federal reserve

8 ways the Federal Reserve's interest rate decisions affect your life

Touching home equity lines
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Touching home equity lines © iStock

Touching home equity lines

Also directly tied to the federal funds rate: your home equity line of credit, or HELOC. That's because HELOC rates are typically linked to the prime rate. When the Fed raises or lowers its target rate, HELOC rates follow suit.

A HELOC is a great way to refinance or restructure your debt, Mervine says, "if you've got home equity that you can use to consolidate high-interest credit card debt or other less accommodative types of debts."

The Fed has tried to stimulate the economy by encouraging the use of HELOCs through low interest rates. If you take out a HELOC to make home renovations, the money you pay the contractor is then used for his or her purchases and helps fuel the economy.

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