Why should you try to understand credit card debt in Texas? It is more beneficial than you know.
Modern life is very difficult. Families try to balance work, parental obligations, extracurricular activities and more. Dealing with overwhelming debt is never fun, and many people now find it interferes with their enjoyment of life. Thankfully, there are many options available to individuals who find they have more debt than they can handle. A person may choose to file for bankruptcy. They can also work out a debt settlement plan with creditors. They also have the option to take out a debt consolidation loan. Quite a few debtors choose to take out a debt consolidation loan, as doing so offers benefits not seen with the other solutions. Why are so many people in Texas in debt and why should these individuals consider turning to a debt consolidation loan for relief?
All About the Credit Card Debt in Texas
According to Value Penguin, Texas ranks thirteenth in the nation in terms of credit card debt, with the average household owing $6,948. The median credit card debt for American households overall is $5,700, considering balances owed by individuals in the United States who are 18 years of age or older. However, this takes into account all households. When only those households that have outstanding revolving debt are considered, this figure goes up to $10,955.
What Many Don’t Realize
Surprisingly, credit cards don’t account for most unsecured debt in the country. In fact, Value Penguin reports that the average American household has $21,281 of unsecured debt in 2011. Only 36 percent of this debt was from credit cards. Unsecured debt is that debt not backed by an asset, such as a car or home. Student loans are a form of unsecured debt, as the lender cannot take the person’s education or degree if they don’t pay the loan as agreed.
In addition, there is a difference between revolving debt and non-revolving debt. Revolving debt is a line of credit, often in the form of a credit card, that users pay each month and receive new credit when they do so. A total limit is typically set on this debt and the user can borrow up to this limit. In contrast, non-revolving debt is a loan that is paid off over time. When a person makes a payment, the loan decreases and no new credit is issued. A mortgage or car loan is a good example of this type of loan. Credit cards are a form of revolving debt.
The Cost of Living Within the State
According to BestPlaces.net, Texas ranks below the national average in every category measured. This site looks at various items and compares each state to the national average, which they put at 100. Texas comes in at 82 for housing, significantly less than the national average, and 89.6 for grocery costs. In fact, overall the state receives a 90, leaving many to wonder why citizens in the state have high debt.
Why Texans Are in Trouble
Although the economy in Texas is good, as reported by Debt.org, individuals in the state often fall behind on their payments or make payments late. Furthermore, the state has one of the highest identity theft rates in the nation, although this figure has decreased over recent years. As a result, residents tend to pay more in interest than many other American citizens. Furthermore, members of the military tend to carry higher balances on their credit cards than other Americans. Not only that, San Antonio is number one in the country when it comes to credit card debt. This is likely due to the high military presence in the area.
Unemployment in Texas
The unemployment rate in Texas is at 4% in April 2018. Individuals who have been without a job in the past may still be struggling to catch up on overdue bills. The unemployment rate in June 2017 was 4.6 percent and shows how much it has declined in recent months.
Unfortunately, getting a job does not mean individuals are in the clear financially. It takes time to get back on track after a period of unemployment, and people may find they don’t have this time. The penalties, late fees and more have already put them in a precarious situation, and they don’t know how to dig their way out and clear a path for a better financial future.
Individuals need to recognize that not all debt is bad. Everyone needs a roof over their head, thus a mortgage debt falls into the category of good debt. The person is building equity every month and making an investment in his or her future. Furthermore, the home increases in value with time. The key, however, is to ensure the mortgage is easily affordable. A person should never buy more house than they can truly afford, as this can lead to debt accumulating in other areas as the person tries to make their mortgage payment each month. Another thing to consider is a variety of debts increases a person’s credit score, as opposed to having one type of debt.
Paying Off Debt
Keeping the above information in mind, people need to prioritize their debt when paying it off. When doing so, individuals need to focus on paying off credit card debt first along with other debts that come with a high-interest rate. While it may seem smarter to pay off the mortgage, as this allows equity to build up more rapidly, the high-interest debt needs to be the priority to allow the debt to be paid off faster.
Debt Relief Options
Individuals find they have several options when they wish to get out of debt. Some debtors choose to file for bankruptcy, as they feel this is the best way to eliminate the debt they have. However, a bankruptcy will follow them for many years, as this must be reported in many documents, such as a job application.
Borrowing from family and friends is another solution when it comes to getting out of debt. Nevertheless, people need to take care when selecting this option, as it can lead to relationship issues over the long term. Only borrow money from family or friends if they don’t expect to be paid back. This will help to prevent problems.
Debt settlement may be considered. However, this option hurts a person’s credit score. Furthermore, some debtors have found they paid a company of this type to settle their debt, only to discover the agreement wasn’t followed and they have more financial problems than they did when they started the process.
Credit counseling can be of help. Individuals often learn they need to use this method in combination with one of the other options to get the relief they desire. A debt consolidation loan, used in conjunction with credit counseling, is the option many ultimately decide on.
How a Debt Consolidation Loan Can Be of Help
A debt consolidation loan brings all debt into one financial product. It leaves the borrower with only one payment to make each month. In addition, the loan often comes with a lower monthly payment and interest rate. At least, it should be lower than what the borrower has previously paid on the various debts. When this option is selected, borrowers find they are better able to meet their monthly obligations. Not only that, their credit is not negatively affected – which is a problem with bankruptcy. What benefits may a person expect when they take out a debt consolidation loan?
Debt Is Paid Off Faster
As the interest rate and monthly payment are reduced, the individual finds he or she can pay off their debt in less time. Furthermore, the risk of late payment fees and other penalties is reduced because only one payment is required each month. Debtors find this significantly helpful because it reduces their debt. After all, one missed payment can be very costly. Multiple missed payments may leave the person with more debt at the end of the month than they started with. But with a debt consolidation loan, this becomes less of a concern.
The Credit Score Goes Up
Once all debt has been consolidated into a single loan with a lower payment, the person finds it easier to meet this obligation. Timely payments of the loan bring the person’s credit score up. This in turns allows the debtor to get a lower interest rate on any future loans to help keep debt down. However, it is recommended the borrower not get another loan until the debt is paid in full. This will ensure new financial difficulties don’t arise.
Collection Calls Cease
When all debts are combined into one loan, the collection calls stop. This helps to reduce the stress associated with the debt, something many borrowers appreciate. This benefit alone is enough for many people to turn to a consolidation loan, as they desire this relief.
If you are struggling with debt, consider taking out a consolidation loan. These are only a few of the many benefits associated with a loan of this type. Nobody wants to have debt hanging over their head, but most people do. Understanding the difference between good debt and bad and knowing how to pay off bad debt quickly gives much peace of mind. Consider obtaining a debt consolidation loan today so you can have this relief and move forward with your life.
In case it is hard for you to get a good debt consolidation loan because of a bad credit score, do not fret because there is another option for you. Here is a video that discusses another option that will help you get debt free despite your bad credit score.