Ask MetaFilter questions tagged with interestrate

The Lock In Game

thisperon — Tue, 29 Dec 2009 11:07:14 -0800

Should I lock in interest rates now for a home mortgage or hope they dip soon? A complication to make this extra nailbiting. Mefites, I need your collective powers of forecasting.... About to purchase a home, but there may be some problem with repairs. I decided not to lock in the rate and float it for a few weeks, but am concerned about the recent rate jumps! Do I lock in now or should I wait until we are closer to the close of escrow (estimated to be a few weeks). The problem is that the inspectors found various problems and I don't know if they'll be fixed by close of escrow. Am concerned that I'll lose the money if we pay for the lock. Am also concerned rates might go down again, and we're locked into something higher. Any mefites have suggestions on what to do?

Interest rates have looked great...but they seem to be rising quickly. Does anyone know if there is any holiday related influence on this, and they might dip back down? Should we lock in and eat a possible fee that we might not have to pay?

Thanks for your collective wisdom.

Student Loans vs. Investing/Saving with a Twist

1901gunner — Sun, 22 Nov 2009 13:11:46 -0800

The paying back student loan vs. investing/saving question - but with a bit of a twist So, I graduated from college back in May, building up approximately $40k in private student loans from Sallie Mae. (Yes, I know; private loans are not the best choice, but I've become much better educated in personal finance now and more wary etc.)

However, thanks to good credit, my interest rate is pretty low (based off the Prime Rate and right now <3%). Nevertheless - it is a variable interest rate, and I imagine it will begin to rise in the somewhat near future.

Since my graduation, I've worked in a part-time job with good pay, and have found a very good full-time position I'm starting next month. Take home will be ~$2k/month, and I live in a very low-cost area.

I've already budgeted dedicating $500/month to paying off my student loan (minimum monthly payment about $270 right now, my grace period just ended).

I know people such as Suze Orman advocate not worrying about paying a whole lot more beyond the minimum when interest rate is low, but since my loan has a variable interest rate, I want to pay down enough before the interest rate becomes more sizable. At the same time, I'm investing in a Roth IRA and building an emergency fund, so I want to allocate sufficient funds there, as well.

My question: What would you do if you were in my shoes? Is $500/month reasonable? I'm not well versed in economics, so I'm not sure how easy it is to predict the Prime Rate's future (I've checked out a couple of forecast sites, but not sure how trustworthy they are)-- is there a certain percentage rate where I should start to look at finding a loan from a bank/credit union to move my student loans into at a fixed rate?

Other details: currently I am funding my Roth IRA at $100 every other week, which hits about half of the maximum limit for the year (but I would like to max it out once my full-time job starts). By the end of the year, I should have about $1,000 in my emergency fund. Also, I just don't like being in debt, and am motivated to pay my student loans off quickly, but reasonably.

Thanks so much in advance! I've been lurking on here for a while and thought some people here might have good guidance for an approach :)

Software for playing the "rotate that credit card balance to the low APR offer" game

GenTso — Sun, 15 Feb 2009 18:27:33 -0800

My googlefoo is failing me: Hasn't anyone written a program that helps you figure out the best strategy for playing the "rotate credit card balances from one card to the next to take advantage of low APR offers" game? (You know the offers - you get maybe 0% or 1.99% APR for 6 months, but a fee of 3% of the transfer amount, maxing out at $75, etc. Add to that the fact that I have a good number of cards, and suddenly the possibilities of what to move where/when can quickly become a tricky matter to manage.)

Help with House

CollectiveMind — Wed, 01 Oct 2008 07:29:25 -0800

Under financial pressure. My house isn't selling. I want to avoid foreclosure and don't care about making a profit. It's the original mortgage; a 30-year fixed at 5.5% in good condition (attractive older house and well maintained) in a decent neighborhood (property values steady as those in more expensive neighborhoods fall). If I price it only to pay off the mortgage and cover commissions, would it attract buyers? Doing so would drop its price 20% below comparables. This would undercut the neighborhood, but not like a foreclosure would. Advice?

Invest for the future vs. Debt reduction

Anonymous — Mon, 29 Sep 2008 18:32:35 -0800

Investing 201: Given the economic news of late, If the value of my mutual funds drop and the interest rate of my debts go up would it be prudent to liquidate the mutual funds to pay off my debts or should I "stay the course" despite this? Financial details inside... OK so I have about $15000 in Mutual Funds (Canadian RRSPs to be exact - these are like 401Ks, I think, where the money invested is for retirement and is not taxed until withdrawn).

I also have about $30,000 in debt that I am paying off.
Half of it is a line of credit at 9%; the other half is credit card debt at about 12%.

Until now, my strategy was to leave my investment money where it is, and allow it to grow despite the temptation to use it to pay off the debt.

Now, if the economy goes to hell, I am assuming that the credit card companies and banks will jack up the interest rates (is this a safe assumption?) and that the value of my investments will plummet (which is expected).

I'm not so concerned about the investments - I normally would have "stayed the course" considering that I am a far way off from retirement, however but I am concerned about the debt - if the interest rates rise, it might become difficult to pay these off in a timely fashion.

So here are my options:
1) Stay the course, watch the value of my funds drop (temporarily at least) and risk paying more interest on my debts and extend this already long and painful course of financial redemption (at the risk of my happiness, health and marriage).

2) Liquidate the mutual funds, pay the up-front tax, pay the income tax on the money I am cashing out, and reduce my debt by 1/3, for the sole purpose of having a smaller debt in the event that interest rates go up.

Given this assumption, do you think it would be a better idea to liquidate the mutual fund, pay the up-front taxes, pay the income tax.

I'm still thinking Door #1 (stay the course). But I am curious to know what the hive mind thinks!

Financial Lease Calculation wiz needed

thinktwice — Mon, 08 Sep 2008 10:30:05 -0800

Finance wiz needed: Although interest rates do not exist in leases, customers constantly ask what is the interest rate for the lease. I have a question regrading how to calculate the implied interest rate in order to get the most favorable comparison. For purposes of illustration I will use a $10,000 60 month $1 purchase option lease with 2 advance payments, a lease rate of .02345 which will yield a monthly payment of $234.50.
The traditional present value method will give an implied interest rate of 15.687% using Tvalue calculator available here http://tinyurl.com/6gewp4

Recently a friend showed me another method which according to him yields an interest rate of 8.24%.
He does the calculations as follows:
$234.50*60=$14,124.00 Total payment
$14,124.00-$10,000=$4,124.00 Total Interest Paid
$4,124.00/5=$824.80 Interest Paid per Year
$824.80/$10,000.00= 8.248% Interest Rate per Year

Something seems weird in this calculation and I was hoping for a finance wiz to clarify the error.

Would we save money by moving the debt to a lower interest credit card?

crunchtopmuffin — Tue, 19 Aug 2008 15:35:28 -0800

Personal Finance 101: Is it smart to pay off an auto loan at 10.25% interest with a credit card that has a 6% interest rate? My husband has a $7700 balance on an auto loan with an interest rate of 10.25%. I have a credit card with a gigantic credit line that has an interest rate of about 6%. Does it make sense to switch the debt over if we continue to make the same monthly payment? Obviously, I want to minimize the amount of interest that we pay, but I don't really understand if auto loans and credit cards compound interest in the same way or not. So I don't know if this is a smart move. However, I really want to get out of this auto loan that has such a high interest rate! Would we save money by doing this?

We're in the US, if that makes a difference.

Thanks in advance!

Will an auto refinance help bring down the payoff for Mom & Dad?

justonegirl — Mon, 04 Aug 2008 12:13:57 -0800

If a family member is paying off my high-interest auto loan, will it help them if I refinance that loan in advance? (My apologies if this question seems stupid to those more knowledgeable of loans and credit than I...this really is new stuff to me.)

My parents are, quite generously, "trading" cars with me -- giving me their (paid off) vehicle and taking mine, with the intention of paying off my loan. Payoff on my car is about $13K, and I have probably 3.5 years left of payments at a whopping 14% interest rate.

Right before my parents made me this offer, I applied with my car insurance company (USAA) for an auto refinancing loan and just received notice of approval for a 6.5% interest rate.

I believe my parents' intention is to make my car payment for a few months, and then pay the vehicle off in full. My mom said I shouldn't go through with the auto refinancing loan because that would extend the loan period, which doesn't make sense since they'll be repaying the loan shortly.

This doesn't sound quite right to me. If USAA pays off the loan and extends me (or my parents, by proxy) a lower interest rate, won't there still be less total for my parents to pay off, either immediately or in the next 5-6 months? If I can do something small to help my parents out, I'd really like to.

Can you please help me understand my school loans?

sharkfu — Wed, 23 Jul 2008 16:23:11 -0800

Can you please help me understand my school loans? Boring numbers and interest rates within. I'm embarrassed that I don't understand this stuff but I guess it's better to ask and learn...

I have two loans, a private loan and a Federal loan (which I consolidated several years back from Federal loans with higher interest rates). I have enough money to pay off one in entirety, but I'm not sure which one to do so to save the most money. Loan details below:

Private Loan
Original principal balance: $12,632
Outstanding principal balance: $5,297
Interest rate: 5.0%
months remaining: 59 months (by 5/28/2013)
monthly fee: ~$112
Total amount to be repaid (from this point to end of loan term) $6,563

Federal Student Aid - Direct Subsidized Consolidated Loan, Fixed Interest Rate
Original Balance: $14,203
Principal Paid $10,085
Interest Paid $3,567
Interest Outstanding $9.59
Outstanding principal balance: $4,118
Interest rate: 6.075%
months remaining: 26 (by 10/14/2010)
monthly fee: ~$164

Note: The Federal Student Aid website was much more confusing than the private loan one and I could not find a "Total Amount to be repaid (from this point to end of the loan term)"

Several questions:

1) Which loan should I pay off completely right now to save the most money?

2) Does the interest outstanding amount of $9.59 mean all the interest for the loan was loaded on the front and I'll be repaying capital only from this point forward? Or is that only interest due this month based up the principal remaining?

3) If I'm going to pay off one in entirety, is there a way to put it on credit card (and then immediately pay the credit card) so I can at least earn points/ miles? The only options I see for 10 day payoff on the two sites involves checks/ direct bank transfers.

Thank you for any insight you can provide...

Can I move my money to Reykjavik?

tomwheeler — Tue, 06 Nov 2007 20:29:48 -0800

I read in the Wall Street Journal this weekend that Iceland's Central Bank raised interest rates...to 13.75 percent! Can I move my money to Reykjavik? I've seen high rates from countries with unstable economies before, but I don't think Iceland is going anywhere. They have moderate inflation (~ 3.5% IIRC) and I'd doubt the US dollar is going to make a comeback real soon. Even after currency conversion fees, I still ought to handily beat online savings account yields.

So is there any reason I can't move my US dollars to an Icelandic bank and enjoy a 13.75% interest rate? Maybe laws, taxes or other factors that make this infeasible?

can I make money off my low-interest loan?

masymas — Thu, 17 Nov 2005 19:33:05 -0800

FinanceFilter: can I make money off my low-interest loan? So I borrowed a bunch of money to pay for college, and at the time, interest rates here in the US were historically very low. If US interest rates continue to increase, is there any way for the lender to make money in this scenario?

For instance, I know that banks sell/buy loans to/from each other. It seems that banks would pay a premium on a low-interest loan with a variable interest rate (under the assumption they would have a higher ROI resulting from increasing interest rates).

Beyond that, it gets confusing to me. Is there a good site explaining the market of purchasing/selling both variabel and fixed rate loans? Is the loan market exclusive to banks, or can lenders get in on it as well? Many thanks.

Negotiating my variable rate mortgage

acoutu — Wed, 02 Nov 2005 14:36:28 -0800

Can I renegotiate my variable rate mortgage? I have a variable rate mortgage. My rate was 3.65% for the past three months. I just got a notice saying it is now 4.15%, which is .6% below prime. However, the posted rate at the bank is 3.95%. Can I ask for this rate and, if so, how would I do that in the most effective manner?

It bugs me that the bank bumped my rate .5% when the Canadian Bank Rate has only gone up .25% and my bank is advertising that their variable rate is 3.95%. Some other banks have 3.95% rates -- I could move to another bank ($250 discharge fee + $2 months of interest), causing my bank to lose my business.

Any suggestions for negotiating my 1.5-year-old variable rate mortgage?

Economics Question

specialk420 — Sat, 20 Nov 2004 08:05:33 -0800

"The Fed chief also seemed to be practically guaranteeing higher interest rates, saying that investors who weren't hedged against a rise were "desirous of losing money."."

these questions have been asked before, but any further thoughts on a hedge for dollar positions and increasing interest rates?

The National Debt's APR?

gsteff — Thu, 04 Nov 2004 12:02:22 -0800

What interest rate does the U.S. pay on the national debt, and is that number likely to change as the debt increases?

ReFi Student Loans?

Tin Man — Wed, 16 Jun 2004 06:53:12 -0800

Is it possible to get a lower interest rate on my student loans? I began paying off my loans in 1999. In mid-2001, I refinanced them through the government and got a slightly lower interest rate (5.7%). Since then, of course, interest rates have gone way down, but the government won't let me refinance more than once. Occasionally I get offers in the mail from companies offering student loan refinancing, but my instinct is not to trust them. Are there any advantages/disadvantages of refinancing through a private bank? Any other ideas?