While there is rampant fear and caution against a global economic downturn, this does not mean that every individual will be hit as hard as the next.
Certainly, there has been and will be even more severe impact across some key industries, but this shouldn’t be a cause for panic, particularly if you aren’t financially tied directly to any of the hardest-hit industries.
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In fact, overly cautious decisions right now could equate to missed opportunities for personal financial growth. What many people don’t realize is that now is the time to take advantage of low-interest loans.
Interest rates are bottoming out at historic lows, which means that it is more affordable than ever to borrow money from financial institutions. There is even some speculation that interest rates could become negative meaning that financial institutions would actually pay people to take out loans. Although unlikely, this has been seen before in places like Switzerland, Denmark, and Japan.
This means that there is a fantastic opportunity to borrow money in order to ease the financial burden of your debt, increase the cash flow that you have on a monthly basis, and potentially provide some peace of mind during these unprecedented times.
So how can you take advantage of low-interest rates to get ahead financially?
In this article, we will explore three financial strategies that can be implemented now.
Refinance Your Mortgage
When interest rates are low, refinancing your mortgage should be on the top of every prudent homeowner’s list.
If you are not familiar with refinancing, it is essentially the process of replacing an existing mortgage with a new loan. This is primarily done to allow the borrower to obtain a better interest rate than the one that is currently held on the existing mortgage. The old loan is paid off and a new one is created at a better interest rate.
There are plenty of examples of people who are refinancing their mortgages right now during the COVID-19 outbreak and finding significant financial relief, which is an important lesson for anyone who might be struggling to keep up with their payments.
Even with some of the social distancing restrictions in place, accommodations can be made for safe appraisals, so don’t assume that it’s not possible to take advantage of low-interest rates through refinancing right now.
Refinance Your Auto Loans
Similar to mortgages, it is even easier to refinance a loan on your automobile to acquire a better rate or a new term.
This can be advantageous if a borrower needs to free up some cash or reduce their monthly payments and with incredibly low rates available - it’s an easy choice to make.
Refinancing your car loan is also much simpler than refinancing your mortgage as it can be completed entirely online, so no physical contact with other people is actually required. This makes it an uncomplicated financial decision and very quick to process in most cases.
By reducing your monthly payments through refinancing, you will have better cash flow and it will be more feasible to fit your payments into a budget that may be contracting due to the economic downturn.
The Time To Buy Is Now
If you have been considering purchasing a home or investing in property, this is an ideal time to make a purchase if you want to take advantage of the very low interest rates that are available.
Right now, it is possible to lock in low-interest rates if you take out a mortgage before interest rates climb back up, which means that you can enjoy years of cost savings as a result of a fixed-rate mortgage.
Of course, you need to carefully consider your financial position before taking out any loan, but if you hold any confidence in your cash flow and assets, then it’s a very appealing time to take out a mortgage.
That said, there is potential that housing prices could come down further, but if buying activity is encouraged by low interest rates, then it might not dip that far depending on where you live. If you are considering entering the housing market, then you should keep a careful eye on price movement and if you see a deal - be ready to jump on it.
Be Cautious - Not Afraid
Markets and the economy are always going up and down. Sometimes it goes in one direction more than the other, but ultimately, it’s not the state of the economy that matters the most. The most important financial decisions are the ones that you make in response to economic trends.
Believe it or not, it is very possible to make money during economic turmoil. If you take careful consideration of your position and your options, then you can find a way to get ahead despite all of the existing challenges.
Granted, we haven’t seen economic problems like this since the great depression, but it’s important to understand that the context and root causes that affect us today are very different than back then.
This is a time to be cautious, but not afraid. Cautious investors make smart decisions. Financial decisions driven by fear are rarely the right choice.
Think carefully, but don’t be afraid to act now in order to take advantage of low-interest loans.