What Happens To Your Credit Card Payments When The Federal Reserve Lowers Interest Rates

At the end of July 2024, the Federal Reserve announced that they would be lowering the federal funds rate from 2.25% to 2.0%. Whether you’re saving or paying off debt, the new Federal Reserve rate will influence your approach. This is the first time that the Fed has lowered the federal funds rate since the Great Recession. The rationale behind lowering the federal reserve rate is to encourage consumers to take out more loans and buy more because it is essentially cheaper to borrow and carry debt. Despite the small drop, the change in rate can have a big impact on your finances.

Banks, lenders and even credit card companies determine the interest rates that they offer based on what the Federal Reserve does. Therefore, despite personal factors like credit history, the federal funds rate plays a significant role in your personal interest rate.

Credit cards either have a fixed or variable rate. A fixed rate is like not to change under a rate-cut. Credit cards that have a variable rate are linked to the Federal Reserve’s benchmark rate. Eventually, these interest rates should drop by the same quarter percentage as the Federal Reserve interest rate.
However, it is important to acknowledge that credit card issuers often have hidden statements in their agreements, allowing the highest prime rate in effect during the preceding 60-day period. Even if your rate is fixed, credit card companies can change their interest rates whenever, as long as they provide notification in advance.

According to Bankrate.com, credit card rates now stand at a record high of 17.85%, on average and almost half of all cardholders do not pay their credit card bill in full each month. Therefore, a lower monthly credit card rate should be beneficial to many. Another option for those trying to eliminate debt is to shop around for zero-interest balance transfer offer so that you can more quickly pay off your credit card debt. Cardholders can also directly reach out to their issuer to request a break on interest rates.

Overall, credit card holders should expect to see lower monthly payments over time under the new federal rate cut, making now the perfect time to attempt to pay off credit card debt.

Tips for Small Business Owners Who Need to Borrow Money for Financing a New Building

In a competitive business world, starting or expanding a business is risky yet rewarding if done correctly. When it comes to financing a new commercial property, lenders will consider many factors, such as your financial strength, the size of the loan, the length of term you desire, and the financial condition of your company. With strict criteria and a national credit crisis, it can be difficult to obtain a loan from your bank. Here are some options for small business owners who need to borrow money to finance a new building.

1. Get an SBA loan
Loans guaranteed by the U.S. Small Business Association have become a hot commodity, as banks are reluctant to take chances with their own money in times of credit crisis. SBA-backed loans are open to any small business; however, there are certain criteria:

• The SBA cannot guarantee loans to businesses that can obtain the money they need on their own, meaning you must first be denied a loan from your own bank before you can apply for an SBA loan.
• You must meet the government’s definition of a small business within your industry.
• Depending on the type of loan, your business may need to meet other criteria.
• After your business has met all the qualifications, you must apply for a commercial loan from a financial company that provides SBA loans. The SBA does not process loans directly.

2. Get a microloan
Despite a lack of credit history and inability to obtain a bank loan, you will still be able to borrow money from a microlender. Microloans are small business loans ranging from $500 to $35,000. Microlenders offer small loan sizes, require less documentation, and have more flexible criteria. However, they do offer slightly higher interest rates than banks. Microloans are great for both startup entrepreneurs and entrepreneurs in an existing business who need to secure capital for new equipment or new establishments.

3. Keep track of your expenses from the start and keep them low
While income grabs everyone’s initial attention, it is important to keep track of your expenses from the start. When securing a loan, your expense liabilities will need to be shared. There are various free or minimal cost business software options that allow you to keep track of your expenses and necessary information. You should also save or take photos of all receipts and invoices. It is easier to keep track of your expenses along the way, rather than letting it build up over extended periods of time. For larger expenses such as rent, payrolls, taxes, interest, cost materials, debts, and utilities, it is crucial to plan in advance. It is also important to keep your initial expenses as low as possible. You do not need the most elaborate materials for your new office. With growth and success, these perks can be acquired.

4. Do not forget about hidden costs
There are many hidden costs that come with running a business such as insurance, taxes, permits and licenses, and legal fees. And of course, there’s always an additional expense at every corner. Make sure to factor these costs and unexpected expenses into your budget and be prepared for mishaps and emergencies.

Tips for Finding the Best Personal Loans for the 2021 Holiday Shopping Season

Tips for Finding the Best Personal Loans for the 2021 Holiday Shopping Season

Around the holidays, many people want to spend more on gifts for their loved ones. You shouldn’t go too deep into debt because you might not be able to pay it off. With the uncertainty of the world in 2021, you may not be able to afford much and still want to enjoy the holiday shopping season.

It’s important to know what a short-term loan is, what to consider when trying to get a personal loan, and much more. Here are all the details:

What’s a Short-term Loan?

Short-term loans are highly convenient. There are two kinds: the payday loan gives you a bit of extra cash that you pay back when you get your next paycheck. A regular short-term loan doesn’t require collateral and offers a repayment period of anywhere from three to 12 months.

They work well for minor expenses, extra cash for holiday shopping, and more. However, you’ve got to approach it correctly to get more from it. Find out what to consider before getting a short-term loan.

What to Consider When Applying for a Short-term Loan

You already know why you want the short-term loan, which is great. It’s important to consider the reasoning for it. Though it’s readily available, you don’t want to get into a situation where you stay in debt all the time. Make sure that you need it and have the means to pay it back in the time allotted.

Here are a few other factors to consider:

Interest Rate

Short-term loans often have higher interest rates. You pose a higher risk to lenders because they don’t check your credit history or score. While some private banks and lenders have lower rates, they may not lend to you because of your poor history.

You should also be aware of how much money you need and try not to overestimate. It’s tempting to spend lavishly, but your loved ones don’t want to see you struggle financially to get that new Xbox system. Borrowing more than you need means having a high-interest rate.

Repayment Terms

It’s up to you to read the repayment terms from the lender to make sure you can cover them. Determine how much you’ve got to pay each month and add it to your budget.

Sometimes, it’s possible to ask the lender to increase repayment durations. That might raise your interest rate, but it gives you more time to pay things off.

Fees

Short-term lenders charge different fees. Some might want you to cover the processing, origination, appraisal, and credit report fees. Ask the lender what they charge before signing on the dotted line. If those costs seem high, consider another lender.

Loan Brokers

It might be wise to visit a loan broker to help you with the process. They have reliable lenders available to meet your needs.

How to Find the Right Lender

You can find lenders online, at credit unions, and banks. Most people choose online lenders because they’re more flexible and quicker. Make sure that you check the interest rates and repayment terms before signing up for a loan.

With that, you should read reviews from others who have used that lender. They may not all be positive, but there shouldn’t be more than a few issues.

Look into how they decide to lend to people. Do they only check credit scores, or do they also use education or employment? Generally, lenders who use employment as the factor are short-term and have higher interest rates.

Types of Loans Available for Average/Poor Credit

If you have average credit scores, you could use a bank or private lender to get funds. However, the lender is likely to charge more interest and other fees because you’re seen as a risk to them.

Typically, people turn to payday loans if they’ve got bad credit. These are short-term loans up to $500 that you pay back when you get your paycheck. That can be anywhere from two to four weeks. They rarely do a credit check and only see if you are employed.

Those who own a home might be able to get a home-equity loan to cover holiday shopping.

Conclusion

It’s crucial to understand what short-term loans are and what to consider when choosing one. That way, you get the best deal and can spend money on your loved ones this holiday season. Make sure to research each lending company and determine its fees and repayment schedules. From there, you can get your funds soon and start shopping!

What are the drawbacks of using a personal for investing in stocks

What are the drawbacks of using a personal for investing in stocks

 

Investing money is a wise financial choice and can result in your increasing the money you have exponentially if you are lucky. It can offer financial stability when you have retired and may even help you retire early. Investing in the stock market is tried and tested method for increasing the value of your money. However, it is not without its risks. The old adage says never invest something that you cannot afford to lose, and this may make you think twice about taking out a personal loan to make investments on the stock exchange. There is no such thing as a sure thing in the stock market. Stocks rise and fall in value, and it is all determined by market consumption and how the company decides to do business. Sudden changes in trends and any problem in a company that you are not aware of can mean your stock tank. But, having said that, a lot of people do make money on the stock exchange.

Pros of using a personal loan

  • More funds – this seems like an obvious one, but when you get out a loan, you clearly have more money with which to invest. It can enable you to make a lot of money if you are lucky. 
  • Tax benefits – If you take out a personal loan, you can claim some tax benefits, such as a rebate that may be available on your loan repayments. 
  • Meet costs with profits – if you are successful and loan interest and other financial costs can be met with profits from the stocks you have invested in.
  • Transaction costs – if you get a loan, you may well be able to make larger investments in one stock, which will bring down the cost of the transaction as a proportion of the amount you invest. Lots of small investments can cost you a fair proportion in translation fees.

Cons of using a personal loan

  • Interest rates – you don’t get something for nothing and a loan comes with high-interest rates, so this may force your hand to make riskier investments that offer returns in the short term.
  • Negative Returns – If you make the wrong investment choice, then you will have lost money on the stock, meaning you still have the loan to pay off, and you have to do it out of your own savings if you have any.
  • Collateral – if you borrow against some form of collateral, say your house, you could lose it.

A Financial Advisor 

A certified financial advisor will help you look at ways to invest your money. They are adept at enabling their customer into making good financial decisions. They may offer advice on particular loans to get out if this avenue appeals to you. They will help you look at the types of investments that make sense when investing with borrowed money. For example, it is only advisable to borrow money for an investment when there is a high ROI (return on investment) and a low risk associated with it. The stock market is generally considered a risky way to use borrowed money, and a financial advisor may try and talk you out of it, while showing the least risky investment opportunities at that time. Additionally, if the stock you are going to be investing in, takes years to develop that ROI you require, it probably means you need to pay the loan back before you get any benefit from the loan. When this means is that a financial advisor may well try and interest you in other forms of investments. 

What personal loans are suitable for investments 

The name was given to a personal loan that is taken out for making investments is known as a gearing or leveraging loan. The good news is a personal loan can be used to make any form of personal endeavor, unlike a car loan, or mortgage, etc., which must be used for that specific purpose. However, this means that a personal loan is more expensive, with a higher interest rate than an item-specific loan. It is perfectly acceptable to take out a loan to use on the stock market. To get a personal loan, you normally have to borrow against some sort of collateral, such as a car or your home. However, it is possible to get an unsecured personal loan. A personal loan can last up to seven years, and interest rates will vary from bank to bank.

Conclusion

Borrowing money to invest in the stock market is not generally not advisable. However, it is not illegal either. Although you run the risk of losing everything, there is the potential for gains. So, the best advice is to speak to a financial advisor.