Interest rates are about to skyrocket — here’s how it’s going to hit you financially

Interest rates are about to skyrocket — here’s how it’s going to hit you financially

A soaring economy is prompting the Federal Reserve to jack up interest rates sooner rather than later.

Thanks to an economy that’s looking better than ever, the Federal Reserve is likely to raise interest rates to keep inflation at bay — but what does that mean for you?

It’s been a while since the Fed has made such a move, as rates have hovered near zero on Dec. 16, 2008, when the country was embroiled in an economic crisis as the markets crashed thanks to a housing bubble. But with jobs reports looking promising throughout this year, it appears that the Fed finally feels confident enough about the U.S. economy that it’s ready to boost those rates in order to stave off inflation.

What does this mean for you? It could have a number of impacts on your finances. For one thing, if you have loans or credit cards with a variable interest rate, that rate is likely to go up. That could make it tougher or take longer for you to get out of debt than you had planned, according to a report.

A common type of loan is a home equity line of credit (HELOC), which is likely to rise in the event of a Fed increase in the interest rate. It won’t be a huge rise, but you may notice it in your monthly bills in the coming months.

The good news is that if you also have things that gain interest, particularly a 401(k), you’re going to see benefits. 401(k) accounts that are invested in bond funds will see a temporary decrease in value, but the dividend yields will start to go up within about six months.

If you’ve got a good credit score, you can likely mitigate most of the negative effects on loan interest rates in the long term, allowing you to get the best terms on new loans and let you negotiate new interest rates on credit cards you currently have.

In any event, if this all affects you, you may want to pay attention to the Federal Reserve’s Federal Open Market Commmittee’s meeting on Wednesday, where they’ll be discussing increasing the interest rates.g.

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