As you may be aware, the Fed is forecasting as many as 3 rate hikes this year, including the one that recently happened. A rising cost of federal funds can affect all forms of debt including mortgage rates , vehicle loans, business credit, and most importantly, variable interest rate debt.


If you currently have debt with a floating interest rate, you should prepare yourself now for added costs. The most common forms of variable rate debt are home equity lines, business lines of credit,  student loans, and credit cards.  It is better to prepare yourself now for the rising cost of debt repayment than be unprepared as these rate cycles persist.


Keep the following tips in mind when handling  your debt:


  • Stay Away from Floating Rates – If taking out any new lines of credit, avoid floating, variable or adjustable interest rates; variable rate debt gets more expensive as interest rates rise.
  • Move to a Fixed Rate -If you currently have any debts with a floating interest rate, try to move to a fixed rate.  Even refinancing a HELOC into a conventional 15-30 year fixed can save an enormous amount in the upcoming years.
  • Pay Balances Down – Reduce your debt the smartest way, prioritize on paying down all balances with an adjustable rate (focus on the highest rate first).


Even though the rising interest rates are out of your hands, it’s important to remember that you are in control of your own debt.  With these three simple solutions, you’ll be able to manage your money responsibly, even during this period of rising interest rates.


If you are considering any equipment this spring, American Capital Group specializes in preserving your valuable working capital and locking in fixed payments.  Click here to contact one of our account managers today.