Work and Money
Getting Your Money in Order: Interest Rates and Loans
Navigating the financial and economic repercussions of the times that we're living in means we need good advice and guidance on the best financial practices. Ana Flores, founder and CEO of #WeAllGrowLatinas, sat down with Ramona Ortega, Esq., founder of the personal finance platform My Money, My Future to get some quality financial advice.
With a recession looming ahead, many women have questions about loans and interest rates. Is this a good time to try to reduce interest on college loans? Will there be any federal intervention on private loans or student loans? Ramona Ortega’s useful information covers strategies for debt consolidation and mindfully navigating loan options based on terms and interest rates.
Ana Flores: Obviously, we're all thinking about the repercussions of the times that we're living in. And the first thing that fear usually brings to us is financial impact and economic impact. And, yes, we're living in a time of fear. We are also living in a time of a lot of hope, opportunity, and creativity. I think the best way to combat fear is information — being informed and being aware of the options we have at hand.
Ramona Ortega: The first topic that I want to cover is the Federal Reserve rates and what's going on. Some people are talking about the bailout because it's all coming out of the Federal Reserve. If you didn't pay attention to them before, now is the time.
The Federal Reserve is important because it regulates interest rates. Interest rates touch everything from your credit cards to your mortgages to your auto loans to your small-business loans to your student loans. The interest rates coming out of the Fed Reserve affect your day-to-day life and how much you pay, essentially, to borrow cash. So first things first: You've heard about the trillion dollars given to corporations and financial institutions. The reason they're doing that is that those companies, those big companies, need a lot of access to cash every day to cover a lot of different things like payroll and day-to-day costs.
"Credit is king in the world we live in. So if you have some private loans or you have some debt that you want to consolidate, now is a good time to do that."
AF: What advice do you have for negotiating interest rates right now?
RO: If you don't want to be making double payments and paying down debt right now, get on the phone with your credit card companies and ask them to either reduce interest rates and/or ask for deferred payments for a month or two. Say to them, "I can't make payments this month or next month. I need to defer those." When you do that, make sure to ask that they not charge interest rates during the deferment. That is important. When you negotiate the interest rates, I would say, “Given that the Federal Reserve rate is 0 percent, I would like to see if I can get a reduction in my interest rate as it pertains to my credit cards.” You can ask for 10 percent and they will probably give you 5 percent, or 3 percent. You want to try to get at least a 3 percent reduction on your credit card rates. You can also do this for your auto loans, your student loans (especially if they're privately held), or any other personal loans that you may have with a bank right now. That will result in a bit of a reduction in your payments because the interest rates should be dropping for you.
AF: Can that tactic be used for other reductions?
RO: Yes. Also ask for reductions for your bills: your cable, your internet, your phone bill — all of those types of things. So do that. It's going to take a few hours on the phone, but go ahead and do that.
AF: What if someone has money in a high-yield savings account?
RO: A high-yield savings account is a savings account that gives you interest. Generally, those yields are about 2 percent, but the rate has dropped. That means if you have money in an emergency savings account right now, you're probably not making that much money off it. There is always a flip side, so low-interest rates mean you get cheaper credit and cheaper borrowing, but it also means you're not making any money on your money.
AF: Is this also a good time to try to reduce interest on your college debt? Also, what do you know about any anticipated federal intervention on private loans or student loans?
RO: Right now they're asking for deferrals and a halt on any interest-rate hikes on student debt. You're going to be able to get a reduction in your interest rate and roll that over, too, but you have to have good credit to do that. Credit is king, unfortunately, in the world we live in. So if you have some private loans or you have some debt that you want to consolidate, now is a good time to do that, absolutely.
But I'm telling you that the financial institutions are probably only going to do that if your credit score is prime. If it's close to 700, essentially. If you're under 650, under 620, it's probably not going to happen. You can try, but I have a feeling they're not going to be extending these “nice” rates to everyone. If you can consolidate or refinance your student loans, now is the time to do it, because those interest rates are lower.
At the end of the day, this is the right time to get your money in order, generally.
AF: This is the right time to get our money in order. Thank you, Ramona.
Ana Flores, Founder and CEO of #WeAllGrow Latina Network, is an accomplished producer and passionate advocate for portraying Latina women in a positive light. #WeAllGrow Latina Network is the first and largest community of Latina digital influencers, hyperlocal events, and an annual Summit that boldly propels growth through brand partnerships and community development.
#WeAllGrow believes in the power of this community to be a channel for healing through connection — now more than ever. Through #WeAllGrow AMIGAS MENTOR sessions, Latina creators, entrepreneurs, healers, and experts, who are at the top of their game and have deep expertise, share insights on a specific topic.