Get myCPE Unlimited Access @ $299 $199/Annually
Inflation is a fact of economic life that can have a significant impact on all kinds of people. Inflation can cause the price of goods and services to rise, making it more expensive to borrow money.
Therefore, when the inflation rate is high, it is essential to control the cost of borrowing.
In this article, I wanted to bring up the discussion on high inflation, the effect of inflation on the cost of borrowing, and at last, conclude with the ways to control the cost of borrowing.
1. Market volatility was quite impacted by inflation at this moment. As a result, savings problems arise due to that volatility.
2. The fed Interest rates were raised last year, which increased borrowing costs.
3. There is a growing trend among people to borrow money, and some of that money is being used.
A big change in inflation directly influences your credit scores and could lead to circumstances that hurt your credit scores and limit your ability to borrow money. And while borrowing money, one of the things that you should be looking at is the effect that inflation might have on your credit report.
All of us are always rated when we want to borrow on what those three numbers are when it comes to our credit reports.
Inflation affects our real estate buying, auto buying, boat buying, and a number of different things. Even if you want to take out another credit card for a particular set of reasons, there is going to be the same effect on that.
Hence, every one of you should have access to your credit report to know what's on there and to take off any late fees or any issues that you see in that particular credit report.
A Case Study:
One of my clients came to me recently. He wants to go back to school for something, and he asks to get a student loan. He was actually denied the student loan, and that's because he had previous student loans. The credit repair company said you were deficient on some of your payments, and therefore, we're not going to be giving you those student loans.
Well, I suggested he checked his credit report for free on a website called annualcreditreport.com. It provides the credit rating of all three agencies.
In the end, it turned out that the client had received a loan serviced by only one vendor. Due to the difficulties of merging the two databases, the vendor was actually acquired. His payments were shown as late when they were not. Currently, he can apply for another student loan in the next 60-90 days.
When it was rampant in the 1980s and 1990s, the cost of credit interest, especially if you were late on a payment, could have been as high as about 26-27%. If you're late with a payment, it might go to 26 or 27 percent.
There are two great ways to get rid of that high-paying debt number.
I. If you have cash and wrapping those high-interest loans and paying them off with a lower-interest credit card,
II. There is then something known as a low-balance credit card, and many vendors actually had access to that many years ago. (I knew there was a company called Fingerhut which is an online retail application where you can do that for credit repair)
The Biden Administration recently took a look at all of the reporting agencies, including health care. With healthcare, there are many individuals, roughly 46 million individuals, that happen to have had at least $500 in medical debt on their credit cards.
If you have a medical debt, or if you own a medical debt and it is currently in the phase where you have 500 or less, it will be wiped off your credit report. So, check if you have any medical debt on your report. Because it could affect your credit, there are a number of combinations that always affect your credit.
It could be that health care and medical expenses are one of those things such as copay where you are not looking at your EOBs. One should take a look into health care expenses, especially in today's EFT world, where everything is electronically authorized. If you're not watching it, you could be racking up money and not even knowing it.
Eliminate the effect of medical debt on credit reports by taking advantage of the Biden administration's new edict and checking your credit report.
Some people just say it's not a big deal. It is a big deal if it doesn't affect you. Now, it will affect you in the future, and here's the big important point I want to leave you with.
As the volatility of the stock market increases, as the interest rates begin to rise, so two will be credit card interest. You don't want to get caught and not be aware of what the interest rate on that card is, especially with a missed payment.
In conclusion, controlling the cost of borrowing during high inflationary times is essential to protect your finances and avoid unnecessary debt. You can find ways to save money on interest rates and protect yourself from rising interest rates considering the above tips.
I'm hopeful that this guide will help you, and if you are looking forward to learning more about how to control the cost of borrowing during high inflationary times, then myCPE has one of my webinars here. Other than this you can enroll for cfp® cpe courses & Financial Planner CPE Webinar at our website. Do not forget for every single credit on my CPE, it's one credit, one meal that's right, and we feed a person in need. In this webinar, I'll tell you about this economic volatility.
Register Now!
Over 38 years of Financial and Sales/Marketing expertise with investments, insurance, annuities, financial planning, analysis, and educating struggling clients to eliminate debt, increase liquidity, and maximize savings for retirement planning
Imtiaz Munshi, CPA
