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Interest rate hike to affect loan payments

Massachusetts residents who have certain loans or lines of credit may see an increase in their monthly payments due to the Federal Reserve's recent interest rate hike. According to one certified financial planner, it may wise for individuals with variable-rate debt to increase how often they make payments or try to refinance their debt into loan with fixed rates.

Those with long-term loans will not feel the impact of the Fed's interest rate hike as quickly as others. The central bank intends to eventually reduce its $4.5 trillion balance sheet, so mortgage rates are very likely to increase in the future as assets begin to saturate the market with reduced prices and higher rates. Even though the market for auto loans is presently highly competitive, enabling those who want to buy cars to be able to afford to do so, that may change in the future as well.

The federal fund rate was increased by a quarter of a percentage point from 1 percent to 1.25 percent, which is similar to the March 2017 hike. Another increase of 0.25 percent is expected to occur later in 2017. According to one chief economist, adjustable-rate mortgages, credit cards and HELOCS will become more expensive because their rates are directed connected to the prime rate, which is influenced by the Fed's key rate.

A quarter-point interest increase will add $175 in total interest to a $5,000 credit card balance. The additional interest bumps expected to occur three times every year through 2019 can add $525 annually to the interest.

A bankruptcy attorney may advise individuals with substantial credit card debt or any other money owed to others about their bankruptcy options. A lawyer may suggest Chapter 7 bankruptcy to stop creditor harassment or garnishment.

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