Interest rate rises are likely to be occurring more these days and possibly more often as well. We have had a long time of very low interest and it is slowly starting to increase now. It can be quite worrying if you have loans or mortgages or are thinking of getting them as you may worry that the repayments might become unaffordable. There are a number of ways that you can protect yourself against rate rises.
Choose fixed rates
Choosing a loan with a fixed rate will mean that you will not have increases in your repayments if the rates rise. These are often available with personal loans or mortgages. They may not be for the full term of the loan, but they can still offer some protection against rate changes. They are normally more expensive than some variable rate loans though, but this can be worth it as you will not have the stress of worrying about coping with unpredictable increases in loan repayments and how you will cope with that. Fixed rates on mortgages only last a few years, but once they have ended you may be able to find another fixed rate that you can move onto and so you will be able to protect yourself again.
Compare and choose cheapest loans
Keeping your variable rate down as low as possible will help a bit as you will not be paying more than necessary. It is therefore wise to check the rates every so often, especially if you’re talking about credit without a credit check and see whether it is worth swapping to a different lender. You do need to be careful of this though. You may get charged by your current lender if you switch and so you need to ask them about this. There may also be set up charges for the new loan which you will have to pay. Therefore make sure that you do all of the calculations and ensure that you will be saving money if you do swap over.
Build up savings
Building up some savings can act as a very useful buffer for you to be able to use in case of finding repayments difficult. If you find that you are struggling, then you will have this money to fall back on. Of course, it is really important to make sure that you budget carefully and make sure that you do save up enough and are not tempted to spend those savings unless you have to. It does take some self-discipline but you can set up a direct debit form your current account to transfer some money into a savings account each month and you will soon start to build up some money. If you want a lump sum of money to start you off you could sell some things that you own and no longer need or use. There are lots of ways that you can do this, such as online auctions, car boot sale or social media groups. You should be able to research the sorts of things that get sold at each of these and you will be able to decide where the best place will be for you to sell your items.
Get a secure job
Having a job that you know will last for the term of the loan can really help to give you some security. It is not easy these days to always find a secure job. However, if you can find something permanent rather than on a contract, then you will know that you will have a regular income. You will also know how much that income will be and so you can calculate whether it is enough to repay the loan. If there are more than one of you in the household that have permanent jobs that can be even better as even if one of you loses their job, there will still be an earner available to provide an income.
Repay Loans Early
It is possible to repay some loans early. You may have to pay a fee to be able to do this and so you need to find out whether this is the case and how much it will be. If you repay more than you need then you will be able to repay the loan more quickly. This means that you might be able to get it all paid off before the rates increase. Even if the rates do go up, you will not have to make so many repayments at this higher rate as you will already have repaid some of it. You may have to budget hard to be able to do this, but it can be worth it if you can save yourself some money and some stress.
So there are a number of things that you can try to do in order to avoid the impact of an increase in interest rates. You may find that you want to do more than one of them or even all of them so that you feel more secure.