Recently, the Federal Reserve raised benchmark interest rates by another three-quarters of a percentage point. How does this affect your ability to pay rent and bring down your overall debt? While higher interest rates affect a landlord’s ability to borrow money, it also trickles down to the renter. By limiting the amount of funds borrowed, renters will find it more difficult to afford a mortgage. Higher interest rates shut more first time borrowers out of the home buying market who otherwise would have been able to become homeowners. The increase in renters drives up demand and competition for available rentals thus driving up prices. These rental price increases are often realized when lease renewals come around.
Don’t let future rent increases derail your budget. Now is the time to prepare for those possible upcoming changes. Paying off debt takes time and cutting back on extra splurges can accelerate your ability to cut your debt. Allotting those extra savings to credit card debt will allow you to open up extra cash and better absorb any rental pitfalls you may encounter.
So, what can you do and how can you prepare for upcoming possible rent increases?
- Pay down any possible credit card debt. This will open extra funds to help offset any rent increase that may be imposed in the future.
- Focus on your credit score. Raising your credit score can help you secure lower interest rates on things such as auto loans resulting in extra available income to allocate to other bills or debt.
- Look into consolidating any debt. By consolidating, you may be able to bundle several payments into one lower payment with a reduced interest rate, thus saving you money.
- Look into having a roommate. If you have an extra bedroom available and are open to it, you may want to rent a room to a fellow renter like you. This can help reduce your costs by sharing rent and utility bills. The extra income can alleviate any rent increases and allow you to pay off debt more quickly.
The point is to be proactive. Keep your finger on the pulse and stay ahead of any economic changes that may lie ahead. You may be able to overcome any financial obstacles that can put a damper on your budget and any overall debt reducing goals. Remember to establish and keep to your budget. Keep in contact with your debt resolution adviser and together you can work towards a more debt free future.
