While a strong economy offers many benefits to Tennessee residents, it can also lead to higher interest rates and more debt. As the economy strengthens, individuals may first accrue more debt than they can actually afford to pay off in a timely manner. After they acquire the debt, rising interest rates push monthly payments higher, which can make them harder to keep up with.
On March 21, the Federal Reserve raised the benchmark interest rate to between 1.5 and 1.75 percent. The three-month Libor rate rose to 2.3 percent, which is the highest since November 2008. The Libor rate is a measure of what large global banks charge each other. As that rate increases, it could pose problems for businesses that are looking to refinance their debt. What lenders charge for adjustable rate mortgages can also be based on the Libor rate.
Overall, credit card spending reached $3.5 trillion in 2017, according to the Nilson Report. That was a 9.4 percent increase from 2016. Furthermore, household debt increased during the fourth quarter of 2017 at the fastest pace since 2007. Those who monitor economic conditions are also concerned about increases in student loan and auto loan debt over the past 10 years. However, recent changes to the tax code and increased savings rates may keep consumers in good financial standing in the short-term.
Those who are struggling to pay off their debts could obtain a fresh financial start by filing for Chapter 13 bankruptcy. Doing so may allow an individual to reorganize secured debt such as a home or auto loan. Unsecured debts such as credit card balances or unpaid medical bills can also be reorganized and repaid over a three- or five-year period. Balances remaining after the repayment period ends may be discharged.