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Man holding credit card and entering card numnber to complete purchase

If you are sitting there with a significant amount of credit card debt, consider dealing with the problem now before interest rates go up. Part of your strategy probably will involve a debt consolidation loan. It would be wise to get that loan now, while rates are low.

With the Federal Reserve planning to raise interest rates soon, consumers should take stock of their current debt and consider refinancing or paying down mortgages or credit cards. Increases in interest rates will be “measured” and likely to occur in the 0.25% to 0.5% range. If the Fed believes there is a further tightening of the economy, interest rates may not change.

“The Fed uses short term interest rates as a way to jump-start the economy when it’s running slow and to hold prices in check and to keep the economy from overheating when it’s doing better,” he said. “The Fed will raise them gradually and is very deliberate in their decisions.”

Interest rates are expected to increase only modestly later this year, which bodes well for consumers who are faced with mounting credit card debt or auto loans. The Fed ended its quantitative easing program in 2014, which was intended to boost the economy and keep borrowing costs low for consumers after the Great Recession in 2008.

While the impact on monthly credit card payments is “pretty minimal,” it is more advantageous for consumers to pay down debt when rates are low, rather than when they are rising. Despite the lower rates, consumers should not fall into the habit of carrying credit card balances from month to month.

A habit of carrying balances can be hard to break when interest rates start to increase on variable rate accounts, leaving the cardholder with a costlier debt to repay.

Many credit card companies are currently offering 0% balance transfers, but the number of offers will dwindle as the Fed raises rates. Grab those rates now while you still can. As the Fed eventually moves away from 0%, credit card issuers will do the same. Over time those offers will dissipate.

Low Mortgage Rates Will Rise

The smaller increases in interest rates mean consumers have greater purchasing power and can borrow money at a lower cost. Mortgage rates will remain “well below” 5% throughout 2015 and increases in mortgage rates won’t start until the second quarter and will “work their way higher slowly,” which presents a refinancing opportunity for homeowners who missed previous opportunities because they lacked enough equity, he said.

While mortgage rates remain very low, homeowners who are on the fence about refinancing should take advantage of them. Buying a house should still remain a decision for consumers who are financially prepared and are looking before they leap.

If the amount of debt that you have is troubling, you should probably get some advice. Carolyn Secor has been helping people develop a strategy to reduce debt for many years. Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site or call 727-335-7151.