A new report from the U.S. Bureau of Labor Statistics shows that 235,000 people were added to the payroll in February. In addition, the unemployment rate decreased to 4.7 percent.
This change isn’t drastically different from January’s 4.8 percent unemployment rate. However, the positive momentum could be just the stimulus the Federal Reserve needs to move forward with another interest rate increase. Here’s what that could mean for your finances.
The unemployment rate is on the decline
While a decrease in the unemployment rate is great news, it’s a trend that’s been ongoing. According to The New York Times, the U.S. is at a 44-year low for jobless claims. This low puts us near “full employment,” something described as when “everyone who wants a job at the going rate can find one.”
While the unemployment rate has declined, hourly wages rose six cents to $26.09 in February. That follows the growth of the past year, a time in which hourly earnings increased by a total of 2.8 percent.
The Federal Reserve poised to increase interest rates
All this is good news for the Federal Reserve, which has its Federal Open Market Committee meeting next week. The Fed will formally discuss the possibility of increasing its benchmark rate.
According to MarketWatch, “The central bank was prepared to raise interest rates at the March meeting unless something unexpected happened.” Their fears? That something might happen to show that the economy isn’t strong enough to withstand an increase in the federal funds rate.
But the strong unemployment report coupled with hourly earnings on the rise might alleviate any concerns the Federal Reserve had. When more people are gainfully employed and earning money, they can handle higher interest rates and the effects on their debt.
The Federal Reserve already had a plan to potentially increase its benchmark rate three times this year. Their main motivation: winning the battle against inflation.
In a down economy, decreasing the federal funds rate gives consumers breathing room to repay their debt. When borrowing money is inexpensive, people are more apt to borrow and make big purchases. More money moves through the economy, which, in theory, means more growth.
In an up economy, increasing interest rates can control inflation and encourage people to save. When it’s more expensive to borrow money, people spend less and the demand for goods drops. That ensures that the dollar remains strong and helps consumers earn more money on their savings.
How rising interest rates could affect you
Depending on the specifics of your financial situation, rising interest rates could help or hurt you.
If you have fixed-rate loans or you have money in savings, a bump in interest rates is actually good news for you. Higher interest rates mean you could earn more on your savings account. If you have fixed-rate loans, your interest rates can’t be increased — thus protecting you from a sudden jump in your monthly payment.
But if you’re carrying debt with a variable interest rate, you’ll end up paying more each month if your interest is increased. To prevent this, you might want to consider refinancing to a fixed rate.
Most credit card issuers also have the ability to raise your interest rate, so this type of debt may get more expensive as well.
If you think your credit card interest will increase, you can pay off your debt with a consolidation loan or balance transfer credit card. The first option gives you a fixed rate and fixed payoff date. The second makes you eligible for no or low interest for anywhere between six and 24 months.
If you’re concerned about the Federal Reserve raising interest rates, form a plan now. The Fed will be meeting again throughout the year to potentially increase its benchmark rate again. Better to take control of your loans now before you get stuck with a bill you can’t pay later.
Want more ways to deal with increasing interest rates? Try these 6 steps.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|