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How Should I Handle My Debt With Rising Interest Rates?

How Should I Handle My Debt With Rising Interest Rates?

Nov 13, 2018 | Financial Concepts

The federal government used a few different tools to battle the collapsing US economy in 2008-2009, from multiple rounds of quantitative easing to pumping more liquidity into the systems. It was an economic downturn that required a multifaceted response. The Federal Reserve helped out by using its most stimulative tool – lowering interest rates, specifically the Federal Funds rate. This, in turn, influenced everything from mortgages to auto loans to trend lower.  

It is now 2018 and times are quite different. The Federal Reserve is in a completely different space regarding interest rates. We have seen seven interest rate hikes since 2016. What should consumers be thinking about as a result of the current rate environment?  

Here are three debt-related questions to ponder:

  1. Do you currently have debt on a Home Equity Line of Credit (HELOC) or are contemplating using a HELOC?
  2. Do you have any credit card debt that isn’t paid in full at the end of every billing cycle?
  3. Do you have any student loan debt where the rate is variable or will become variable in the near future?

At the heart of these three questions is the same characteristic – the fixed or variable nature of the interest rate. 

Understanding the rates on your existing debt accounts is quickly becoming something that requires more consumer attention. The days of historically low rates are gone.  

No longer can we simply go to any financial institution down the street and get a once-in-a-lifetime mortgage or home equity loan. The Fed has signaled that rates are likely to continue to climb, therefore, having a debt related conversation with your independent financial advisor is important. We can analyze a client’s current or future obligations and determine the correct loan and term.  

In our opinion, debt management can be just as impactful as asset management to your financial plan. 

Wait, you do have a financial plan, right?      

Nate Condon     

Walkner Condon Financial Advisors is a registered investment advisor with the SEC and the opinions expressed by Walkner Condon Financial Advisors and its advisors in this piece are their own. Registration with the SEC does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.

Information presented in this piece is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.

Information in this piece does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Readers are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.