Interest Rates are Low— It’s Time to Reduce Your Debt.
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The cuts in the federal funds rate made headlines in every news outlet. While the denizens of Wall Street are taking advantage of it, the folks on Main Street largely don’t realize how lower interest rates can change the trajectory of their future.
“Cash-strapped consumers and those bogged down with debts are missing out on this possibly short-lived opportunity,” says Webster Wealth Advisors co-founder Joe M. Cox, CFP®. “This welcomed move by the Federal Reserve is making refinancing home mortgages, paying off student loans, reducing credit card debt, and making major purchases more affordable.”
“This cut gives consumers some real breathing room,” adds Webster Wealth Advisors CCO Christopher N. Perry, CFP®. “For the first time in a long time, consumers are again seeing ads for zero-down home loans, zero percent financing on new car purchases and lower automobile lease rates. Credit card interest charges are also dramatically lower, and many of the lower rate cards are offering zero percent transfer charges. The days of holding credit cards with more than 19% interest rates should, thankfully, be a thing of the past.
For those with significant assets, for example, a low interest climate allows investors to borrow against their portfolios at a low rate and even deduct interest from debt from their tax.
A practice known as intra-family borrowing can provide a win-win opportunity for families. Children and other family members who are saddled by very high debts, such as student loans and high mortgage payments, can borrow money from a relative, typically a parent. The lenders and borrowers contract the lending rate and term of the loan. The loan repayment is usually much lower than the borrowers could have gotten for themselves. The lenders, in turn, receive payment on their debt that can be higher than what they are currently earning from their savings accounts, CD’s and others. They also get the rewards of knowing they are helping future generations. Working with your attorney will help you understand applicable IRS guidelines and the gift and income tax consequences of any potential loan forgiveness down the road.
“Because we’ve been working with affluent investors for 30 to 40 years, we have experience in working with their attorneys to initiate intra-family loans and Grantor-Retained Annuity Trusts*, can be another effective form of wealth transfer for the affluent,” says Perry. “We are also advising the second generation of children, hoping to assure that our clients’ hard-won assets and their family values are lasting legacies.”
At WWA, our goal is to fill a need in the marketplace for truly client-focused financial services. “Our clients are, by and large, very successful and intelligent people,” says Perry. “But they might not have the time or inclination to stay abreast of tax issues and regulatory changes that can undermine their financial success. We’re here to handle these details, freeing clients to focus on what in life is most important to them.”
* This material has been provided for general informational purposes and is not intended to be tax, legal, or financial advice. Please consult a qualified professional regarding your specific circumstances. Commonwealth Financial Network and Webster Wealth Advisors do not provide tax or legal advice.
This communication is strictly intended for individuals residing in the states of AZ, CA, CO, CT, FL, GA, IA, IL, IN, LA, MA, MD, MO, NH, NJ, NV, NY, OH, PA, RI, SC, TN, VA, and VT. No offers may be made or accepted from any resident outside these states due to various state requirements and registration requirements regarding investment products and services. The financial advisors of Webster Wealth Advisors offer securities and advisory services through Commonwealth Financial Network®, member https://www.finra.org/www.SIPC.org, a Registered Investment Adviser. Financial planning and consulting services offered through Webster Wealth Advisors are separate and unrelated to Commonwealth. Investments are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any bank or depository institution. Funds are subject to investment risks, including possible loss of principal investment. Webster Bank is not a registered broker-dealer or Registered Investment Adviser. Webster Bank and Commonwealth are separate and unaffiliated entities. Fixed insurance products and services offered through Webster Wealth Advisors or CES Insurance Agency.
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