(NewsUSA) - Interest rates have soared dramatically, raising the cost of buying anything on credit. For example, over the past two years, mortgage rates have more than doubled, adding hundreds or thousands of dollars to monthly payments. At the same time, high interest rates offer new opportunities for earning an attractive return on savings. With rates expected to stay high, now is the time to consult a CERTIFIED FINANCIAL PLANNER™ professional who can help you find ways to earn more interest while paying less.
The Basics: What Are Interest Rates?
Nobody lends money without wanting all of the principal back — and more. The “more” is the interest rate you pay. It’s the price of money, and it can add up quickly. For example, if you have $10,000 in credit card debt and you take five years to pay it off with a 20% interest rate, you’ll pay $5,896 in interest. On the other hand, if you paid off the credit card with a five-year, 10% personal loan, you’d pay only $2,748 in interest — a savings of $3,148. That’s just one strategy among many that a CFP® professional can customize to your particular financial situation.
Earn More Interest With These Three Letters: APY
The annual percentage yield (APY) is used to compare the rates paid on savings accounts and some checking accounts. Look at the APY number, not the interest rate number. Two banks may have the same posted interest rate but pay different amounts of interest. Here’s how: Bank No. 1 pays interest everyday on your principal and the interest you earned previously. That’s called daily compound interest. Bank No. 2 compounds interest only monthly. The financial institution that pays compound interest daily will have a higher APY.
Is your money sitting in a bank earning an interest rate of one-tenth of 1%? Many people are making that mistake. Would you like to earn far more interest? A CFP® professional can help you review options.
Make Smart Money Moves With a CFP® Professional
Some interest payments are tax deductible while others are not. A CFP® professional can figure out whether it makes sense to shift some of your borrowings to the tax-deductible category and save you money.
The Impact of Interest Rates on Investing
High interest rates affect stocks, bonds, real estate and other investment markets, and some investments are more resilient than others in high-interest rate environments. That is where the insights of your CFP® professional can improve your portfolio’s performance.
Whether you want to pay less interest or earn more, a CFP® professional can guide you to better outcomes during a time of high interest rates. Find your CFP® professional today.