Debt is THE trending topic. And for good reason. A new survey conducted by CreditCards.com found that 25% of respondents believe they will never pay off their debt. Almost two-thirds of respondents said they don’t know how they will get out of debt. A lot of people are talking about whether they should get a debt consolidation loan.
The Debt Crisis
The Federal Reserve Bank of New York recently reported that seven million Americans are 90 days or more behind with their auto loan payments. Economists are sounding the alarm, predicting that auto loan defaults could crash the auto lending industry similar to the way the subprime mortgage crisis devastated the real estate market ten years ago.
Financial experts and politicians warn that student loan debt is threatening to bring down the economy. Even the Department of Education called student loan debt a crisis. The same Federal Reserve report cited above states that more than 44 million borrowers are holding roughly $1.5 trillion in student loan debt. Further, it was found that 11.4 percent of outstanding student loans are delinquent or in default.
Credit Card Debt
The sad truth is that the majority of credit card debt is not due to frivolous spending. Surveys, such as CreditCards.com, find that consumers are using credit cards to pay their monthly bills, medical expenses, groceries, or to repair the car. That’s not to say that undisciplined credit card use does not exist. But it is not the primary cause of credit card debt among American consumers. Credit card debt has simply become a way of life.
The question of how to get a debt consolidation loan is definitely on the front burner.
As we discussed in previous blog posts when you find yourself overwhelmed by debt, particularly credit card debt, a debt consolidation loan can be your pathway to serenity. The longer you struggle to pay your bills, missing or skipping payments, the more damage you do, not only to your credit score but to your ability to meet your monthly expenses. All of your money will be going to mounting loan and credit card payments, forcing you into an endless cycle of charging to cover expenses. Your interest rates will rise and you will face extra fees and penalties imposed by your creditors.
This is one reason so many consumers say they have no idea when they will ever get out of debt. Because when you can’t pay the bills, the balances grow. Ultimately, the mountain becomes too high to climb. Your credit score plummets, limiting you to the worse financing deals. A poor credit score could even prevent you from getting a job or renting a home.
If this is your story, it is time to think about how your life can improve when you get a debt consolidation loan.
What Happens When You Get A Debt Consolidation Loan?
You can consolidate your credit card debt on a new credit card. You will find many balance transfer offers. This is only a good option if you will be able to pay the transferred balance IN FULL before the special transfer period ends. Otherwise, you will find yourself facing high-interest rates on the balance you are still carrying.
If you are one of the millions of Americans using your credit cards just to stay afloat every month, a balance transfer card is not your best option.
When you get a debt consolidation loan, all the balances from your credit cards and other accounts become one single balance. You will be free of the creeping interest rates and late payment fees. Your loan payments will be automatically deducted each month from your checking account. This means you will rebuild your credit score by demonstrating on-time payments. You won’t be in default, and you will demonstrate fiscal responsibility.
You are now in control of your debt. And you are on your way to financial freedom.