5 Myths about interest rates

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Interest rates affect many parts of our financial lives to getting that home, car or personal loan to even saving. All these things work on interest and this is fact. But with every fact there’s a myth too. So let’s bust just five of the myths that lead to false ideas about interest rates.

Myth No 1: If you’ve no down payment for a home loan you’ll have to pay huge interest rates.

Many people are under this assumption and that you’ll also be stuck with extra mortgage insurance coverage. If you don’t have a down payment fund, don’t let that stop you from inquiring into your options to combine your loans and get that home you so desire.

Myth No 2: When buying a car shopping around for the best interest rate will hurt your credit score.

Yes and no. It’s worthwhile to apply through two credit providers simultaneously prior to shopping for your car. This way you’ll know what budget you’re working with and may also secure the best possible interest rate.

The problem is applying at seven different credit providers over the course of a month for a better rate and credit. This could signal a red flag to credit bureaus, and you’d end up with a higher interest rate than you’d have received.

Myth No 3: Checking your credit score will affect your credit rating.

Not true. You’re actually legally entitled to request a free credit report annually. It’s important to know what your credit score is and how to improve it. The higher your score, the lower the interest rate you’ll have to pay.

Myth No 4: When it comes to saving compound interest is the eighth wonder of the world.

Unfortunately, compound interest really needs time to work its magic. By putting off saving until you can afford it, you’re losing out on one of the most powerful forces in the investment universe. The sooner you start, the better, even if the amount seems small.

Myth No 5: Paying in cash or by debit card is always a better strategy to paying with a credit card.

True, but you may be missing out on goodies offered by credit card companies. You can rack up some serious rewards points using a credit card, like cashing in points to go on a vacation at no cost.

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