(MONEY Magazine) – What to expect: Most loan rates will rise slightly in '95, with 30-year fixed mortgages climbing to 10% or more.

What to do: Take advantage of stiff competition to bargain hard for the best rates and terms. And attention, mortgage shoppers! Don't overlook 10/1 ARMs.

Looking for relief from rising loan rates? Sorry, but 1995 won't offer much. True, this business cycle's steepest interest-rate jumps-the ones that sent rates on 30-year fixed mortgages up more than two percentage points over the past 14 months to 9.3% on average lately-are probably past. But most forecasters, including Money's Michael Sivy, expect interest rates to continue levitating another half point or so at least through the first half of 1995. So don't be surprised if rates on 30-year fixed-rate home loans next year pierce the double-digit barrier, a level not seen since 1990. Says David Lereah, chief economist for the Mortgage Bankers Association in Washington, D.C.: "I think 10% mortgages are the most likely scenario."

Figure on home-equity lines, now carrying a 9.8% average rate nationally, to top out next year at about 10.5%, and average credit-card and auto-loan rates-currently 17.9% and 9%, respectively-to rise nearly half a point.

Still, borrowers who skillfully play whatever hand 1995 deals them can actually lower their credit costs. How? By taking advantage of today's tough competition among lenders, who, with few customers walking through the door, are suddenly willing to negotiate rates and fees. Here are some savvy borrowing plays for '95:

Bear ARMs. Don't automatically walk away from fixed-rate mortgages. Even if rates do top 10% next year, they'll still be lower than the 11.5% average for such loans from 1980 to 1994. That said, '95 is stacking up as a comeback year for adjustable-rate loans.

Adjustables? Have we totally lost it? A year ago, when fixed-rate mortgages were 7% or so, no self-respecting borrower would be caught dead with one. But now, with initial rates on one-year ARMs averaging around 6.5%, adjustables constitute fully 46% of mortgage originations, up from 20% just two years ago. One steal: Beneficial Savings Bank in Philadelphia (215-864-6733) recently offered a one-year ARM with a first-year rate of 4.3%.

Of course, before you commit to an adjustable, be sure to figure whether you can live with it under the worst-case scenario. Conventional one-year ARMs generally come with caps that limit rate increases to two percentage points a year, six points over the life of the loan. And with rates on the rise, you've got to figure, as we do, that this year's 6% ARM will become next year's 8% loan-and maybe even higher down the road. Still, give 'em a look. With a 6% ARM that maxes out each year-jumping to 8% in Year Two, 10% in Year Three and 12% in Year Four-you still end up with a four-year average rate of 9%, which beats today's 30-year fixed-rate average of 9.2%. Our advice: If you're planning to stay in your house for less than five years, opt for a one-year ARM. Even interest-rate meltdowns are palatable for short-timers. If you figure to be in your house for five to 10 years, a so-called two-step or balloon-reset mortgage (current rate: about 8.5%) might be the call. The monthly payments stay at the same level for the first five or seven years then are reset for the duration of the loan, typically at the yield of the 10-year U.S. Treasury constant maturity plus 2.5 percentage points (now 10.5%). Finally, if you would rather lock in a discounted rate for a longer period than two-step loans offer, check out a comparatively new product called a 10/1 adjustable-rate mortgage (see the Best Idea box below).

Go to HELs. Forgive us our wordplay sins, but home-equity lines of credit will remain hot in 1995-with rates (today's average is 9.8%) that will easily consign such rival sources of cash as credit cards to their rightful place in credit inferno. Factor in the deductibility of HEL interest payments on loans up to $100,000, and the deal gets even better.

Smart borrowers think ahead. So even if you have no use for the cash now, you might secure a credit line anyway. "You never know when money will get tight," says investment adviser Jack Bonne of New Canaan, Conn. "And if you can open a line of credit for no charge," he says, "it makes sense." Are there really such deals? You bet. Union Planters Bank in Knoxville (615-549-2209), for example, offers a revolving, 10-year line of credit on as much as 100% of your equity at prime-lately 8.5%-with no closing fees for loans of $50,000 or less.

A warning: Planners recommend that you avoid borrowing more money than you can pay back in three to four years-a hedge against an unexpected zoom in interest rates.

Call your credit-card issuer's bluff. Ruth Susswein of Bankcard Holders of America (703-389-5445) in Salem, Va. reports about 50 credit-card issuers are currently tempting potential applicants with low rates, deals on annual fees or both. Example: Signet Bank ($29 annual fee for its Visa or MasterCard; 6.4% variable rate through January 1996, 11.9% thereafter; 800-952-3388). Your move: If you are satisfied with your issuer's service but not with its rate or fees, call and threaten to switch. If your issuer doesn't meet the sleekest deal you can find, go ahead and switch (BHA will send you its list of no-fee/low-rate credit cards for $4).

Drive a hard bargain on auto loans. Brisk car sales and the growing popularity of leasing have given automakers and dealers ample reason to curtail the rock-bottom loan deals they plied customers with in the 1980s and early '90s. Where to turn? Try a local bank or, better yet, your credit union, where car loans are in the 9% neighborhood these days. More important, according to Fritz Elmendorf of the Consumer Bankers Association, banks are hungry to reverse their declining share of the auto-loan market. Says he: "Banks have become very aggressive."

So should you, for that matter, when playing your hand for the best borrowing deals in 1995.