Michigan debt consolidation is neither a new financial concept nor a silver bullet to debt issues. Over the years, Michiganders have been managing their credit card debt satisfactorily. A recent report indicated that the average VantageScore credit score for Michigan credit card holders is 698 – a significant drop from the start of 2021 when they boasted a remarkable 705. These, and other financial indicators such as average household debt, show that U.S. consumers are slowly sliding back to bad credit card habits.
The automobile capital’s economy has slowly been picking its pieces after the COVID-19 pandemic. As part of this recovery, the incomes of the Great Lakes state are rising, with the median house income standing at $59,584. Yet, many residents in the state still hold low-wage jobs. This, coupled with the nationwide inflation, is certainly recipe for credit card debt. In this post, we look at the options for debt consolidation for bad credit to help you stay debt-free.
Michigan Debt Consolidation: What is it and What are the Options?
Most Michiganders hold at least one credit card. Those who hold multiple cards may find it challenging to keep up with monthly payments. This way, they could be looking at huge outstanding balances. So, how will consolidation help you manage your balances and keep off the endless loop of debt?
Debt consolidation is a financial strategy through which you merge multiple bills into a single debt, which can then be paid through a loan or any other method. Essentially, debt consolidation cuts on costs by reducing monthly repayments and lowering the interest on debts. Consolidation extricates consumers from the mess of struggling to keep up with multiple bills and deadlines from various credit card issuers.
Process of Debt Consolidation
Debt consolidation companies in Michigan can help you merge multiple debts into a single monthly payment. But how does debt consolidation work, and how do you about this financial process? Keep in mind that debt consolidation works well when it lowers your monthly payments and interest rates on unsecured debts such as credit card debt.
If you’re looking to consolidate debt, you first figure out how much you owe. This will help you know the best option consolidation. You then need to calculate your average monthly interest rate. Each credit card will carry a different balance and interest rate, and it is important that you establish the weighted average interest rate.
What follows is determining an affordable monthly payment – an amount you can easily pay alongside other expenses. Go through your monthly budget and spending on reasonable needs like food, housing, transportation, and utilities. The money left after paying those bills can be used to pay off your credit cards. Most importantly, your monthly debt consolidation payment has to fit your budget.
Next, you need to weigh your Michigan debt consolidation options. You’ll need to do a little digging to find out what options you have, how they differ, and the best one for your situation. If you’re not familiar with consolidation, read on to find out more about debt consolidation in Michigan and the options available to credit card holders.
Debt Consolidation Loans
A common Michigan debt relief option is a debt consolidation loan. It lets you combine multiple high-interest debts into one manageable loan. Debt consolidation loans are readily offered by banks, credit unions, online lenders, and even family or friends. Most consolidation loans will come with interest rates lower than your current rates. Also, these loans have fixed monthly repayments. What’s more, you only get to track one payment due date in a month.
Michigan debt consolidation loans are personal loans, which are usually unsecured. This means that they could come with a relatively high interest. As such, you will need a good credit score to help you significantly lower the interest on you loan. Your credit score can hurt, especially when you’re juggling multiple payments and miss a deadline.
With debt consolidation loans, your credit score might initially take hit. However, it improves over time if you make your payments on time. A Michigan debt consolidation loan is a good option if you have revolving lines of credit and high-cost loans that attract steep interest rates. If you’re struggling with credit car debt, gas cards, title loans, or payday loans, a debt consolidation loan in Michigan would be a good debt relief option for you.
Debt Management Plan
Unlike a consolidation loan, a debt management plan doesn’t involve borrowing a loan. These are plans offered by not-for-profit credit counselling organizations to help reduce your current interest rate and monthly payment. Most debt management plans in Michigan can help consumers eliminate their debt in 3-5 years.
With a debt management plan, you don’t need an excellent credit score. Your preferred credit counselling agency will negotiate and probably receive concessions on interest rates from your credit card companies. This way, you’ll have an affordable monthly payment to make moving forward. Monthly payments are made to your counselling agency, who then remits the agreed-upon amounts to the various creditors.
Credit Card Balance Transfer
A balance transfer is when you move debt from one or several accounts to another. Many credit card companies offer a balance transfer card which allows you to move high-interest debt to one credit. What’s attractive about a balance transfer card is that it comes with a 0% APR, which could help you save greatly.
If you wish to consolidate debt through a balance transfer, you’ll need to apply for a new card with zero or low introductory APR. Then, you initiate a balance transfer ad pay down your balance over time. Clearing all your debt before the introductory period elapses can be a huge money-saver since you pay it off interest-free.
However, credit card balance transfers are not without costs and limitations. If you’re looking to consolidate debt using this option, you have to pay a balance transfer fee, which is a percentage of the total transferred. It is also important to check your balance transfer card limit – transferring your full balance might not be possible if your card’s limit is low.
Home Equity Loans and HELOCs
Michigan credit card debt relief can also be achieved by consolidating using a home equity loan or home equity line of credit (HELOC). Homeowners who have equity in their home may consider this option as most banks will allow them to borrow against 80% of their home equity.
Since these loans and lines of credit are secured by the equity on your home, they come with a considerably lower interest rate. However, taking up home equity loans and HELOCs means that you could lose your home to foreclosure if you fail to make payments.
It’s easy to find yourself entangled in a financial mess if you’re juggling multiple credit card payments. If you’re already in that position, Michigan debt consolidation can help you get out of your debt hole. Before choosing a debt consolidation option, be sure to evaluate your debt and average interest rate so that you fit an affordable monthly payment into your budget.