The Florida credit card debt problems never really went away. In the recession of the last decade, Florida was especially hard hit because of the growth in the housing market that had preceded the housing crash. After the credit bubble burst, home values were cut nearly in half. This left many Florida residents underwater on their mortgages. According to data from the US census, the state of Florida saw major declines in median household income and homeownership rates. At the same time, the number of people living in poverty increased significantly. In the past few years, the state has been in a process of recovery with major gains in tourism and new construction. The overall economic outlook for the state is optimistic. However, Florida residents still have relatively high rates of consumer debt and low credit scores compared to national averages.
Current Economic Conditions In Florida
Economists look at several factors in evaluating economic health. These include employment, cost of living, and a number of bankruptcies. After reaching the high point of 11.4% in 2010, unemployment rates in Florida have declined steadily. At only 3.6% at the end of 2017, Florida’s unemployment rate is lower than that of most of the 50 states.
When it comes to the cost of living, Florida is close to the national average. The costs of food, transportation, and healthcare in Florida are higher than average. On a positive note, housing prices and utilities are a little bit lower. Florida’s cost of living index is 100.5. Florida is also close to the median in terms of personal bankruptcies. In June of 2017, Florida residents were declaring personal bankruptcy at the rate of 347 per 100,000.
Credit Scores In Florida
The average credit score in Florida in 2017 was 669. This is a little below the national average of 695, which represents an all-time high. However, Florida is among a handful of states in which 40% of the population is considered “sub-prime”. This means their FICO credit scores fall below 640. Typically, low credit scores correlate with high levels of personal debt.
Mortgage Debt In Florida
In 2016, Floridians owed an average of $177, 932 in mortgage debt. This is representing a 2.53% increase from the previous year. However, mortgage debt in Florida had decreased by 5.32% over the previous decade. This makes Florida one of the ten states with the greatest decrease in mortgage debt between 2006 and 2016. In 2016, Florida mortgage debt was below the national average of $196,014. However, many residents are still coping with home values that have fallen below their mortgage. When homeowners owe 125% or more of the current value of their home, their mortgage is considered “underwater.” The city of Lakewood, Florida, for example, ranks among the top ten cities in the nation with the highest number of seriously underwater mortgages.
Student Loan Debt In Florida
Student loan debt is the second largest category of personal debt across the country, exceeded only by mortgage debt. The two are typically considered to be “good debt” because they both represent an investment that has the potential to increase the borrower’s wealth. A home may increase in value, for example, and a college degree may lead to a higher-paying job. Unfortunately for college graduates, the high-paying jobs may not be available immediately after graduation. In fact, approximately 25% of college graduates are currently over-qualified for their job and earning 35% less income than they are qualified to earn. In the state of Florida, 53% of students leave school owing student loan debt. The average student loan debt in Florida was $23,379 for 2015 graduates.
Credit Card Debt In Florida
Credit card debt is considered “bad debt” because it’s an expense that yields no returns for the borrower. In fact, excessive credit card debt is the number one reason why Florida residents turn to credit counseling and debt relief programs. Credit card debt can be measured in a couple of ways.
One common statistic is the average credit card debt per person, including those who pay their bill in full every month. By this measure, Florida ranked 19th in the nation in 2016 with $5,754 in credit card debt per person, a little above the national average. Another way to measure credit card debt is to consider only individuals who carry debt from month to month. By this measure, Florida is a little higher than the U.S. average credit card debt of $16,048 for indebted individuals. For these households, the main reasons for using credit cards are unnecessary purchases, non-emergency medical expenses, and essentials not covered by income.
Other Types Of Debt In Florida
Other types of consumer debt include auto loans, which are on the rise, personal loans, and short-term, or payday, loans. Short-term loans are especially problematic as they charge extremely high interest rates and fees. Often, the borrower is not able to repay the loan and ends up rolling it over or taking out a second loan to repay the first. Unfortunately, these types of loans mainly drive borrowers further into debt rather than solving any problems. Auto loans are another area of concern because there is a growing number of unscrupulous lenders who are luring customers with poor credit ratings who can’t afford the loan. In fact, some economists are predicting that auto loans are the next credit bubble.
Debt Solutions For Florida Residents
When Florida residents get into trouble with debt, they may feel hopeless and helpless as expenses mount and debt collectors become more and more aggressive. Fortunately, help is available for those who seek it out. Many people are able to benefit from credit counseling and personal counseling designed to help people change their spending habits. Credit counselors educate their clients about money management and help them to create a workable budget that will allow them to make debt payments. Additional strategies include self-help, debt consolidation, and debt settlement.
Self-Help Steps To Debt Relief
There are some steps individuals can take to solve debt problems on their own. One of these is to try negotiating with their creditors for lower payments, lower interest rates or waivers of fees. In many cases, creditors are willing to work with debtors to help them avoid bankruptcy. However, it is very important to take this step as soon as possible. Once a debt has gone over to a debt collection agency, the original creditor will not be able to help.
It is especially important to contact a mortgage lender or auto lender if there is any risk of a late or missed payment. Auto loan companies are often quick to repossess a vehicle, and mortgage lenders can foreclose on a home after just one missed payment. However, mortgage companies, in particular, are often willing to work with clients who are suffering just a temporary setback.
Finally, individuals who are in debt due to their spending habits should consider personal therapy or a support group like Debtors Anonymous (DA). DA is a 12-step program focused on helping members stop incurring unsecured debt.
Debt Consolidation In Florida
A debt consolidation loan is a single loan that a person takes out in order to pay off multiple unsecured debts at one time. Most people use them to get rid of credit card debt from several different cards. A debt consolidation loan is provided by a bank, credit union, or other lending company, and the payments can be spread out over several years. Benefits of debt consolidation usually include a lower interest rate and a lower monthly payment. That is in addition to the opportunity to get rid of several debts all at once. However, the best interest rates are only available to customers with a relatively high credit score. Those with low scores may not be eligible for a debt consolidation loan. Borrowers should also be prepared to pay a loan origination fee and late fees, if necessary.
Debt Settlement In Florida
Another debt relief option available to Florida residents is debt settlement. With debt settlement, a third party negotiates with creditors on behalf of the client to arrange a lower lump-sum payment amount. In some cases, the lump sum is much lower than the amount of the debt. This makes the plan an attractive one. The client is responsible for setting aside money every month. This is usually done by depositing it in an escrow account, toward payment of the debt.
When the amount in escrow has reached a certain percentage of the amount owed, the debt settlement company will begin the negotiation process. During that time, the client typically stops making loan payments and runs the risk of accruing late fees that will add to the amount of the original loan. In addition, stopping payments can have a negative impact on the client’s credit score. Despite the risks of debt settlement, however, many people find it a positive alternative to bankruptcy.
Even in the best of economic times, individuals can face a job loss, emergencies, and problems with compulsive spending. Florida residents who are facing a personal financial crisis have several options for getting out of debt. When seeking professional help, it’s important to work with a reputable company and to understand all costs involved.
If you want to consider consolidating debts, here is a video that will help you decide if it is the smart debt solution.