5 Ways to take Advantage of Low Interest Rates

The Fed has seen fit to grace the American people with lower than average interest rates for an extended period, hoping this will stimulate spending and kick start a stagnant economy. And the Fed is dead on.

For most households, low interest rates make buying almost anything a real possibility. When rates are low, financing big-ticket items like houses and cars becomes a possibility instead of a pipe dream. If you find yourself twiddling your thumbs, wondering what you should buy while rates stay low, fear not dear consumer, the following gives you five ways to enjoy the benefits of lower than average interest rates, without getting over your head in debt.

1. Buy a house

Low rates and falling real estate prices make for an excellent buyer’s market. Taking advantage of government backed FHA loans can mean getting into a home for as little as 3.5 percent down, and earning on that investment over time.

2. Maximize your credit card rewards

If your wallet contains a cash back rewards card – and every wallet should – now is the time to take full advantage of your program. Instead of just using your card for emergencies, employ your card to pay monthly bills, and then pay that card off before your grace period expires. Rinse and repeat this simple strategy and you can save a few hundred dollars each month. Doing this while rates are low means that even if you miss a grace period, what you pay in interest won’t negate what you are earning in rewards.

3. Refinance your car

If your auto loan rate is a little higher than what you would like, there is no better time than now to refinance it. In fact, it is quite possible for well-qualified buyers to complete an auto refinance setting foot in a bank.

4. Refinance your mortgage

If you have 20 percent (or more) equity in your home, you might be able to knock off a point or two on your fixed interest mortgage if you refinance while rates are low. This drops your payments significantly. To take full advantage of this opportunity, however, don’t tack on time to your mortgage; but rather, continue paying the higher amount and pay off your mortgage much faster.

5. Consolidate

If you have racked up a lot of debt, low interest rates can mean favorable consolidation terms. By consolidating your credit card balances and personal loans into one low-interest rate basket, you can scrape some money off your monthly payments and eliminate a stack or two of bills each month.

Low interest rates are many splendored things, providing they are used responsibly. Instead of using low interest rates to finance everything under the sun, use them to build a foundation for enduring wealth by spending wisely.