How to Take Advantage of Low Interest Rates During COVID-19

• Author: Jeffrey Simmons
• Posted: 2024-07-30

Interest rates are as low as they have ever been right now due to the COVID-19 pandemic. While many people are simply just trying to hang on in the wake of job loss and other cuts to their income, these low rates actually present an opportunity for you to change your personal financial situation. Interest rates are likely to remain low for an extended period of time, giving you plenty of opportunities to take advantage of them. Here are five different ways that you can leverage low interest rates to improve your own financial picture.

Refinance Your Student Loans

Many people are not thinking about their student loans because some of them have been placed in forbearance, and they do not currently need to make payments on this debt. However, the lows in interest rates mean that it has never been a more advantageous time to consider consolidating your student loans. Depending on your credit, you can refinance your private student loans at rates near 4%, or even lower depending on the duration of your loan. You can even refinance some of your federal student loans at a cheaper rate. If the rate on your existing federal loans is high, you can get a private loan to refinance the federal debt at a lower rate, but you may be giving up some benefits of having a federal loan.

Transfer Your Credit Card Balance

If you are paying high interest rates on your credit card debt, you can make that a thing of the past right now. Many lenders want your business so much that they are willing to lend you money for free for a certain period of time. Some credit card issuers can offer you a 0% interest rate on your transferred balance for an extended period of time. You will pay a fee to transfer your balance, but if you pay off your debt before the introductory rate expires, you can still take advantage of this promotion to save yourself some money. You will need to have decent credit to qualify for this deal, especially when issuers have raised their lending standards. Nonetheless, many people do not realize how much they pay in credit debt each month until they no longer have to pay it.

Refinance Your Mortgage

Mortgage rates have also never been lower than they have been right now. When your current mortgage interest rate is at least 2% higher than the new rate, it makes sense to refinance your loan. You will pay some fees to refinance, but the difference in interest rates can lower your monthly payments by hundreds of dollars each month. Since real estate values have remained high, refinancing loans have not yet become difficult. You will still need good credit and proof of income in order to refinance. Thus, this may not be an option if you are one of the tens of millions of Americans who have lost their job recently.

Sell Your Fixed-Income Investments

When interest rates are low, it means that the price of bonds that you own has gone up since price and interest rates move inversely. This may be the time to take profits in your investment or retirement portfolio and rebalance what you own. You may be able to take advantage of the economic slump to buy certain stocks at a discount. While bonds offer you a certain degree of safety, their real return on investment is practically negative right now. This may be a time to use some of your money to buy stocks since bond prices really can only move in one direction from here.

Take Out a Debt Consolidation or a Personal Loan

These types of loans usually can save you money under normal circumstances. The rate of interest on this form of credit is often lower than that which you pay on your credit cards. Now, they will come at an even lower interest rate because banks are paying less for their own capital. When you take out a debt consolidation loan, it is at a fixed interest rate. This means that, even if interest rates go back up in the future, you will still pay the same rate that you initially agreed to when you took out the loan. The percentage points that you save in interest for these types of loans will add to your bottom line each month.