How to Take Advantage of Rising Interest Rates

Estimated reading time: 3 minutes

The United States central bank sets the federal funds rate, which directly affects the interest rate you are charged if you borrow money. Rising rates affect everything from your investments to your debt, so there are several things you can do to get ahead of these rate hikes.

Refinance Student Loans

If you have debt from school, you may want to consider a refinance to help you get ahead of these rate hikes. It is not hard to do and it can help you save money on your monthly expenses. When you refinance student loans with NaviRefi, you can often get a lower interest rate or lock in more favorable repayment terms.

Consider Saving With a CD

While increasing interest rates are not a good thing for borrowers, they are excellent for savers. The interest you earn on money in your bank account rises with the recent rate hikes. A CD locks in your money for a certain amount of time, but during that time, the interest rate is also locked in. If interest rates start to fall in the future, your money will be protected from that.

You can often find even better rates on long-term CDs, but you won’t be able to get to the funds unless you pay a penalty. Consider investing in multiple CDs that will mature at different time periods. This is known as creating a CD ladder, and it is less risky than getting one account with a single maturity date. You can take advantage of interest rates, and you won’t have tied up all your funds if rates continue to rise.

SEE ALSO: I’d Rather Burn a CD Than Look for the Original

Evaluate Your Mortgage

Understanding how assets and liabilities are connected to net worth is critical. Fixed-rate mortgages may not have changed much, and some mortgage rates are tied to the economy and Treasury yields, so they may not be as expensive right now. However, if you have a home equity line of credit or adjustable-rate mortgage, those rates will begin to rise.

Make sure you can handle potentially higher payments in your budget. If you are about to buy a home, consider shopping around for the best lender with the lowest rate. If you don’t want your payments to go up, you may consider getting a fixed-rate mortgage. A fixed-rate loan may have a higher starting rate than an adjustable rate, and the stability it offers can be worthwhile. You will not need to worry about payments increasing over time.

Consider Treasury Bills

Federal Treasury Bills are another way of diversifying your investments. You can get them on the Treasury Direct site or through an investment bank or broker, so it is not hard to obtain them from your home. It is easy to buy and sell them, so if you ever need the cash, you can sell them to another investor.

T-bills are short-term debt obligations from the federal government, and their maturity dates are typically a year or less. Of course, as with other types of investments, the longer you hold them, the more they will earn. They are also safe, as they are backed by the United States government.