By Missie Berteotti
If you’re a golf instructor and in the market for some type of personal financing, you may be encountering sticker shock. In June of 2022, inflation topped 9 percent for the first time in over 40 years.
Currently, the U.S. inflation rate is at 6.41 percent, compared to 6.45 percent last month and 7.48 percent last year. This is higher than the long-term average of 3.28 percent. The Federal Reserve has been aggressively hiking the federal funds rate in order to combat this skyrocketing price jump. They were still raising rates as of February 2023 and the same thinking and action is forecasted for the next year. They have told us their playbook and they are sticking to it.
Personal loans haven’t been immune to rising rates, and in fact are up over 25 percent on average since early 2022 alone. This type of environment might seem downright hostile if you’re looking to borrow money. However, it actually opens up a great opportunity if you want to take out a personal loan. Here’s the reason you might want to look at personal loans right now, along with a few caveats you should be aware of.
Personal Loan Caveats
Personal loans come with a significant number of advantages. In addition to being fixed loans that traditionally have lower rates than credit cards, most personal loans have no additional fees attached to them and can be funded rapidly via an online application. However, there are a few drawbacks to note.
First, while the interest rates on personal loans may be lower than some other options, they aren’t traditionally “low.” You may be able to find better rates via a secured or collateralized loan. They also aren’t good options for funding things like home or auto purchases, as those rates are currently in the mid-single digits, or even lower. Some lenders do tack on fees for prepayment or even originating a personal loan, so you’ll want to watch out for this as well
The best places to get a personal loan are banks, credit unions and online lenders. The best place for you to get your personal loan is whichever lender will approve you for the best package of key terms: Loan amount, interest rate, repayment period and fees.
A personal loan can be a good idea when you use it to reach a financial goal, like paying down debt through consolidation or renovating your home to increase its value. A personal loan may also make sense for large purchases that you don’t want to put on a credit card.
Here are the top nine reasons to get a personal loan.
- Debt consolidation—it’s one of the most common reasons for taking out a personal loan
- Alternative to payday loan
- Home remodeling
- Moving costs
- Emergency expenses
- Large purchases
- Vehicle financing
- Wedding expenses
6 important things to know before taking a personal loan
- Maintain a good credit history
- Compare the interest rates in the market
- Assess all costs
- Consider your needs to choose the right loan amount
- Evaluate your ability to repay the loan
- Avoid falling for gimmicky offers and plans
A financial professional can help
In 2021, a study revealed that people who feel the most confident about their long-term financial strategy exhibit a few key behaviors. First, they write down a financial strategy and stick to it. Secondly, nearly two-thirds of this group work with a financial professional. In doing so, they gain a professional in developing a custom strategy for their retirement goals. When the going gets rough because of inflation or a recession, their financial professional helps keep them on track for the long haul.
If you have a future goal to perhaps buy your own academy, to acquire more coaches who work for you, to invest in your business in certain technologies, to pay rent to gain access to a green grass piece of land, the decision to go find a loan that is a fair rate, that is fixed and has no additional fees, may feel risky. Knowing how to best fund these dreams, whether you borrow or self-fund, is very important. The best advice I can offer is to have someone who is a financial professional with experience talk it through with you.
Financial professionals also are versed in products that can help mitigate the impact of inflation on your retirement strategy, particularly if you’re getting close to retirement age. Talk with them about potential options, such as buying an annuity with an inflation rider or a Treasury Inflation-Protected Security (TIPS) from the U.S. Treasury. Together you’ll determine the appropriate path forward for you. Regardless of whether this period of inflation proves short-lived or not, it’s crucial to stay focused on your long-term financial strategy. Your financial professional can help you create a resilient strategy to meet your retirement goals.
For additional assistance with your financial planning contact Missie Berteotti at The Hicks Group, a part of Luttner Financial Group, at mberteotti@luttner.com or 412-398-5030.