freedom once again. Right now the interest rates for just about everything are incredibly low, which can be a blessing to people trying to get out of debt.
Why Low Interest Rates Are Good For Debt
While you usually want interest rates to be higher to increase your savings rate, keeping them low can be ideal to get out of debt. For example, let’s say you have a mortgage with a 6% interest rate right now and you have a debt burden of $20,000. If you have enough equity in your home, you can refinance your mortgage at a lower rate and roll that debt into your mortgage. Now you have an interest rate of 3.5% or possibly lower depending upon your credit rating and approval for the loan. When rates are low, you will end up paying less money in interest!
Why Lower Interest Rates Are Bad For Savings
Keeping the rates at a low level can help to pay off debt quickly but it makes it incredibly challenging to save money. The interest rates on savings accounts are also at an all time low, which means you aren’t really earning much of anything! Consider looking into different types of savings accounts and investments that can pay out a higher interest rate. Money market accounts, CDs, and online savings accounts will come with a higher interest rate from a standard savings account at your local bank. Compare rates online to find out which banks have the highest interest rates and also to find out which ones have consistent returns for their customers.
Create A Debt Payment Plan
Things in the economy are not easy for a lot of people and anyone with debt knows that now is the time to get out of it as soon as possible. Take a look at your credit cards and other loans and write down the interest rate of each account along with the monthly payment amount on each account. Set a goal to pay off the accounts with the highest interest rates first. This will end up saving you the most money in interest payments. If you would like to have a little extra motivation about paying off credit cards you can opt for paying off the accounts with the lowest balance first. This way you can start rolling these smaller payments together and pay more to the larger accounts as you start chipping away at your debt.
The time to get out of debt is NOW! Don’t add to your debt, start getting out of it by taking advantage of lower interest rates on credit cards and other accounts. Learning how to control your spending will aid you tremendously as you focus on paying off debt and gaining control of your financial life again!