Starting
in 2008, the Federal Reserve adopted a policy aimed at maintaining low
interest rates. The reason for the adoption of this policy was the hope
that low interest rates would make it more affordable for consumers and
businesses to borrow money for things like financing a new auto loan and
to raise capital. They hoped that the end result of such a policy would
eventually stimulate the faltering economy.

While low interest
rates haven’t exactly put the economy back on track just yet, they have
created some very unique opportunities for businesses and consumers.
Lending rates have been plummeting ever since 2008 and have reached
record lows in recent months. This means that people looking to
refinance or consolidate debt could be locking in the lowest rates in
decades.

What is consolidating debt?

Put simply, debt
consolidation is the act of taking out one larger fixed term loan to
replace multiple smaller ones. By consolidating debt it is possible to
lower costs by lowering your overall interest rate. It can also provide
the convenience of being able to pay all your bills in a single monthly
payment.

Why should I consider consolidating my debt?

There
are plenty of reasons to consider consolidating your debt. Reasons can
range from having a high interest debt, to wanting to pay off a loan in a
specific time period.

With
rates as low as they are, you may just want to negotiate a lower
interest rate in order to increase your overall cash flow. Used auto
rates have sunk from 7 percent to 3.69 percent in the last three years.
Why not take advantage of an interest rate that is almost half of what
you may be getting charged?

What should I look out for when trying to consolidate my debt?

It
is important to know what to look out for when trying to refinance a
loan or consolidate debt. Be sure to know what interest rates you are
paying right now. Just because average rates are lower doesn’t mean that
you will automatically be granted a lower rate.

It is also
important to know how long your current loan term is. Some institutions
will make an agreement look more attractive by having low monthly
payments. It is important to understand that by doing this you may be
extending the loan period. You may end up spending more money long term,
even though you are paying less monthly.

Be on the lookout for
fees. Even if you can negotiate a lower interest rate, hidden processing
and transactions fees may negate any benefit you may have incurred.

Be
sure to shop around before making any decisions and do your research
online to get an understanding of what average interest rates in your
area are.