The impact of interest rate hikes
Florida residents who are able to absorb higher interest rates from the Federal Reserve will still benefit from creating a debt repayment plan. Someone who is currently paying off a $5,000 credit card balance at a 15.5 percent interest rate will take 10 years and four months to do so in full. That person will pay $2,286 in interest, but that person would pay an extra $100 in interest if the rate were to increase to 16 percent.
Individuals who have mortgages, auto loans or other forms of debt should take into consideration how an interest rate increase could impact their finances. In fact, those who don’t have any debt at the moment should be aware of how it may impact them as well. Individuals who are using their savings accounts to pay down credit debt may need to take a closer look at their budget.
One way to reduce credit card debt may be to transfer credit card balances to a new card at a lower interest rate. Lowering the interest rate allows for more of each payment to go toward the principal balance, which means that it may be paid off quicker. Ideally, anyone who uses a credit card will be able to pay the balance off in full at the end of the month.
Filing for Chapter 13 bankruptcy may make it possible to get put on a manageable payment plan. This may allow a debtor to pay off some or all credit card and other debts in either three or five years. If there is a remaining balance after the repayment period ends, those debts may be discharged. In the meantime, a debtor may be allowed to renegotiate the terms of existing debts to avoid a foreclosure or repossession.