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Debt to increase after Federal Reserve raises interest rate

Ohio residents who have credit card debt or mortgages with variable interest rates might want to consider the quarter-point interest rate increase made by the Federal Reserve on June 14. This increase affects loans with variable interest rates since they are based on the short-term rates set by the Federal Reserve. Because the Fed increased the interest rate, monthly payments on mortgages with adjustable interest or credit cards with variable rates may rise.

A certified financial planner noted that an increase in interest could reasonably cause debtors to decide to work toward paying off their credit card debt in a shorter period or to refinance their debt so that it has a fixed rate. Nonetheless, credit card debt will likely be affected sooner by the increase than a long-term mortgage.

The Federal Reserve increased the short-term interest rate benchmark to lower the national debt of $4.5 trillion. Another increase of a quarter of a percentage point is expected later in 2017. The rate increase will not affect only monthly credit card payments and mortgage payments, but it could affect car buyers. A buyer of a new $25,000 car can expect to pay $9 more per month due to this increase.

Credit card debt and other types of loans can be overwhelming to a consumer. If debt becomes a major issue in the life of an individual, it might make sense to file for Chapter 13 bankruptcy. This is designed for people who have a regular source of income, and it allows them to pay a portion of them off pursuant to a court-approved plan that lasts for either three or five years. An attorney can describe the other requirements that must be met in order to file under this chapter.

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