The prices of commodities are on the rise, partially because of inflation. Currently, the inflation rate in the United States has reached 9.2%, one of the highest rates since the 90s. This means that the prices of everyday items have increased by about 9% in the past year. Many factors contribute to inflation, but the most common is increased money supply.
When more money is available to be spent, each dollar is worth less because it can buy fewer goods and services. However, one thing can counter inflation, and that is loans. Getting a loan during a time with a high inflation rate favors the borrowers because the actual value of their debt decreases.
For example, if you have a $100 loan with an interest rate of 10% and inflation is at 5%, the actual value of your loan after one year would be $105. So you can save a decent amount of money by taking loans right now. But which loans are the best this year? Find out here.
Home Loans
Home loans are essential because of the high price of homes today. So if you’re looking to buy a house, get a home loan. The average price of a home is around $370,000, and it will continue to rise. However, home loan rates are at about 5%. It’s relatively low compared to a few years back, but it was at its lowest when the pandemic first hit.
Many are taking home loans because they can afford the monthly payments and because it’s a good investment. With prices of homes getting higher, it also means people’s equities have the potential to go even higher. Home loan lenders are taking advantage of this by offering rates at an all-time low. Moreover, with the inflation rate so high, these lenders are expected to receive more clients than ever before.
Student Loans
If you have student loans, you’re not alone. Student loans are one of the most common types of debt in the United States. The average graduate has $37,000 in student loan debt.
Fortunately, student loan interest rates have decreased over the past few years, and they’re currently at 2.75%. However, with the inflation rate rising, these rates may increase in the next few years.
If you’re thinking of taking out a student loan, now is a good time. The sooner you get a loan. The lower your interest rate will be. But make sure you shop around for the best rates and terms before signing anything. However, always take advantage of your loans by landing a high-paying job. Remember that unlike other loans in this list, the asset given to you by student loans isn’t tangible.
Car Loans
Like homes, cars are getting more and more expensive. The average price of a new car is now $36,000. But unlike homes, cars depreciate quickly. A new car can lose up to 20% of its value in the first year.
If you’re thinking of taking out a loan to buy a car, you should do so as soon as possible. Car loan rates are currently at 3%, but with the inflation rate rising, they’re expected to increase in the next few years.
Moreover, many lenders offer incentives to get people to take out loans. For example, some lenders are offering 0% interest for the first few years of the loan. This means that you can get a new car without paying any interest on the loan. But make sure you read the fine print before signing anything.
Personal Loans
Personal loans are one of the most popular types of loans right now. People can use them for anything from consolidating debt to financing a wedding. The average personal loan is $15,000.
Personal loan rates are currently at an all-time low of 10%. However, with the inflation rate rising, they’re expected to increase in the next few years.
If you’re thinking of taking out a personal loan, now is a good time. But make sure you shop around for the best rates and terms before signing anything.
Bottom Line
Loans are essential if you want to purchase the vital things in life. Home loans, student loans, car loans, and personal loans are all holding up well in 2022. But with the inflation rate rising, interest rates on these loans are expected to go up in the next few years. So if you’re thinking of taking out a loan, now is a good time to do so. However, using other forms of loans like credit cards this year might be a mistake because of their interest rate. So make sure to avoid other forms of loans this year aside for the ones mentioned above.
