The stale economy has consumers looking for savings -- and
profits -- wherever they can find them. But you should think twice
about some recent come-ons that tempt you to lock up your money
Home Equity Lending on the Rise Again
Take seven-year car loans. They're becoming more prevalent at
dealers, where their share of the loan market is growing and the
share of more-typical five-year loans is shrinking. Consider: A
$26,000 loan at 4.6% (about the average amount and rate for new
loans) would cost $3,154 in interest over five years; extend the
loan to seven years and tack on another percentage point in
interest, which is typical, and you'll pay $2,334 more.
You'll also owe more on the loan than your car is worth for a
longer period of time, making it harder to sell and break even if
your needs change.
Investors desperate for yield might be tempted by ten-year CDs.
The best rate is currently 2.1%, which sounds relatively generous.
But with interest rates at record lows and fears of inflation
lurking, it's risky to tie up your cash for a dec�ade.
You'll lose the chance to earn higher yields when rates rise, and
the buying power of your money will erode. Consider buying I-bonds,
which keep pace with inflation and currently yield 1.8%.
This article first appeared in Kiplinger's Personal Finance
magazine. For more help with your personal finances and
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