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What does interest rates increase mean for business?

The answer is not simple, but it depends on whether you are a lender or a borrower.

What does interest rates increase mean for business, money and personal finance?

Recently the FED increased its benchmark interest rate 0.25%, after another same increase a few months ago. What does this mean for personal finance and daily business decisions? Is it good or bad? The answer is not simple, but it depends on whether you are a lender or a borrower.

Car loans, credit cards rates, mortgage loans, will probably get more expensive. This will be negative for your personal financial budget, and if you have a lot of debt and loans, it is a good idea to start preparing paying it off now, so as to avoid total amount of capital paid in the future. The cost of money is going up and money is becoming more expensive. So this means in simple terms that any person should be more prudent with his/her spending and investing or financial decisions.

In case you need to make any large investment and need to take a loan, it is now a good time to negotiate and try to obtain a low fixed rate of interest or any special offers banks have to minimize total future payments. In case of credit cards, someone should try to pay more than minimum amount of payment, as if not doing so, the future total amount to pay off the debt will be higher, plus there may be a negative credit rating to the credit score.

Be more thoughtful on your spending and investing also. As the cost of money goes up, so does its opportunity cost of not having it. What we mean is that unless you have already financial freedom, it is a nice idea to prioritize your spending needs or buys, if these are combined with debt. A new house or car is almost always desirable, but can you really afford to pay it off in the future?

If you can become a lender, then you can benefit from rising interest rates. How? It is simple, just make a thorough search for best interest rate on deposits from local or regional banks and negotiate with them the interest rate you can have. It may take some time, but it is worth it.

Finally for businesses that have already a lot of debt, it will be a nice time to focus more on operating performance and boost as much as possible their profitability, have a business plan to overcome rising interest rates based on expansion, growth, and increasing share of their market.

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