World Population Day: How Population Growth Impacts Your Loan Rates

World Population Day, celebrated on July 11th, is a day focused on the importance of population issues. Population growth is slowing world-wide. But what does this mean for your loan rates?  
With a greater percentage of older people saving their money for retirement and a smaller percentage of young people borrowing for big-ticket items like cars and homes, interest rates are decreasing. This isn’t restricted to just savings and bonds. Real estate and equities are also noticing this shift, which isn’t showing any signs of slowing down.  
In this article, we’ll break down the relationship between population growth and interest rates, what happens to interest rates when there’s a population decline, and if you’ve been wondering how to pay off debt, why now is a good time to get started. 
What’s the relationship between population growth and interest rates?
Population growth determines the proportion of a country’s savers vs. its borrowers. Young people are typically borrowers while older people are often savers. When populations are consistently growing, there are a greater number of borrowers. This results in interest rates increasing to slow down the amount that people can take out loans. If population growth slows, the delicate balance of borrowers and savers is disrupted and interest rates shift.  
What happens to interest rates in countries with declining populations?
In countries with declining populations, such as Japan and the U.S., we see interest rates falling. This is because there are a greater number of savers than borrowers and as a result, interest rates are lowered to facilitate more borrowing and to discourage individuals from saving. In financial parlance, there is an excess of money looking for yield.  
Which financial products are affected by this imbalance?
These lowered interest rates affect savings assets and accounts, which have a direct connection to interest rates, but also real estate and equities.  
Why you should pay off your debt now
With interest rates at all-time lows, now is an ideal time to pay off that debt. With your debt gone, you’ll be able to put your money toward a financial goal you’ve had for a while, like putting a down payment on a house (that is, if you can find one). 
4 ways to pay off debt
Here are 4 ways you can start paying off your debt and take advantage of the newly decreased interest rates. 
1. Debt avalanche
The debt avalanche method is a debt payoff method that focuses on paying off your balances with the highest interest rates first. You’ll pay minimum balances on all your loans, but you’ll put extra money toward the loan with the highest rate. Once that’s paid off, you’ll put your extra cash toward the loan with the second-highest interest rate. The debt avalanche is ideal for saving money overall.  
2. Debt snowball
With the debt snowball method, you’ll also pay your minimum balances. But instead of putting money toward the balance with the highest interest rate, you’ll put it toward your smallest balance. Once that’s paid down, you’ll focus on paying your second-smallest balance. The debt snowball is great for individuals who need a little extra motivation to pay off debt.  
3. Balance transfer
With a balance transfer, you’ll move your existing credit card balances to a new credit card that ideally has a promotional 0% APR period. This will simplify your bill paying each month and save you money on interest, assuming you can pay off your debt before the promotional period ends (typically 12-18 months). Note that you’ll need to have a good credit score to qualify, and you may have to pay a balance transfer fee.  
4. Debt consolidation loan
A debt consolidation loan is a low-interest loan that you take out to pay high-interest debt. Similar to a balance transfer, it can simplify your bill paying and allow you to save money, assuming you can secure a favorable rate.  
There you have it. By eliminating your debt and taking advantage of today’s low interest rates, you’ll be on your way to achieving your financial goals in no time.  
Source: Credello