It’s no secret that the cost of living is rising, but how will it affect your loan? Consumer prices have been rising for years, and wages have not kept up. A lot has been said about the “cost of living crisis” in recent years. But what does that term actually mean? Is this an unspoken reality that is slowly approaching in many developed countries?
Cost of Living Vs Standard of Living
To understand the cost-of-living crisis, we must first understand the difference between cost and standard of living. Simply put, the cost of living is how much money you need to live, while the standard of living is how well you live.
Living costs have been rising steadily for years while wages have remained relatively stagnant. This means that it takes more and more money to keep up with everyday expenses, leaving less and less room for savings or discretionary spending, which consequently impacts the standard of living.
What is the Consumer Price Index? How does it tie into the Cost of Living?
The Consumer Price Index (CPI) measures the average price change over time. The CPI measures how much a typical consumer spends on a basket of goods and services. The CPI is used to measure inflation as well. However, for its benefits, it also has its shortcomings. The CPI doesn’t accurately picture the true cost of living crisis. The CPI only measures a basket of goods that an average family might purchase. But what about all the other expenses families must pay for, such as childcare, healthcare, and housing? When you factor in all these additional costs, it’s clear that the real cost of living is higher than what it suggested.
How Do the Price Changes Affect Your Loans?
Inflation has begun to grow at a pace that exceeds the projected forecast as the prices of goods and services increase. This year’s cash rate hikes have been introduced to combat inflation and have, in turn, raised interest rates and increased borrowing costs. Consolidating your loan can help save you money by locking in a fixed interest rate for the life of the loan. This will protect you from any further interest rate rises and ensure your repayments remain consistent. If you want to consolidate your debt, talk to your bank or financial advisor about making the most of current market conditions.
So how will it end?
It’s hard to say for sure, but there are a few possible scenarios. First, the government could step in and start regulating prices. This would make life more affordable for everyone but could increase inflation. Another possibility is that wages will begin to catch up with the cost of living. This would take time, but it would eventually help to bring things back into balance. The cost of living is a complex issue, but ultimately, it will end.
What you can still do?
If you’re considering taking out a Personal loan, feel reassured that great rates are still to be had – in fact, we’ll find and secure them for you. Whether you want to finally take out your ideal loan or consolidate them, getting in contact with us today can help ensure you get the best deal possible.
