Is now a good time to take out a loan?
Although the recession has been officially over for some time now, many Americans are still grappling with the after effects of the credit crunch.
However, despite the overall desire to reduce outgoings, there are a number of different reasons why loans could still be required.
Unfortunately for those with a low credit score, loans are far more difficult to obtain that they were prior to the recession, with many lenders opting to scrutinize applications much more closely.
Some people with a poor credit history will find they are unable to access any loans until they have managed to boost their score, whilst others will find themselves restricted to specialized bad credit loans.
However, for those individuals who have a good enough credit score to be able to take their pick of the loans available on the market, now has never been a better time to obtain finance.
Whilst the downgrading in the credit status of the US and the debt crisis in Europe are generally not viewed as healthy, they could be seen as beneficial for those considering borrowing money.
The economic climate at the moment means that interest rates will remain at their current record low levels, meaning that it is much cheaper to borrow money now than it was before the credit crunch hit the US.
One of the possible effects of the US credit downgrade could be an increase in the cost of the country’s borrowing, a cost which would undoubtedly trickle down to personal loan rates.
Whilst this would more than likely be the case for many other countries, Americans could be protected because of the superpower’s previous standing in the credit market.
Although it is true that the US has a large debt burden right now, no-one really believes that the country is suddenly going to fall into financial ruin and US Treasuries have always been seen as a safe haven in troubled economic times.
For this reason, although a longer-term downgrade may cause some increase in costs, it is seen as extremely unlikely by financial experts that government interest rates will rise in the short to medium term.
This is good news for borrowers, as interest rates on car loans and mortgages are often tied in to the government rate and rise in tandem.
Anyone with long term finance that was arranged prior to the recession may even find that refinancing their borrowing could work out cheaper, because the interest rates available in the market now are ridiculously low.
Interest rates are predicted to remain at rock-bottom rates for a considerable length of time, especially as fears over a double dip recession remain, as the government’s priority is encouraging growth into the economy.
A fixed rate loan will be the best option to ensure future repayments do not rise, but these are better taken out sooner rather than later.
Any fixed rate loans will see their rates start to rise as soon as there is any possibility of interest rates going up and will become more expensive some time before interest rates actually move. It is therefore much cheaper to secure fixed rate loans well in advance of any interest rate increase.
