Why 2018 could be a hard year for those struggling with debt
The new year could be a hard one for those struggling with debt as interest rates are set to rise.
The beginning of a new year is a time when many people decide to set themselves ambitious resolutions, from quitting smoking to hitting the gym more regularly. However, one resolution could be much harder to attain in 2018: getting free of debt. That’s because as interest rates are set to rise, people with credit card debt, mortgages, and lines of credit will soon see the amount they pay in interest each month start to rise. More distressing still, as consumer debt rises along with interest rates, many people don’t have a plan in place for how they are going to become debt-free.
Interest payments likely to increase
As CNN reports, about half of Americans are currently carrying credit card debt and the average household owes $15,654 in credit card debt. Assuming an average interest rate of 14.87%, the typical American household pays $904 in interest on credit cards per year. As the Federal Reserve has already begun increasing interest rates and has indicated it will continue to do so in 2018, next year the average amount paid in credit card interest will go up to $916.
While that may sound like a small increase, it is important to remember that many people will be paying higher interest rates on their credit cards. Furthermore, many households have variable rate mortgages and lines of credit which typically come with much larger debts than credit cards. Any increase in those interest rates could mean a substantial increase in the amount those people are paying in interest each year.
Many people don’t have a plan
More distressing still is the fact that many people don’t have a plan for how they are going to get out of debt. As CNBC reports, a recent survey found that 26 percent of Americans who are in debt have no plan in place for paying it back. The rate of Americans without a debt repayment plan is particularly high for those with medical debt, which tends to be both sudden and unexpected. The survey found that 36 percent of Americans with medical debt don’t have a debt repayment plan in place.
The lack of debt repayment planning combined with higher interest rates could mean that for those who are already struggling with debt, 2018 could be a particularly difficult year.
Getting out of debt
One way to get out of debt faster and to put an end to pesky creditor phone calls is to consider bankruptcy options. While bankruptcy is not always the right choice, for some people it can mean getting out of an endless process of seeing thousands of dollars go to waste on interest with little dent being made to one’s overall debt burden. A bankruptcy attorney can show clients whether bankruptcy may be the right choice for them and how to go about taking the next steps .