Lefkovitz & Lefkovitz
Nashville Office 615-686-2279 Cookeville Office 931-400-2218
Serving all of Middle Tennessee's Bankruptcy Needs

How interest rate hikes impact credit card debt

Tennessee residents may have heard about the Federal Reserve's decision to raise the federal funds rate to between 1 and 1.25 percent. This is the second time that rates have been raised this year, and a third hike could come later in 2017. For those with mortgages or home equity loans with variable rates, it may be a good idea to pay them off faster or refinance to a fixed-rate loan.

Interest rates on auto loans may also go up over time, but a competitive market may keep rates steady for the time being. The average credit card interest rate is 15.07 percent. A person with a $5,000 credit card balance will pay an extra $175 in interest every time the prime rate is raised a quarter point. If the Fed raises rates three times a year, that could equal $525 in additional interest per year.

As the interest rate on a home equity loan is roughly 5 percent, three rate hikes in a year may increase a borrower's monthly payment by about $18. Those who have fixed-rate mortgages may have little to worry about as a multitude of factors go into determining the interest rate a lender charges. As a general rule, current rates already reflect the latest decision to increase rates.

Filing for Chapter 13 bankruptcy may help a debtor overcome his or her credit card debt problem. A reorganization bankruptcy allows an individual to repay balances over the course of three or five years according to a plan approved by a bankruptcy court. Filing for bankruptcy may also put an end to creditor collection calls or put a stop to other actions such as foreclosure or repossession. An attorney can further explain the benefits and process of seeking bankruptcy protection.

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Nashville Office
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Phone: 615-686-2279
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