Ohio debt consolidation can help debt-burdened consumers to financially regain their footing. Certainly, Ohioans have seen better times than the past two years where the world has been dealing with a full-blown pandemic. Yet, most consumers seemed unstirred by the financial misfortunes of the pandemic over this period.
As of 2020, the average FICO score for Ohio borrowers had moved up seven points to an impressive 712. This was likely spurred by the overall shrinking debt and a drop in delinquencies and credit utilization. Even with such accomplished numbers, it would be naïve to think that residents are without financial troubles.
Consumer Debt Statistics in Ohio
The median household income in the Buckeye state is $56,602, which is some way below the national median ($79,900). According to Experian, the typical borrower in Ohio carries about $4,888 in credit card debt. Still, consumer debts such as personal loans, auto loans, mortgages, student loans, and other unsecured loans add to their financial load. With about 9% of Ohio’s population living in poverty, it is true to say that the debt burden in the state isn’t getting lighter any sooner.
Ohio Debt Consolidation vs Bankruptcy
When finances hit rock bottom, many people contemplate bankruptcy. However, this process can have major implications on your credit and assets. Keep in mind that bankruptcy filings may remain on your credit report for as long as 10 years. This means you could have difficulty obtaining a credit card, mortgage, or car loan in the future.
Bankruptcy may not apply to all consumers stuck in debt. Even for those who are eligible, it is a wise thing to consider debt consolidation before declaring bankruptcy. Particularly, debt consolidation could be an effective way to quell your financial troubles if all your consumer debts are manageable. But how does debt consolidation work, and what options are available for debt consolidation?
Ohio Debt Consolidation: Definition and Ways of Consolidating Debt
Debt consolidation is the process of rolling up all your high-interest consumer debts into a single payment. This way, you only have to write one monthly check. What’s more, you get a longer payment period and lower interest on the payment. Typically, Ohio debt consolidation companies will help you save money on interest and stop constant collection calls from your creditors.
Options For Debt Consolidation in Ohio
If you have good credit, a manageable debt amount, and the willingness to get out of the financial hole you’re in, then you’re a good candidate for debt consolidation. Below, we look at some of the options for debt consolidation in Ohio.
Ohio Debt Consolidation Loans
Debt consolidation loans are easy to access for consumers with good credit. These are readily offered by banks, credit unions, and online lenders. By taking out a debt consolidation loan, you can pay off your existing debt quickly and efficiently. With a debt consolidation loan, you have a fixed payment and also get a line of sight of paying off your existing debt.
Besides unsecured personal loans, you can also get a secured loan or line of credit to consolidate your debts. The two most common secured financial products for debt consolidation are home equity loans and home equity line of credit (HELOC).
Home Equity Loan
Like an unsecured personal loan, a home equity loan helps you quickly shrink your debts while saving money on interest. The special side to a home equity loan is that it is secured against your home’s equity. Homeowners with a bigger stake in their homes can secure a larger loan and pay all their debts at once.
These loans have long repayment timelines and also let you enjoy a lower interest rate. For instance, a homeowner could pay off a 15% APR credit card with a 5% APR home equity loan. However, these loans are not without risks – a lender may foreclose on your home if you default on the loan.
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit that allows you to draw funds as you need, much like a credit card. This too is secured against your home’s equity. With a HELOC, you can opt for a variable rate and payment or a fixed rate. Variable rates and payments mean that new balances start at a competitive rate that may change as payments are made. With a fixed rate, your monthly payment and rate won’t change.
HELOCs have lower interest rates than personal loans and home equity loans. However, you’ll need good to excellent credit, a low debt-to-income ratio, and a lot of usable equity on your home. Like a home equity loan, you risk foreclosure if you don’t make payments on a HELOC.
Balance Transfer Credit Card
Balance transfer cards allow you to transfer debt from multiple credit cards into one with a 0% introductory APR. As a cornerstone of a debt-repayment plan, a balance transfer credit card is a smart move and can be a huge money-saver. Further, a balance transfer card simplifies payments and eliminates the risk of missing a payment on one of your credit cards.
A balance transfer credit card is a practical strategy for debt consolidation in Ohio, but the catch is in the introductory APR period. Paying off all your high-interest credit card debt in this period could mean huge savings on interest charges. If you use a balance transfer card for debt consolidation, look out for the balance transfer fee. Most credit card issuers will charge 3-5% of the transferred balance.
If you’re diligent in your payments, a balance transfer credit card will improve your credit. A hard inquiry on your credit report upon application for a new balance transfer credit card knocks points off your credit score. However, your score will recover as you pay off your debt.
Debt Management Plan
If you’re looking for an Ohio debt relief program, you might as well consider a debt management plan. These plans are offered by non-profit credit counseling agencies. Particularly, they offer a viable solution and a sense of debt relief to consumers who feel overwhelmed by their monthly payments.
With these Ohio debt consolidation programs, you’ll have a credit counselor who will set up and manage a repayment plan. This is done after assessing your financial situation and laying out the available options for you. If a debt management plan is a good fit, the counselor negotiates with your creditors and comes up with new payment plans.
Part of the negotiations may involve waiving fees and lowering the interest rates on your existing debt if you agree to adhere to the payment plan. Once you agree to the debt management plan, you’ll start making a single monthly payment to the agency. Some agencies may charge a small monthly fee, but the benefits of their services often exceed the costs. What’s more, you receive professional advice to help you better manage your finances.
Bottom Line
Ohio debt consolidation can be helpful to consumers with good credit and manageable debt. While it isn’t a silver bullet for your financial woes, it can help you shrink your unsecured debts quickly and save on interest charges. To manage debt effectively, be sure to spend modestly and have a debt-reduction strategy.
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