SafeAmerica Credit Union

Finance

• By Kevin Alvarez

Living in a Changing Rate Environment: How the Fed’s interest rates effect you

The Federal Reserve Systems (The Feds) job is to strategically change rates to accommodate the economic well-being of the nation. Their job is to keep the nation afloat by raising or lowering the cost of borrowing money.  When the economy starts to grow too fast, which is what’s happening in today’s environment, the Fed may decide to raise rates in hopes that consumers slow down on borrowing.

These higher interest rates make loans more expensive.  This strategy encourages consumers to postpone any projects that involve financing and simultaneously encourages people to save money so they can earn higher interest. While higher interest rates may be bad for borrowers, they are great for anyone with a savings account, as these rates tend to increase as well.

Here we’ll discuss a few ways the Fed’s changing rates directly impact you and your borrowing needs.  But, as with everything, with the bad there also comes the good.  We’ll also show you ways to take advantage of rising deposit rates.

The Borrowing Impact on You:

  1. Mortgages and HELOCs (Home Equity Line of Credit) — While fixed-rate mortgages are not directly impacted by the Fed, they may have some influence on their rates.  If you already have a fixed-rate mortgage, nothing to worry about here – you’re locked in.  However, variable rate mortgages and HELOCs are tied to the Prime rate, meaning those will rise along with the fed funds rate.
  2. Auto Loans — You might find that auto loan rates are on the rise too.  Auto loan rates are dictated by the time of year, the type of vehicle, the borrower’s credit score and more. But the Fed sets the benchmark rate on which auto loan lenders base their rates.
  3. Credit Cards – Most credit cards charge a variable rate, meaning the rate can “vary” based on the Prime rate.  So, when the Fed increases its rate, variable rates tied to Prime also increase.  This can mean significant increases in your minimum payments each month.  Unlike most credit cards, SafeAmerica’s Visa Platinum Rewards credit card has a fixed-rate, so your rate will not adjust.

Now Is The Time To Focus On Saving

There is some positive news in all of these rate changes.  Savers tend to benefit from Fed rate hikes. Financial institutions will typically adjust their APYs (Annual Percentage Yields) in hopes to encourage more money on deposit with them.  A win for you!  Now would be a great time to look around for higher-yielding savings accounts as well as share certificates so you can start to earn more.

We’ve recently increased some of our certificate rates.  To see our rates, click here.

What's SafeAmerica Doing With These Rate Adjustments?

“The recent rate increases from the Federal Reserve are an effort to alleviate the financial pressures brought forth from recent years. While it may seem worrisome, it is a sign of returning to “normal”. You can rest assured knowing that your credit union will begin to accommodate the rate increases in the form of leveraging higher-yield rates for our savings products.”

-Tom Graves, President & CEO of SafeAmerica Credit Union

Our team here at SafeAmerica Credit Union is closely monitoring and following the Feds rate adjustments as they come.  Our number one goal is to continue to provide you with the most competitive rates in our area.  As such, we look closely at our peers to assure we remain competitive, giving you the best rate we can.  We understand these borrowing rate hikes have tremendous impact on you.

If you are ever in need of financial assistance, we encourage you to reach out to our financial wellness program, GreenPath Financial Wellness.  They can help with anything from credit counseling, budgeting, or just financial education.  For more information click here

GreenPath Financial Wellness

Sources: Bankrate.com, Forbes.com

• By Kevin Alvarez

Five Steps to Prepare for a Big Purchase

A financial journey typically includes several twists and turns – such as understanding how to manage spending, build savings and control debt. There might be “speed bumps” in the form of unexpected changes in income.
Along the way, you might also navigate milestone purchases such as financing a home or car. When considering a big purchase, the destination is within reach when you steer through the following five financial steps.

1. Look at Your Financial Picture

Start by considering what you can afford given your current income, expenses and other debt obligations. Get a handle on how much money comes into your household each month, and where the money goes. Make sure to consider your net income-what is available to you after taxes. Use Greenpath's Budgeting worksheet to calculate your monthly expenses and income to get an idea of what you have to work with, what your commitments are, and what they have remaining to devote to their goals.

For Homebuyers

When purchasing a home, a common rule of thumb is to spend about 30% of your monthly gross income on housing. That includes costs like mortgage principal and interest, property taxes, insurance and maintenance.

For Car Payments

A general rule of thumb is to keep total monthly car costs at about 20% of monthly take-home pay.

2. Check Your Credit Score and Report

Checking your credit score and report is key when considering a big purchase like a home or car.

Pull your credit report from AnnualCreditReport.com and follow the additional instructions to see your current credit score–which influences your overall cost of financing your purchase. The lower your credit score, the more likely you will have a higher interest rate and greater overall cost.

Tip:

Be sure to check your report for accuracy. Resolving errors or incorrect information often helps increase your credit score, giving you more attractive financing options. If the report is inaccurate, file a dispute with the credit bureau. Make sure to check all three bureaus, as sometimes one has information that the another does not. Before making a big purchase, it's important to fully vet (and make sure toy understand) your financing options.

3. Research Your Financing Options

For a home purchase, that means giving yourself enough time to explore mortgage options including types of mortgages, terms, fees, interest rates and other information. Consider getting a preapproval or prequalification letter from a lender, especially in a competitive market with low housing inventory.

If you’re looking to finance a car or other big purchase take inventory of the most competitive loans offered by the dealership, credit union, bank or other lender.

Also be sure to read through any fine print: for example: Is there a pre-payment penalty if you pay your loan off earlier than expected?

Tip:

When conducting your research, remember to use trusted, unbiased information sources, rather than depending upon advice from someone who might benefit from your choice.

4. Plan Your Purchase

Timing is everything, and having a plan in place for when to pull the trigger can make all the difference. Do you have enough in savings to provide a good down payment on a home or car? Is there a certain time of year that special financing or promotions are generally available?

Now’s also a good time to find someone you trust to help you carry out your big purchase – if you’re buying a home, ask friends or families for a real estate professional they can refer.

Having someone in your corner who can help you to understand your options and know warning signs to look out for can make all the difference. For a car purchase, do you feel like the dealership is able to provide advice and guidance? Have you taken the time to research vehicle make and model from a reputable source of information?

Tip:

This is also the time to get your documentation in order, like proof of employment, insurance or other financial information.

5. Make the Deposit

Finally, get ready to make an earnest money deposit for your purchase. In the case of a home purchase ,which indicates you are a serious buyer. Generally, earnest money deposits range from 1% to 2% of a home’s purchase price and are only refundable under specific circumstances.

For a new car purchase, deposits typically total about $500 once you agree to the vehicle price in writing.

Tip:

Make sure you understand whether the deposit is refundable before making a purchase - especially if you think you may change your mind later.

The Journey Ahead

While not an exhaustive list, these steps should help prepare for the financial road ahead. As you travel along your financial journey, take advantage of financial counseling and guidance provided by the trusted national
nonprofit GreenPath Financial Wellness.

To help spread the knowledge, read our Understanding Financial Terms blog post to become even better equipped to make any of your upcoming big purchases.

GreenPath Financial Wellness