Issue #2: Interest Rates Are Not Coming Down Fast Enough to Wait
The Lionhood Financial Briefing, Issue #2: Interest Rates Are Not Coming Down Fast Enough to Wait
Series: The Lionhood Financial Briefing | Issue: 02 | Read Time: 4 min | By: Raymond Ihim | Updated: March 2025
Key Takeaways
- The Federal Reserve has signaled a slower path to rate cuts than markets expected heading into 2025
- Every month you carry high-interest debt in this environment costs you more than the same debt cost two years ago
- Waiting for rates to drop before taking action is a strategy that has already cost many households thousands of dollars
- There is a specific debt sequencing method that outperforms waiting under current conditions
Here is what most people are doing right now with their debt: waiting.
Waiting for rates to fall. Waiting for refinancing to make sense. Waiting for a better moment to attack the balance. And while they wait, the interest compounds.
This issue of the Lionhood Financial Briefing explains why the waiting strategy is failing, what the data says about the rate environment ahead, and what you should be doing instead.
Trend Watch: The Fed Is Moving Slowly and That Is Your Problem
The Federal Reserve raised the federal funds rate aggressively between 2022 and 2023, bringing it to a range not seen in over two decades. Since then, cuts have been modest and slower than initial market projections suggested.
According to Federal Reserve commentary and updated dot-plot projections, policymakers remain cautious about cutting rates too quickly given persistent services inflation and a still-resilient labor market. The result: borrowing costs remain elevated, and the timeline for meaningful relief keeps extending.
What does this mean practically? Credit card APRs, which are directly tied to the prime rate, are averaging above 21 percent nationally according to the Consumer Financial Protection Bureau. Home equity lines of credit, adjustable-rate mortgages, and many small business credit lines are carrying rates that would have seemed extreme just three years ago.
If you are holding variable-rate debt and expecting rates to bail you out before your balance grows, the data does not support that expectation right now.
The Coaching Edge: Waiting Is a Decision Too
One of the most common things Raymond hears from new coaching clients is some version of this: "I was going to start paying down debt when things settled down."
The problem is that financial inaction has a cost that is just as real as financial action. It is just less visible.
Here is what inaction looks like in numbers. A $10,000 credit card balance at 21 percent APR accrues approximately $2,100 in interest in one year. If you wait 18 months before addressing it, you have paid over $3,000 in interest before touching the principal. That $3,000 did not disappear. It transferred from your net worth to a lender's revenue line.
The decision to wait is a financial decision. It just rarely gets treated like one.
"Inaction is not neutral. In a high-rate environment, doing nothing with debt is the most expensive choice on the table." — Raymond Ihim, Lionhood Financial Coaching
The shift that changes behavior is recognizing that every month you delay a decision, you are making a decision. Once clients see it that way, urgency stops feeling manufactured and starts feeling rational.
This Week's Move: Run the Interest Cost Calculation
Most people know they have debt. Very few know what that debt is costing them monthly in interest. This calculation takes five minutes and tends to produce clarity that no amount of general advice can match.
Step 1: List every debt balance with its current interest rate. Credit cards, personal loans, auto loans, home equity lines, business lines of credit. Everything. If you manage business finances through QuickBooks Online, pull your liability summary from the balance sheet report. It will show you every outstanding obligation in one place.
Step 2: Multiply each balance by its annual rate, then divide by 12. That is your monthly interest cost per debt. Add them together. That total is what your debt costs you every single month before you reduce a single dollar of principal.
Step 3: Compare that number to what you are actively paying toward principal each month. If the two numbers are close, you are essentially running in place. If the interest cost exceeds your principal payments, your debt is growing despite your payments.
Step 4: Identify the one debt with the highest interest rate and redirect an additional $100 to $200 toward it this month. This is the avalanche method baseline. It is not glamorous. It is mathematically superior to every other approach when rates are high.
💡 Pro Tip: If your highest-rate debt is a credit card, call the issuer and request a rate reduction before you do anything else. Issuers grant this request more often than most people expect, especially for accounts with consistent payment history. A 2 to 3 point reduction on a large balance is worth the 10-minute call.
Money Metric: The True Cost of Minimum Payments
On a $5,000 credit card balance at 21 percent APR, paying only the minimum payment results in over 17 years to pay off the balance and more than $6,000 paid in interest alone.
That means the original $5,000 purchase effectively costs more than $11,000 when carried on minimums. This is not a scare tactic. This is standard amortization math, and most cardholders have never run it on their own balance.
The minimum payment is designed to keep you in the relationship with the lender as long as possible. It is not designed to serve your financial goals.
⚠️ Watch Out: The debt avalanche method (highest rate first) and the debt snowball method (smallest balance first) both work. The avalanche method saves more money mathematically. The snowball method produces faster psychological wins. The method you actually stick with is the right one. Do not spend three weeks choosing between them. Pick one and start this week.
Frequently Asked Questions
Should I wait to pay down debt until rates drop? No. Waiting for rate relief that has not materialized costs you compounding interest on balances that are already expensive. The mathematically correct move is to accelerate payoff now at the current rate, regardless of what the Fed does next quarter.
Is it better to save or pay off high-interest debt? In most cases, high-interest debt should be addressed before aggressive saving. A savings account earning 4 to 5 percent while you carry debt at 21 percent is a net loss of 16 to 17 percent annually. The exception is maintaining a small emergency buffer, typically one to two months of expenses, to avoid adding new debt when unexpected costs arise.
Does this apply to small business debt as well? Yes, and often with more urgency. Business lines of credit and short-term loans frequently carry variable rates that have risen in parallel with the federal funds rate. If your business is carrying revolving debt, the same interest cost calculation applies and the same sequencing logic holds. QuickBooks Online can help you track business debt service costs alongside cash flow so the numbers stay visible rather than abstract.
What if I cannot afford to pay more than the minimum right now? That is a cash flow problem before it is a debt problem. The first move is a spending audit, not a debt strategy. If every dollar coming in is already committed to outflows, the solution is identifying which outflows can be reduced or eliminated. A coaching conversation can help clarify that sequence faster than working through it alone. Connect with Lionhood Financial here.
The Bottom Line
The rate environment is not going to rescue you from high-interest debt on a timeline that serves your financial goals. The window for rate-cut relief has moved repeatedly, and carrying expensive debt while waiting is a cost that compounds daily.
The interest cost calculation is your starting point. Run it today. Know the exact number. Then make the decision with full information instead of assumption.
Waiting is a choice. Make sure it is an intentional one.
If your debt feels like it is outpacing your progress, that is exactly what coaching addresses. Start the conversation here.
Forward this to someone carrying debt who is waiting for a better moment to deal with it. That better moment is now.
Raymond Ihim is a banking and risk management leader and the founder of Lionhood Financial Coaching. Through his "Make More of Your Money" podcast and one-on-one coaching programs, he has helped individuals and small business owners nationwide build real wealth by closing the gap between what they earn and what they keep.