Interest rate changes have been a big concern for many South Africans dealing with things like car loans, home mortgages, and general credit. Since 2021, rates have gone up by 4.75%, causing financial stress for many consumers. But in a recent discussion, the South African Reserve Bank decided to keep the current repo rate at 8.25%

But let’s consider a few scenarios and what you could do:

Here’s What You Can Do If Interest Rates Remain The Same

Sticking it out with the unchanged interest rates might feel tough and stressful, but if you’ve managed to weather the financial storm, you’re doing great! There are ways to ease the pressure by cutting expenses and finding some financial relief for yourself. Here’s how:

• Budgeting Matters: Don’t overlook budgeting—it’s a powerful tool. Using the 50/30/20 split can help plan expenses, extra spending, and savings. It’s a smart way to find extra cash to make it through the month.
• Tackle Costly Debt: Settling any debt requires commitment and a positive mindset. High-interest debt, like payday loans, credit cards, or personal loans, can drain your income. Focusing on settling these quickly can free up more of your salary.
• Create an Emergency Fund: Having an emergency fund separate from your savings is crucial. It acts as a safety net for unexpected expenses without dipping into your savings or investments. This buffer can be a game-changer when you need extra funds.

Managing your finances during these times can be tough, but small steps like these can make a significant difference.

Here’s What You Can Do If Interest Rates Decrease

Ideally, we’d all love to see interest rates drop for some much-needed financial relief. Yet, it might take time before we witness a sudden decrease. Presently, due to high inflation, the government must maintain current interest rates to curb further inflation.

Nevertheless, preparing for potential rate drops is wise. Here’s what you can do:

• Tackle Your Debts: If rates decrease, it’s prime time to settle payday loans, credit card debts, overdrafts, or personal loans. You can even try to put more money into your vehicle or bond debt.
• Save Smartly: Lower rates create a favourable environment for savings. Settling debts and catching up on missed payments can pave the way for significant savings.
• Improve Your Credit Score: Lower rates provide a chance to repay debts and boost your credit score simultaneously. With better payment habits, you can elevate your credit score, potentially gaining better access to credit markets.

Here’s What You Can Do If Interest Rates Increase

Saving the toughest scenario for the end: What if interest rates go up? How do you navigate that? Well, in the event of a sudden increase in interest rates, you’ll need to brace yourself for a more challenging financial battle. However, there are steps you can take to weather the storm:

• Enforce a Tighter All-Round Budget: A stricter budget can help you and your family navigate the impact of higher interest rates. This might involve making compromises on things like vacations, utilities, phone expenses, and even reducing driving.
• Trim Unnecessary Expenses: Cutting out unnecessary expenses might seem extreme, but it can make a significant difference. Consider unused subscriptions, online purchases, or delivery memberships. Redirecting these funds can help cover necessary expenses or bolster your savings.
• Minimise Credit Use: If interest rates rise, avoiding all forms credit is advisable. Monthly credit obligations come with added interest. Missing payments leads to more interest accumulation, making it harder to catch up.
• Start a Side Hustle: A side hustle utilising your skills or expertise outside regular work hours can bridge financial gaps. It can contribute substantially to savings or help repay debts during challenging times.

When Should You Evaluate Interest Rates?

Before diving into buying your dream car or home, take a moment to check out the current interest rates and your quoted rate. Keeping an eye on these rates and staying updated about any changes helps you prepare financially. This way, you’re ready to adjust your plans based on rate fluctuations.

Plus, it’s smart to understand what influences interest rates. Things like economic indicators, government policies, and global market trends can impact rates. Knowing these factors helps you predict changes and take steps to protect your finances in advance.