The domestic economy which derives 70% of its productivity from consumption needs low rates to generate demand for consumer products.  A 0-.25% rate means that prime rates sit at roughly 3.5%, low enough for most consumers to spend money on virtually everything.

The only problem is that for the most part, few have been willing to spend.  An economy so dependent on consumption needs strong spending to fuel job creation and even more spending.  The endless cycle of wealth has seemingly come to a standstill with few willing to act, and even fewer willing to speculate with business expansion.  No jobs = No Money, No Money = No Jobs.

Although the Federal Reserve failed to act in this 9-1 vote, many expect the FED will have to raise rates this summer in response to higher energy prices and general inflation.  Since US energy demand is largely displaced by foreign producers, higher oil prices mean a widening trade deficit and even more fiscal problems for a country already fighting to stay even.

Also, since nearly every good and service requires transportation in at least one stage of production, higher energy prices mean higher prices for virtually every product, domestic or imported.

That’s right a 0% rate could be near. What does that mean for you? Well eventually savings rates would have to go down, but your ability to loan money would be better. Which for some, could be a nice relief given the recent credit squeeze that has created the need for the Fed to act in this way.

A 0% rate could signal what everyone is fearing. Deflation, little to no economic growth and the need for the Fed to act drastically to bring the US back to it’s feet after a credit crisis has nearly toppled the largest banks in the world.

So what do you do with our money? Well, we might suggest paying off debt and saving a little more in a CD or savings account. Locking into rates now before they go too low and you get nothing in return for allowing a bank to keep your hard earned cash to loan out.

But that’s just some of things you can do. Nothing is fail safe these days, except maybe sticking it under the matress.

Car Loans have been some of the most difficult to get, so we’ve heard, mainly due to the fact that the car loses value so quickly and banks are having a hard time recouping any type of principle from a car loan. These types of loans, even if given to non-subprime loan applicants can be risky and banks just don’t want to do them.

In the UK if you need a car loan you need to shop around and Credit Plus is a site that makes it extremely easy to do just that, shop around for a loan. You are able to quickly compare loans, look through a database of cars that are available and then put the two together and get a great car and a great car finance right from your home. That way you don’t have to waste all the gas driving around looking for that car.

Illustrating the Concept

To give you a better idea of how it works, here is an example. For instance, you have $10,000 saved as a high-yield investment. Under traditional method of earning interest, if you are to earn 4% on that savings, you get $400 in one year from your $10,000. In ten years time, you’d earn $4,000 from your savings.

Now, if you apply the interest as a compound daily interest, you get to earn $8.08 daily. This figure would of course vary depending on whether you add back the interest earned to the principal or not. In ten years time, you’d earn $4,917.92. You get an additional $917 with compounded interest rate.

With compound interest, you get to earn money while you without having to put more money into the investment! If you know how to take advantage of this interest, you are likely to end up spending your earnings on your interest while your principal continues to earn money.

Harnessing the Benefits of Compounded Interest Rates

Generally, regular consumers or the public cannot take advantage of compound interest rates as it is not widely offered. Usually, it is only the large firms that benefit from this tool. The public usually can earn money from compound interest when they invest in mutual funds or stocks. Therefore, in order to benefit from this type of interest, you should make the right investment in those instruments that are offering compound interest. Your personal finance will greatly improve.

If you are considered a creditworthy customer then the bank may lend to you at what is call their Prime rate. This in a way is the banks more favorable lending rate. The figure varies from one bank to another; and oftentimes, banks would revise the rate every so often. This rate, however, is regarded as a benchmark for other interest rates for other loans like mortgages, variable rate loans, student loans, and home equity loans. Today, the Wall Street Journal Prime Rate controls the market. Understanding how this rate works and how it controls the system might help you understand consumer’s interest rates as well. If you are applying for a new credit card or a car loan, this rate would have effect in the interest rate that your loan would be charged with.

It might be interesting to know that the reference for consumer’s interest rates is the prime rate. You could say that it functions as a base rate. Oftentimes, it moves along with the current market interest rates and trends. So, the next time you are thinking of applying for a car loan and you are wondering what your interest rate would be, you should check out the prime rate. This would help you decide in whether your personal finance can take in the loan.

There are various rates that are imposed on mortgage loans. You can choose the kind of rate that you prefer or that you can live with. One of the rates that people usually consider getting is the Adjustable Rate Mortgage or the ARM.

Defining the ARM

Adjustable Rate Mortgage is a mortgage that has an interest rate that closely relates to the economic index. Being adjustable, ARM changes along with the index. It can go up or down depending on how the economic index is behaving. Initially, ARM loans have fixed rate that runs within a short period of time. After the lapse of that period, the ARM will change according to the economic index.

There are various types of ARM rates. There is the 3/1, 5/1, 7/1 rates. When you say 3/1 ARM, this generally means that the rate is fixed for three years and in the 4th year, the rate becomes adjustable. The same goes with both 5/1 and 7/1 ARM. The rate is fixed for 5 and 7 years respectively; and on the 6th or 8th year, the interest rate turns variable.

When you are making your decision as to the kind of interest rate that you would prefer for your loan, you should take into consideration your personal finance plans. If you are not expecting that your payments can go up, do not consider ARM. You may opt for the fixed interest rate instead.

Be aware that with an ARM you will need to have some kind of financial buffer to cushion the effects of a increased rate change when the fixed period is up. If interest rates are high you will be paying substantially more for the mortgage so you should save some money for this eventuality.

In cases like this, people would usually resort to a subprime loan since they cannot get loans with prime rates.

What are Subprime Loans?

Subprime loans are offered to individuals who have less than attractive credit history or scores. When you cannot qualify for the prime rate financing, it is highly unlikely that you will get the kind of loan that you want. Mortgage companies have exact requirements for prime mortgage loans. Basically, approval for loan despite bad credit score is the classic feature of a sub prime.

What is the drawback to these kinds of loans? Since financing companies know that loan default rate is very high when you have bad credit score, they usually charge high interest rates for subprime loans. This often translates into a bad personal finance setup for many people. Usually, however, the interest rate varies depending on how bad your credit score is.

Selecting a Lender

You might not be able to do anything about your credit score at the moment, but you have a choice as to your lender. There are companies that primarily specialize in these types of loans. There are traditional mortgage companies that are venturing into subprime loans. Make sure that you place a quote request with various lending companies before settling with one. By doing this, you may still get a great deal despite your credit score. You may still minimize the effects to your personal finance.

One key point however is that you must pay up your monthly installments on time or risk losing your property.

So with low rates, what does that mean for you. It means finding the right lender who won’t put you in the poor house as some mortgage lenders have done over the past few years. You need to weed through the good and the bad to find the right loans and site like Thrifty Scot can help you out.

They can help you find a cheap loan with their loans finder. You input the amount of money you’d like borrow, the purpose, the repayment period and the all important “are you a homeowner” question and out pops several places where you can get the cheapest loan for your situation. They also list all lenders in their database on one page so you can go through and read all of the information on the different loans and find the cheapest for yourself.

Speaking of being a homeowner. Whether you’re in the UK or in the US you’re probably feeling a little bit of the mortgage crisis reaching your neighborhood. If you bought in the last 3 years, chances are you might even be feeling it yourself with a ARM loan that is set to reset in the next year or two. Thrifty Scot has over 500 homeowner loans that you can search through from tons of lenders to help you make the switch from that horrible adjustable rate mortgage loan to one that can actually keep you out of the poor house. They also have a few tips and suggestions that I think everyone should read to avoid becoming part of the next mortgage crisis.

Lastly, if you’re looking to buy something nice for yourself that isn’t a home or a car, you may need to get a personal loan (better than most credit cards and usually through your bank.) This site has a section to allow you to compare personal loans to see which one will give you the best rate. These purchases could be a diamond ring, a new TV, that pool to keep you cool in the summer, or maybe even a vacation that you can go on now and pay off later by taking out a personal loan.

No matter where you borrow money just make sure that you’ve done your research at a site such as Thrifty Scot. Use the search features and find a loan that fits your needs.

That’s why when I’m told about new sites that help consumers find places to put their money I try and share them with our readers. Sites like this one offering bank reviews can be truly helpful when looking for the right bank to put your money. Obviously you want a bank that can give you the greatest return but sometimes those banks are hard to find or come with stipulations. That’s why finding a site that offers reviews on many different banks, all in one place can be very very valuable.

You can find a good savings account, that you can access easily, gives you a good return and keeps your money safe.

Also a good idea for your money is not just a regular old savings account, but instead a money market account. Although these accounts aren’t as safe as a regular account, they have shown to be nearly as safe over the entire history of their existence. (But that does come with a warning) Companies like paypal are offering to keep your money in a money market account to earn you money while it sits their waiting for the next ebay gem. This may be a good option to get a higher rate than a savings with a little more risk (but still quite low). You can check money market rates on the site as well.

Overall, you need to diversify your money and savings and money market accounts are just one way to do that. Look around and visit sites like this one to help you decide which account is the right one for you.

But today, when the Feds announced a quarter point cut stocks plummeted. I mean dropped like a rock, loosing almost 300 point overall. This after a morning of strong movement upwards.

Stocks like Google, GOOG, went from being up $5 to dropping nearly $20. Almost everything else followed suit, on the NASDAQ and the NYSE stocks just dropped.

The reason being, is because there was a general though that Feds would drop rates a half point and they didn’t. We’ll see how things rebound tomorrow.