Interest rates tend to rise and fall as needed to benefit the economy. When interest rates are low, getting personal loans or mortgages is easier, costs less, and can help borrowers fund expensive purchases easily. However, when rates rise, it can be difficult to apply for a personal loan or mortgage. Here are a few ways that rising interest rates can impact your ability to borrow money.

1. Higher Interest Rates Mean Higher Returns
When interest rates are low, interest-bearing investment accounts like certificates of deposit and even some savings accounts will not earn much in the way of returns. However, when rates increase, the amount you earn will often be higher. For individuals saving money at their local credit union, this can help increase savings throughout the year.

2. It May Become More Expensive to Borrow
Higher interest rates mean borrowers pay more over the life of their mortgages and personal loans in interest payments. For all borrowers, higher interest rates mean higher monthly payments, though the increase may only be a few dollars each month. For individuals with good credit, the interest rate increase will be less noticeable. However, for those with credit scores below 700, the rising rates will make the loan more expensive both overall and month-to-month. Unfortunately, for some borrowers, this could make loans less feasible and less affordable.

3. You Could See an Increase on Existing Loans
All loans, whether for a new car or property mortgage, have either a fixed or variable interest rate. If your interest rate is fixed at the time that the Federal Reserve raises the rates, you won’t see an increase in payments. However, if you have a variable interest rate, those loans may fluctuate with the market. An increase in the Federal Reserve interest rates will cause variable-rate loans to increase as well.

Wondering how a rising interest rate may impact your loans and mortgages? Contact the personal loan experts at your credit union. With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial Federal Credit Union is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services online, follow us on Facebook, Twitter, and Instagram for news and updates, or call 832-8700 on Oahu or toll-free at (800) 272-5255 with any questions.