By Warren Littlefair
  • Interesting times

    Interesting times

October

Want to make the most of the current low interest rates? Here are some smart ways to make hay while the sun shines.

Interest rates are at some of the lowest we have ever seen in Australia and many people are saying that they won’t be going up any time soon. So how do you take advantage of these low rates? Below are a few things you can do which will benefit you in the short term as well as the long-term.

If you currently have some debt, especially home loan debt, you should be trying to pay the same payments as you did when rates were higher. For example if your old repayment was $300 a week, and after all the interest rate cuts the new repayment is $200 a week, continue to pay the $300 a week. What this will do is in the first instance pay the loan off a lot sooner, but will also create a buffer with redraw so if your loan allows, you can take the funds out of the loan down the track if needed. one hundred dollars a week may not seem much but this will add up over the time and will make a substantial interest and time saving on your mortgage.

If you have some personal debt, it may be worthwhile rolling it into a low-rate personal loan. The rates on personal loans are a great deal cheaper than credit cards and by doing this it should free up some spare cash, which realistically you should use to pay off the debt quicker. Credit cards can be up to and over the 20% mark so this makes sense from a financial point of view. Just make sure you don’t rack up the debt on those cards again.

Fix the term of your loan

This is an option and in some of my recent articles I have spoken about the pros and cons of having a fixed loan. Rates will not stay down for ever so it may be worth locking away your loan whilst they are low. Make sure you consider the pros and cons of fixed rates loans first and get some financial advice.

Make a new purchase

This could be a car, house, boat etc. When rates are down it means the economy is not tracking as well as it could be and there can be some opportunities to purchase a sizeable asset at a good price. We have all seen some of these assets fall in price in the past months so this may be the time to go out and buy using fairly cheap money.

Top up your super

Possibly not as fun as that brand new car but long term, it's a very good option. With the money you are saving on your loans you may make the decision to boost your super for retirement. If you plan to do this make sure you speak to your financial planner to get some advice on this.

These are just a few small things you could consider in a low interest rate environment. Some are more fun than others but if you stick to your guns and make some wise decisions, it could pay very hanson dividends down the track. 

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