How Rates Can Work in Your Favor


Posted: 11th May 2020 10:13

When people hear the words interest rate, they usually have a bad feeling in the pit of their stomachs. That's because they're thinking about the interest they pay on things like credit cards, their mortgage, car loans and more. The way to turn a negative into a positive is to make interest work for you rather than against you. How? By employing one of the techniques listed below. Fortunately, you have plenty of options, so there should be at least one or two that suit your style of investing.

Open a Roth IRA

When you start a Roth IRA, you're essentially setting up a retirement account that will be earning long-term interest on a tax-free basis. Taxpayers have this ability because of the way the laws are written. Roth’s are funded with post-tax dollars, so the IRS doesn't make you pay tax on the accumulated basis as the years go by. Just remember not to break your IRA by dipping into it before retirement or you'll pay substantial penalties that will all but wipe out any savings you made on the taxation side.

Invest in the Stock Market

Investing regularly in the stock market is a smart way to make money when interest rates are higher than usual. Companies charge interest on their debt. This is especially true for financial lenders who are listed on the major stock exchanges. You benefit directly when interest rates go up if you own shares of stock in banks and financial institutions.

Refinance Your Student Loans

Refinancing student loans can be a quick, safe way to make interest rates work for you. When you enter a refinance agreement on your education debt, you get three specific benefits such as you save more each month because your new payment amount tends to be much lower, you get a lower interest rate on the loan, and you get a longer time to repay the entire amount of the debt. In terms of sheer savings, when you enter into a refi on a student loan, you instantly cut down the amount of money you pay in interest on the debt. That means you're making lower interest rates save you money compared to what you were paying on the original loan.

Become a Lender

Crowdfunding sites are everywhere these days, and at least a few of them specialize in lending arrangements. The way it works is that you choose among people who are looking to borrow money via the crowdfunding platform. You can choose one individual or a group of people. The platform does all the legal niceties by matching you with potential borrowers. Whether you lend a little or a lot, you stand to earn solid profits by becoming an entrepreneurial lender. It's important to remember that all the lending platforms carry the risk of loss. If you choose unwisely, you might end up with a borrower who defaults on the agreement and you'll be on the losing side of your hard-earned funds. So, be careful when choosing a platform and a borrower.


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