Georgia debt consolidation options could be invaluable to consumers who are struggling to manage their debt. If you’re a credit card holder in the Peach State, chances are you have a balance on your card. Georgians rank 11th for the most credit card debt in the country, with the average consumer owing about $3,110.
Besides credit card debt, Georgian households have to manage student loans, mortgage, auto loans, and other high-interest unsecured loans. By the end of 2020, there was a significant dip in the average credit card balance in the state. The COVID-19 pandemic saw a combination of debt relief measures, an acute slowdown in consumer spending, and multiple stimulus checks. These, and other factors, allowed Georgians to rely less on their credit cards and pay down their balances.
Despite these factors, Georgians are still struggling with consumer debt. Their credit card delinquency rate is at 9.52%, slightly above the national average. What’s more, their below-average credit score means that their card issuers charge higher interests on their credit cards. Yet, it’s not all gloom and doom for credit card holders. With debt consolidation strategies, Georgians can dig their way out from under their credit card debt.
Georgia Debt Consolidation vs Debt Settlement
There are various methods you can employ if you’re seeking to emerge from debt. Debt consolidation is one of those and is a DIY strategy for managing debt. It involves bundling all your unsecured debts into one debt. This way, you don’t have to track the due dates for your several monthly payments – you only make payments for your single debt.
Debt settlement, also known as debt adjustment or debt relief, is a process through which you can resolve your delinquent debt. It involves making a lump-sum payment to your creditor in exchange for having a portion of your debt forgiven. You can do this by yourself or hire a debt settlement company, but creditors are not obligated to reduce your debt. While debt consolidation and settlement offer some sort of debt relief, they’re not the same.
Georgia Debt Consolidation Strategies
If you’re looking for a way to put your unsecured debts behind you, then debt consolidation could be for you. Below, we look at some options for debt consolidation in Georgia.
Georgia Debt Consolidation Loans
Most consumers struggle with debt due to the high interest charged on their balances. If “friendly debt” is anything to go by, it would mean one that comes with low-interest rates and friendly payment terms. Depending on your lender, most debt consolidation loans will offer just that. A debt consolidation loan could be a personal loan or a secured loan used to pay off all other expensive debts. This way, you save significantly on interest charges, put a stop to collection calls, and get a repayment period.
Secured debt consolidation loans are those that are borrowed against collateral, such as a home. These include home equity loans and HELOCs.
Home Equity Loan
If you have significant usable equity in your home, you can use it to get a debt consolidation loan. These loans will typically come with a lower interest than your existing debt and more favorable payment terms. This way, you can use it to pay in full all your delinquent debts. However, home equity loans aren’t risk-proof – failure to make payments on this loan could lead to the foreclosure of your home.
A home equity line of credit (HELOC) is among the Georgia debt consolidation options that consumers in the state can use to pay off their credit card debt. Like a credit card, it gives you access to cash up to a certain amount, only that it is secured against your home’s equity. Most HELOCs will have adjustable interest rates, which will go up or down depending on the baseline interest rates.
To secure a home equity loan or HELOC, you’ll need good credit, significant usable equity in your home, and a good debt-to-income ratio. These loans are desirable for their significantly lower interest rates, especially if you have large equity on your home.
Zero-Interest Credit Card
Having revolving debt and holding multiple credit cards can be double trouble – you may never be able to escape the debt cycle. However, a zero-interest credit card, also called a balance transfer card, is a Georgia debt consolidation option that can come in handy. It lets you do a balance transfer, which involves moving your debt from one account to another. But why do a balance transfer?
Most balance transfer cards have a 0% APR period, which means that you don’t incur interest charges during that period. If you move all your high-interest debt to such a credit card and pay it off during the introductory APR period, then you can save hugely on interest. However, balance transfers will involve a fee – typically a percentage of the balance transferred.
Not all balance transfer cards are good for debt consolidation. Look for one with a zero introductory APR offer, zero annual fees, and a low balance transfer fee. Otherwise, the cost of balance may override the benefits of consolidating debt. However, to qualify for the ideal balance transfer credit card, you’ll need good to excellent credit.
Debt Management Plan
With a debt management plan, you don’t take out a new loan to pay off your debt. A credit counselor evaluates your financial situation and lays out the options you have for managing your debt. Georgia debt consolidation companies that offer credit counseling services may also negotiate with your creditors for more favorable payment terms, such as lower interest rates on your outstanding debt.
Once you agree to a debt management plan, you’ll begin making monthly payments to your debt management company, which will then pay your creditors. Such a plan helps you focus on only one monthly payment as well as take advantage of better payment terms. What’s more, credit counseling ensures that you understand how to plan your finances and handle debt in the future.
While Georgia debt consolidation is a lifeline for consumers struggling with debt, it doesn’t cure your financial problems. Remember, debt consolidation often involves borrowing funds to resolve your delinquent debt. However, it may do you more harm than good if you quickly fall back to your old habits. If you wish to regain your “debt-free” status while maintaining your credit, be sure to back up debt consolidation with good financial habits.