Personal Loans – A Cheap Way To Meet Financial Needs
Do you think that borrowing money from a financial institution is expensive and can stress your financial budget? Think again. This may have been applicable a few years ago but now, the cost of borrowing has changed completely. Since 2008, when there was a significant down turn in the economy, the central banks around the world have kept the bank interest rates very low. This is the interest rate that banks obtain when they need to borrow money from the central bank. As a result the interest rate charged on personal loans has also been very low making it very attractive to borrow money to meet consumer’s financial needs. Personal loans have become a cheap way to meet financial needs as well as mortgage rates are at record lows. The rate paid on investments has also dropped, but that is the subject of another post at a later time.
This low interest rate on personal loans has meant that consumers have a cheap way to meet financial needs such as car loans, renovations to their homes, credit card debt consolidation, mortgage renewal and much more. At the time of updating this post, it appears that interest rates will remain low well into 2014, which is a huge help to consumers and also the economy. Money can continue to be obtained relatively cheaply through personal loans to fund purchases of larger items which in turn keeps the economy going and provides people with more jobs. This is the central objective of the central banks and the governments as well around the world. Although we think that rates will remain low into 2014, you can never tell when rates will change. This is the time to take advantage of these low rates, particularly if you need to consolidate credit card debt which carries a very high interest rate.
What Happens When Interest Rates Rise
This is the fundamental problem that most bankers and governments are worried about. As long as interest rates remain at their low levels and stable as well, consumers will be able to find personal loans that allow them to meet their financial needs in a cheap manner. The cost to borrow money for a personal loan remains low and monthly payments also remain low, leaving money in consumer’s hands to be used for other purposes. The economy does well with more people having jobs and spending money.
Once interest rates begin to rise, the cost to borrow money for personal loans, mortgages, perhaps even credit cards are going to rise. This means that any personal loan that is being applied for or being renewed is going to cost more and the monthly payments will also increase as well. The key question that all governments want to know is can the consumer afford to pay this increase and what impact it will have on the economy? With personal loans no longer being cheap, will this mean that consumers will stop buying large consumer goods and will they be able to meet their debt obligations on the personal loans that they do have.
This is a huge question for the people who try to manage the economy, however for the regular guy who is looking for a personal loan and a cheap way to meet financial needs, it can be a catastrophe if they are living on the edge from a financial perspective. A two hundred dollar a month increase in payments on a mortgage or a personal loan can really put people under water from a finance perspective. This is the time to lock in a low interest rate for your personal loan or mortgage and lock in for as long as you can.
Cheap Personal Loans to Consolidate Higher Interest Debt
Credit card companies still charge a high interest rate on any unpaid balances. Their rates do not seem to change much even when interest rates on personal loans are at an all time low. Many consumers who have not been able to repay their credit cards have turned to personal loans as a means to reduce the overall cost of the money they have borrowed on their credit cards. Instead of paying perhaps 18% on the unpaid debt balances on their credit card, they might pay as low as 5% interest on a personal loan that is secured. This translates into a huge savings in terms of reduced interest charges and if managed properly can help the consumer repay his personal loan very quickly.
Although personal loans provide a cheap way to meet financial needs, consumers should always look for methods to repay even these cheap personal loans to avoid paying more interest that they need to. Whenever you pay your principle on a personal loan, the amount of interest you need to pay is lower and it also means more money in your pocket. Consumers who pay off their personal loans quickly will also enjoy the freedom that comes with not having to pay a monthly payment.
Interest Rates May Increase In the Future
Most economists expect higher interest rates in the future, although the exact timing of these increased interest rate increases is not clear. In past years, governments have raised interest rates whenever inflation began to increase too quickly. So far as of 2013, there is no sign that interest rates are going to increase. However if you lock in a personal loan now for five years or a mortgage term for five years, not only do you have a personal loan at historically low interest rates, you are also protected from any increases for the term of your mortgage or loan.
Use a Personal Loan Broker to find Competitive Personal Loan Interest Rates
Check with mortgage brokers as well as your bank manager to find the best rates and terms for your personal loan. Using a broker is one of the best ways to find cheap interest rates and to meet your financial needs. A mortgage broker will develop your profile using information provided by you the applicant, and market your loan application to several lenders who specialize in lending money for personal loans. Consumers can compare the interest rate and the terms of the loan with whatever their personal bank will offer and then select the one that provides them with the best deal.