It is not surprising that many people will be worried about what effects an interest rate rise might have on them. With interest rates being low, then there is always a chance that they will go up and it seems more likely to happen than a reduction in rates would. However, it is never easy to predict and so you should be prepared for the rates going up even if you think that it is unlikely.
How a rate rise might affect you
If you have any loans or have borrowed money in any way, then a rise in interest rates could mean that your repayments on these could be higher. If they are on a fixed rate of interest then they will stay the same. However, if they are on a variable rate, then they will be very likely to go up. This means that the amount of interest you will have to pay on them will be more. Therefore, every loan you have on a variable rate will become more expensive. The amount that the cost increases will depend on how much the lender decides to put the rate up. Usually this will be in line with the Bank of England base rate increase, but it could be more and there is a small chance that it could be less.
If you are struggling to make your loans repayments anyway or are only just managing then a rise in interest rates could make things difficult for you. If you are not struggling, then a significant rise could still have an impact on you. If you are looking to borrow money then it will be more expensive, possibly even for fixed rate loans and so this could impact you too. In this instance, using a short term lender such as Emu.co.uk may be more beneficial as the loans are offered over a much shorter period of time meaning you pay back less in total.
A rate rise can have a knock-on effect though. It tends to slow the rate of inflation meaning that prices do not rise so quickly. This can be useful as if you are paying more out on loan interest as you do not want to have to be paying more for things you are buying as well.
What you can do to prepare
Thankfully there is a lot that you can do to prepare and so hopefully if rates do rise you will be able to easily cope with them. Firstly, it is a good idea to take stock of what loans you do have and whether they are fixed or variable interest. This will allow you to know which items are likely to go up in cost if there is a rate rise. The fixed ones will not go up and the variable ones might. Then you can calculate how much extra you will have to pay if the rates go up. Try estimating how much they may rise or calculate for different percentage rises and you will be able to work out whether you will still be able to afford the repayments or not. This can be handy as you can then prepare if you need to.
If you think that things will be a struggle then it is a good idea to come up with a plan or make changes now. Look at the items that you are spending your money on and think about whether you can cut down anywhere. You might find that You can compare prices and switch to buying some cheaper items or cut back in some areas so that you will still be able to afford the extra payments. If you look at everything that you buy, then you could find that switching to a cheaper energy supplier, insurance company or things like this will allow you to reduce the amount that you are spending without having to change your lifestyle at all. You may also be prepared to buy items at a lower price, perhaps by shopping at cheaper retailers so you can still have as much but just pay less for it.
It could also be wise to see whether you can change your loan to a cheaper lender. There may be fees associated with this though so you need to look into it really carefully. It could be that paying off the loans that you have could help. If you have any spare money you might be able to pay off some of the loan which could mean that you could negotiate making smaller repayments with the lender. Alternatively, you could try to pay it off quite quickly and then you will not need to worry about interest rates as you will no longer owe money. If you have savings, you could use it to pay off all or some of the money that you owe and that would mean that the loans will not be so expensive. If you cannot free up money then you could perhaps look to selling things to raise some. You might also want to think about increasing the hours you work so that you can earn more money. There are lots of options but you will need to find one that will suit you the best.