Federal Reserve Lowers Interest Rates Amid Covid-19 Chaos, Here’s How That Can Affect You

LifestyleMarch 6, 2020

The 2019 novel coronavirus, also known as Covid-19, is a worldwide problem that prompted states to resort to drastic measures. In the United States, the Federal Reserve recently announced that it will be lowering its rate by 0.5 percent – the first since the financial crisis in 2008.

This move comes as officials are worried that the virus will adversely impact the economy even more in the coming weeks as experts have yet to develop a cure for it. But how will this affect a typical consumer?

Car Buying

If you’ve been eyeing on purchasing a vehicle, then good news for you because according to Bankrate chief analyst Greg McBride, interest on auto loans will decrease just like the prime rate. As per Experian data, purchasing a second-hand or a brand-new car is both costly.

Auto loan interest rates will likely fall

Specifically, you will be slapped with an average of 9.57 percent interest rate for a used ride, while it was 5.96 percent for new units, as per 2019’s third quarter information. With the recent federal reserve funds cut, you can expect that rates will lower, making this the perfect time to go car shopping.

Credit Card Payment

Along with the decrease in prime rate, you should also expect to see a decline in credit card interest rate by about 0.5 percent. This is one of the greatest financial problems of Americans as reports showed the credit card debt has ballooned to $930 billion.

Each household has an estimated credit card debt of $5,700, Value Penguin said. As such, it will be a huge relief that you can pay with a lower interest rate or if you are wise, you will consolidate this balance to the others so you will be entitled to a low rate.

Launching a Business

Pursuing a venture is costly

If you have been wanting to start a business for a while but are frequently turned off by the interest rate, now is your chance because venture loans follow prime rates, which means you can borrow money for a cheaper price.

Home Renovations

Renovations like a new splash of color on your abode’s walls as well as a landscape on your background may need a huge sum, which is why people usually opt for a loan. Home equity lines of credit, or commonly known as HELOC, have lowered their interest rates in line with the Federal Reserve’s move.