Debt consolidation in Maryland can be an invaluable strategy for consumers looking to crush their unsecured debts. While other debt relief options such as bankruptcy can give consumers a fresh financial start, they don’t always apply to everyone. In this post, we take a look at how Maryland debt consolidation can help consumers settle their manageable debt.
An Overview of Consumer Spending in Maryland
With the easing up of COVID restrictions in the past year, consumers were eager to swipe their credit cards and spend some of what they had saved during the lockdown. After many months of little spending and staying at home, you could understand consumers’ desire to buy, travel, and consume.
Yet, the pandemic had substantially halted the production of goods and services. Even with the ending of lockdown measures, supply chains were still not up and running. This, coupled with high consumer demand, meant that inflation would be inevitable.
True to the prediction by most economists, the last quarter of 2021 saw consumer prices go up by 6.2% compared to the past year – the fastest yearly price hike since 1990. The cost of items such as gas and food hurt consumers’ wallets, which would possibly mean more spending on their credit cards.
Consumer Debt in Maryland
Unemployment rates began to rise in the wake of the COVID-19. The unemployment rate in Maryland spiked to a record-high 9.0% in April of 2020, while the national consumer debt rose by a staggering $800 billion. During the same period, credit card debt dropped but experts predicted that reduced incomes and the urge to spend would spur more borrowing.
By the close of 2021, Maryland held the 5th highest average credit card debt ($5,977). Still, unemployment in the state is higher than the national average level. Most Marylanders who are employed are income-constrained and have limited assets. That means they live paycheck to paycheck and heavily rely on their credit cards to pay for food, utilities, rent, and healthcare costs. With the current financial situation, such consumers are likely to struggle with their finances and pile up debt.
Debt Consolidation in Maryland as a Debt Relief Option
Overreliance on credit cards and other consumer loans often leaves individuals starring at substantial amounts of debts. Most people see bankruptcy as the best debt relief option if their debt is not manageable. However, the bankruptcy card should only be played as a last resort as it negatively affects your credit for 7-10 years.
Debt consolidation refers to combining multiple debts into one payment. Typically, debts that can be consolidated are high-interest debts such as payday loans and credit card bills. Consolidation comes in handy in resolving debt if your preferred option can help lower the cost of your debt. This not only helps you save on interest charges but also pay off your debt faster.
Consumers with a manageable amount of debt can rely on consolidation for debt relief. Debt consolidation entails reorganizing several bills with varying interest rates, payment amounts, and due dates. By consolidating such bills, you are left with one monthly payment which reduces the risk of skipping a payment. What’s more, it is an easy, DIY approach to managing debt.
Debt Consolidation Options in Maryland
What options do Marylanders have when it comes to debt consolidation? Well, the basics of debt consolidation are finding a way to concentrate your debt payments into a single monthly bill. Below, we highlight the primary strategies of debt consolidation in Maryland.
Credit Card Balance Transfer
When most of your debt is in credit card bills, a credit card balance transfer can be a good option for debt consolidation in Maryland. To do a balance transfer, you have to apply for a 0% interest balance transfer credit card from a company of choice. You will likely need good to excellent credit (690 and above) to qualify for one. If granted, you’ll move all your credit card debts onto this balance transfer card and start paying the balance.
Most companies offer these cards at zero interest for a promotional period. To make the most of this consolidation option, you have to settle the balance in full during this period. That way, you get free debt consolidation as you do not pay any interest on your balance.
Debt Consolidation Loan
A debt consolidation loan refers to any amount you can secure and use to pay off all your debt at once. These loans are usually fixed-rate, meaning that you do not have to worry about adjustments of interest rates. You can then repay the loan in installments over an extended period.
While a credit score of 689 or below will not prevent you from securing a debt consolidation loan, you are likely to pay more in interest. Borrowers with better credit often qualify for the lowest rates when taking out debt consolidation loans in Maryland.
Personal loans such as those borrowed from family and friends can also help consolidate debt. In some cases, such loans are huge money-savers as you may not need to pay interest when repaying. What’s more, they may come with flexible payment terms, including the repayment period.
Provided you have a good or fair credit score and a debt-to-income ratio of 50% or less, debt consolidation companies in Maryland or other lenders will get you pre-approved and offer you a loan.
Other Options for Consolidating Debt
Consolidation loans and balance transfers may not be a perfect fit for every consumer. You could consider taking out a home equity loan or using a home equity line of credit to pay off your debt if you are seeking additional options for debt consolidation in Maryland. However, these loans are secured against the equity in your home, which puts it at the risk of foreclosure.
Certain employees can also borrow 401(k) loans from their retirement accounts. However, such loans can put their retirement at risk, especially when they default on payment. Also, you can look around for free government debt consolidation programs which can help you repay all your debts at a low or no cost.
Debt consolidation is a strategy that lets you roll multiple debts into a single payment. Depending on your credit score and current cash flow, you can explore the various options for debt consolidation in Maryland. When choosing your consolidation option, keep in mind the interest charges and other repayment costs. With proper consolidation, you can save on interest charges and get out of the debt loop.