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Major bank is marketing loans to pay off credit card debt

Recently a major U.S. bank began promoting a new line of personal loan products to consumers who want to pay off their credit cards. For Massachusetts residents struggling with credit card debt, anything that looks like a way out can be a temptation. For many individuals, however, taking on new debt to pay off old debt will only make the problem worse.

The bank has mailed advertising materials with the slogan "debt happens" to customers who have credit scores over 660. The loans are unsecured and range from $3,500 to $30,000. The repayment schedules range from two to six years, with average interest rates between 12 and 13 percent. The bank suggests the loans can be used to pay off credit cards or finance home repairs.

Sometimes refinancing credit cards is a good idea. These loan products may be a solution for those who have sufficient income to pay them back. But, consumers who are already having trouble making the minimum payments on their credit cards may not find it any easier to pay off the new loans.

For people who are already struggling, the new loans may just be a way to get deeper into debt. Many people may fall into the trap of taking out the new loan, paying off their existing credit card debt, and then charging new expenses on the credit cards. The net result, of course, is more debt, not less.

People burdened with overwhelming credit card debt would be wise to look at other options, including personal bankruptcy. A Chapter 7 bankruptcy can eliminate all credit card debt and give the debtor a fresh financial start. Those who do not qualify for Chapter 7 may still be able to get out of debt with a Chapter 13 bankruptcy repayment plan.

Source: Money, "Goldman Sachs Targets a New Kind of Customer: People in Credit Card Debt," Kerry Close, Nov. 17, 2016

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