Six Ways you can protect yourself against rising interest rates

Rates are on the rise and nobody likes it. Being able to offer someone a low 6% rate has quickly vanished. Also seeing the prime interest rate continuing to rise is hurting even me with a Home Equity Line of Credit. Luckily there are ways around it?

Do you see the rates leveling off anytime soon? What are your thoughts.


Here are six ways to prepare yourself to come out ahead:

1. If you're only making minimum payments on your credit cards, start paying more. If you can't come up with the money to increase your payments, start budgeting or tighten your existing budget, cut spending, and pay down credit card debt with the money you save.

2. Don't be fooled by your "fixed rate" credit cards. Your credit card company legally must only give 15 days written notice before raising your rate. Even so, if interest rates are expected to increase and you haven't already transferred your balances to lower-rate cards, you should consider doing so, looking for those that promise a low rate for a specific period of time. For advice on the fastest way to reduce your credit card debt, see Get Out of Debt Now.

3. If you have a home equity line of credit, consider taking out a home equity loan to repay it if interesst rates are expected to rise. Since interest rates on home equity lines of credit are tied to the prime rate, if rates rise, so will the interest on your loan. Depending on how much you borrowed, this could quickly become a payment you can't afford, and your house is at risk. By replacing the home equity line of credit with a home equity loan, you lock in a lower interest rate.

4. If you have an adjustable rate mortgage, and you plan to be in your home for at least five years, consider refinancing to a fixed rate mortgage when rates are expected to rise.

5. As mortgage interest rates rise, you'll be able to afford less house for your money, so if rates are expected to rise and you're in the market for a house, consider stepping up your house-hunting efforts. Be sure to research real estate trends in your area so you don't buy at a period of inflated home prices.

6. If you're in the market for a new car, consider accelerating your plans before interest rates rise, possibly taking advantage of zero percent financing. These offers often disappear as rates rise.