Debt Consolidation in Indiana
Debt Consolidation options in Indiana

Indiana debt consolidation can be the go-to strategy if you are looking to turn your financial situation around. By the end of 2021, the Hoosier state registered an 8.7% drop in the average credit card balance from the previous year. Hoosiers rank among consumers with the lowest credit card debt in the country, with the average borrower carrying a balance of $4,796. That is $729 lower than the national average – an indication of consumers’ efforts to manage debt.

While Indiana boasts a low unemployment rate (3.0) and among the lowest cost of living index (91.1), credit card debt statistics in the country suggest that more people are struggling with debt. With the growing affinity for spending on credit cards, consumers may soon find themselves with spiraling credit card debt.

Debt levels have steadily been rising in Indiana, with the 3.6% increase from 2019 to 2020 outpacing the national increase of 3.0%. Debt levels in 2020 soared by about $8 billion, and there is a rising concern about what’s to come in 2022. Obligation to pay some debts is set to resume this year, which means more monetary stress for consumers.

What Kind of Debt Can Be Consolidated?

Indiana debt consolidation may be applicable in the payment of some types of consumer debts. When it comes to consolidation, debt can be split into two categories: secured and unsecured. Secured debt means that you get an asset in exchange for what you are paying. For instance, a house in exchange for your mortgage, or a car in exchange for your auto loan.

For unsecured debt, no collateral can be taken away if you don’t pay. It is when your credit card company extends a line of credit in good faith depending on your credit score. If you fail to pay your unsecured debt, your creditor can’t take any of your assets to pay back the debt. In most cases, such debt can be consolidated.

Indiana debt consolidation can work if your debt is in the form of credit cards, gas cards, store cards, and unsecured personal loans. Some unpaid medical debts and payday loans may also be consolidated. Depending on your debt, you can choose a consolidation option that will help you pay what you owe over time while incurring the least payment cost.

Indiana Debt Consolidation: When and How to Consolidate Debt

Debt consolidation refers to rolling multiple debts into a single payment. Carrying debt doesn’t always mean that you qualify for debt consolidation. Typically, consolidation is a good idea if your debt is high-interest, such as credit card bills and payday loans. Debt consolidation in Indiana can help you get a lower interest rate, reduce your total debt, and pay off what you owe faster.

Debt consolidation is a sound approach to managing debt on your own if you have a manageable amount and good credit. This process helps you reorganize multiple bills with different interest rates, payments, and due dates. That way, you only track a single payment date and make the same payment until the debt is settled.

You can be successful with debt consolidation if:

  • Monthly debt payments and other expenses don’t exceed half of your monthly income
  • Your credit is good enough to secure a low-interest consolidation loan or a zero percent credit card
  • You have a consistent income that will help you pay your debt
  • You can pay off your consolidation loan within five years

Consider the following example to understand how debt consolidation works and when it makes sense: Assume you have three credit cards with different interest rates ranging from 18% to 25%. If you have been making payments on time, your credit is good. That means you can qualify for an unsecured consolidation loan at 8%, which is a significantly lower interest rate.

Indiana Debt Consolidation Options

Now that you are familiar with the concept of debt consolidation, let’s take a look at the various options for consolidating debt.

Debt Consolidation Loan

Indiana debt consolidation companies and other lenders can give you a low-interest consolidation loan if you have a good credit score. You can pay off all your high-interest debts and focus on making a single payment for your loan. However, be sure to establish whether the low-interest rate for your loan is a “teaser rate” that will only last for a given period and increase afterward.

Also, find out if your consolidation loan includes fees or costs that would make it an expensive option for consolidating debt. Debt consolidation loans in Indiana potentially lower your monthly payments since payment is spread over a longer time. However, that could mean paying a lot more than you owed. If that is the case, you may want to explore other consolidation options or Indiana debt relief programs.

Credit Card Balance Transfers

A credit card balance transfer refers to the process of moving balances from several credit cards with different interest rates to one credit card with a promotional zero-percent APR. A balance transfer credit card could offer much-needed Indiana credit card debt relief for Hoosiers carrying multiple credit cards. However, there are important things about balance transfers you should keep in mind.

The promotional or introductory interest rate for most balance transfers runs for a limited period. Once that period lapses, the interest rate on your balance transfer credit card may rise, increasing your scheduled payment. Late payments (by 60 days or more) could see the interest rate on all balances, including the transferred debt, increased by your credit card company.

Many credit card companies charge a “balance transfer fee.” This fee could be a fixed amount or a percentage of the amount transferred, whichever is more. If you choose to consolidate credit card debt through a credit card balance transfer, avoid using that credit card for other purchases. If you must use it, wait until you have paid off all the transferred balance. That way, you pay off the balance faster and avoid interest charges on the other purchases.

Home Equity Loan

A home equity loan is a secured loan – you borrow it against the equity in your home. By securing a home equity loan, you can pay off all your existing creditors and then pay back the loan. While this is a viable consolidation option for homeowners, it is also risky – your home could be foreclosed if you fail to make payments. However, these loans often come with lower interest rates than other loan types, making them an attractive consolidation option.

Bottom Line

Debt consolidation programs can help you solve your financial issues and avoid bankruptcy. However, taking out a new loan to pay off old debt may not always be feasible – you must cut your spending and stay within your budget. Otherwise, you will be stuck in a debt cycle.

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