Overcoming the credit card debt problems in Illinois is not impossible. The task might seem intimidating but it is not a lost cause.
At the close of 2017, the U.S. economy is staying strong. It is evident in the low unemployment rates across the nation and rising consumer confidence promoting gains in retail sales. Despite these positive indicators, however, consumer debt is also on the rise. It has hit an all-time high in 2017. While a large portion of that debt comes from mortgages and student loans, nearly a third of it comes from credit card debt. In October of 2017, Americans owed over $1 trillion to credit card companies, and the majority of those charges were made to cover health care expenses. Currently, the average U.S. household owes more than $7000 in credit card debt alone.
Economic Factors Affecting Consumer Debt In Illinois
The state of Illinois is fairly representative of the rest of the country in terms of consumer debt and other economic factors. For example, the cost of living in Illinois is indexed at 96.5, coming in just below the national average. The cost of food and housing are somewhat lower than average. The housing accounting for the largest percentage of difference. Transportation and utilities, on the other hand, are slightly above the national average. Health care in Illinois is equal to the average cost of health care in the U.S.
Employment is another factor that affects debt. Individuals with a high income tend to have more debt overall, but their debt to income ratio tends to be lower than that of low-income individuals. A period of unemployment is a risk factor for problematic debt. It is more likely that people will turn to credit cards in order to maintain their lifestyle while seeking a new job. Residents of Illinois were somewhat more likely than average Americans to face unemployment at the end of 2017. The unemployment rate in Illinois was 4.9% at the end of the year, compared with a national average of just 4.1%.
Mortgage Debt In Illinois
Mortgage debt is categorized as a fixed (rather than revolving) debt, and it’s also considered “good debt” since it can lead to an increase in wealth if the value of a house goes up. According to 2016 data, Illinois homeowners carried an average of $176,282 in mortgage debt, which is below the national average. In a list ranking the states from lowest to highest average mortgage debt, Illinois came in at number 30. Illinois mortgage debt has barely increased over the past nine years. The average Illinois home currently sells for $212,000, compared with a national average of $377,100.
Student Loan Debt In Illinois
Student loans are considered another “good debt.” After all, a college degree is expected to lead to a higher-paying job. This makes the cost of education an investment. Unfortunately, high-paying jobs can be hard to come by. Students often leave school owing a large amount of money with no means to pay it back. The average graduate in the U.S. leaves school owing more than $30,000. Unfortunately, 40% of them are delinquent on their loan repayments or in default. Illinois students owe just slightly less than average, at $29,305, and sixty-six percent of Illinois graduates have student debt.
According to 2016 data, only 9.4% of Illinois graduates were in default on student loans, compared with a national average of 11.3%. Mirroring national trends, the default rates were significantly higher for graduates of community, vocational, and for-profit colleges. At least, compared to four-year state colleges and universities.
Credit Card Debt In Illinois
Credit card debt is categorized as rotating debt, since it is, ideally, paid off each month. It’s also considered “bad debt” since it is expensive money that does not lead to an increase in wealth for the borrower. Illinois residents own an average of 2.27 credit cards per person. This is just slightly below the national average. They carry a credit card balance of $6,254 on those cards, again slightly less than average.
Credit card debt in Illinois is often the result of a healthcare emergency or a sudden change in financial circumstances. This is just like the rest of the country. After a job loss, some people use credit cards to pay utility bills and buy other necessities when their savings run out. When account holders are unable to pay their balance in full, they owe a high rate of interest (an average APR of 16.21% as of December 2017). This is in addition to high annual and late-payment fees, if applicable.
Other Types Of Debt In Illinois
Other types of debt that often lead to problems for consumers in Illinois include auto loans, personal loans, and payday loans. Some analysts are predicting that sub-prime auto loans constitute the next financial bubble that is due to burst in the near future. Auto lenders are becoming known for using aggressive collection practices. This includes repossession of the vehicle, which can be devastating to an individual’s personal finances. Payday loans are another especially problematic form of debt. This is because they are specially marketed to borrowers who have low credit scores. People in financial straits may turn to these loans in order to cover an emergency or pay off another bill. Of course, we all know that short-term loans generally lead to more severe debt.
Consumer Debt Solutions in Illinois
Even in the best of economic conditions, individuals can have money problems due to unforeseen personal crises or out-of-control spending. The process of resolving debt often begins with a thorough financial review of income and expenses. It will determine how much money the debtor can pay towards the debt each month. It also helps in budgeting efforts to conserve funds as much as possible.
Creating a realistic budget and sticking to it month after month is crucial to the success of any kind of debt solution. Other steps that individuals can take on their own include talking with creditors to make a new payment plan. This has to be done before a house goes into foreclosure. Or even before a car is repossessed. There is also the option to seek counseling or support for problems with spending. For many people, however, these steps are not enough to relieve their debt problems. They turn to professional credit counselors for solutions like debt consolidation or debt settlement.
Debt Consolidation In Illinois
Debt consolidation is the process of taking out a new loan to pay off more than one current loan, and there are a couple of ways to do this. To consolidate debt from multiple credit cards, it may be possible to transfer the balance to a new card with a lower interest rate. Some cards even offer a 0% interest period for new balance transfers. This approach works well for individuals with good credit scores and who are currently paying a high rate of interest. Another approach to consolidation is a debt consolidation loan. These loans are offered by banks and credit unions, and they may require some form of collateral. Typically they are available at a lower rate of interest than a credit card, and they can also be extended over a longer period of time, which allows for lower monthly payments.
Debt Settlement In Illinois
With debt settlement, a third party negotiates with creditors on the debtor’s behalf to arrange for a lower lump-sum payment of the debt. Although there is no guarantee that a creditor will agree to a settlement, many are willing to do so. In general, the debtor will need to make a monthly payment to the debt settlement company or to an escrow account in order to set aside the lump sum. During that time, debtors may cease making regular loan payments, which can have a negative impact on their credit score. Nonetheless, some people find it worthwhile to risk their credit score in order to become debt-free.
Additional Tips For Overcoming Debt
- Get a copy of your credit report.
It’s important to check your credit score before starting the process of debt consolidation in order to make sure there are no errors that need to be corrected. A small error could make it difficult or impossible to qualify for the loan.
- Make sure you understand what the cost of resolving your debt will be.
In addition to monthly payments, you will also need to be prepared to pay a loan origination fee for a debt consolidation loan or balance transfer fee. Debt settlement companies also charge a fee for their services, either a percentage of the amount of debt you enroll or a percentage of the money you save.
- Avoid new debt.
One of the biggest mistakes people make when they are trying to settle debt is to continue borrowing money. Using credit is a habit that is hard to break, but avoiding debt is crucial to the process of getting out of debt. Destroy or lock away all credit cards and live a cash-only existence until the debt is gone.
- Stay on track.
Even after the current debt is paid off, it’s important to keep following a budget and tracking expenses in order to remain debt-free. A good budget should always leave room for regular but unexpected expenses. These expenses include a flat tire, a broken dishwasher, or an uninsured root canal. A budget should also include something for entertainment or small luxuries.
Obviously, you need to implement financial management to keep yourself out of debt trouble. Here is a video that will help you accomplish that.