Texas debt consolidation strategies can help residents avoid being caught up in the endless loop of credit card debt Despite a recent drop in the unemployment rate, Texas still has its fair share of economic struggles. The median household income in the state is $61,874, which is below the national average ($79,900).
Another damning statistic is that the poverty rate in the state stands at about 16%. It means that 1 in every 6 Texans lives in poverty. What’s even more telling is the state’s credit card debt status. Texas ranks eighth in the country when it comes to total credit card debts, with the average credit card holder owing about $7,000.
Texas also ranks among the highest in the country in the various credit-card-debt-related categories. These include credit card ownership, late payment, utilization rate, and maxed-out credit cards. Undoubtedly, Texans love their credit cards, but most of them are burdened with credit card debt.
Debt Consolidation Options for Texans
If you’re struggling to make a dent in your credit card debts, you may want to consolidate your debts. The options for credit card debt consolidation Texas residents can explore allow them to roll their debts into one loan. This way, they get to post only one check instead of several. Debt consolidation also allows one to pay at a lower interest rate, which means lower total monthly payments.
So, what Texas debt consolidation options are available to individuals who wish to consolidate their credit card debts? Below, we look at some of those.
Texas Debt Consolidation Loans
A debt consolidation loan is a personal loan that lets you bundle your credit card debts and other unsecured debts into a single, long-term loan. This leaves you with one monthly payment at a potentially lower interest rate. Typically, $50,000 high-interest credit card debt would amount to $109,000 in payments. With a Texas debt consolidation loan, this could incredibly go down to about $63,000.
With a debt consolidation loan, you can pay off all of your credit card debt in a shorter period. If you’ve racked up $50,000 in credit card debt, it would take over 20 years for you to fully pay off your debt. Yet, with a suitable debt consolidation loan, full payment could take about six years.
If you have credit card debt of $10,000 or more, a low-interest Texas debt consolidation loan could be a great option for you. You can apply for one with an online lender, bank, or credit union to find out if you qualify. Normally, you’ll need a good credit score to be eligible for a debt consolidation loan.
Credit Counseling in Texas
Credit card holders looking for debt relief in Texas can also consider credit counseling. A credit counselor assesses your debt situation and recommends the best course of action for you to get out of debt. The counselor draws up a debt management plan, which doesn’t involve getting a new loan. Since these are considered hardship plans, they typically reduce your credit card interest rates.
Credit counseling sessions also educates credit card holders on how to manage their money, make budgets, and improve their credit health. The debt management plans created by credit counselors are meant to consolidate your debts and lower the interest on your credit card debt. This form of Texas debt relief could enable you to pay off your debt in three to five years.
Texas Debt Negotiation
If you’re buried in debts and are looking for a way to get out of the hole, debt negotiation could be suitable for you. Debt settlement is particularly feasible in situations where an individual is five or more months behind on payments. However, more missed payments during negotiation mean a dented credit score, and the possibility of striking a deal diminishes.
Individuals considering Texas debt settlement have the option of do-it-yourself debt settlement or hiring a debt settlement company. Negotiating a settlement on your own isn’t easy, but hiring a debt settlement company will cost you money and time. If negotiations are fruitful, your creditors reduce your principal balance, helping you bring down your debt faster at a lower repayment cost.
Credit Card Balance Transfers
Credit card holders who qualify for credit card refinancing can have their credit card debt transferred to a balance transfer card. Normally, this credit card charges zero interest for a promotional period. However, you’ll need good to excellent credit to qualify for one.
Before choosing this consolidation option, ascertain whether you can pay all of your debt within the zero-interest period. After this window lapses, any remaining balance will be subject to a regular or higher APR.
HELOC or Line of Credit
Homeowners may be able to take out a home equity loan (HELOC) or line of credit on the equity in their home and use it to clear their credit card debts and other unsecured debts. A HELOC is a lump-sum loan offered at a fixed interest rate, while a line of credit comes with a variable interest rate as it works like a credit card.
These loans offer lower interest rates since they are secured by your house, and good credit may not be necessary for you to qualify. Further, their long repayment period means lower payments. However, defaulting on these loans could lead to foreclosure.
Retirement Account Loans
Texas credit card holders struggling with debt may also consider borrowing from their 401(k) retirement plan balance to pay off their debts. If your employer allows it, you can borrow half your vested account balance. In most cases, you’ll have to pay the advance in five years. However, borrowing from your retirement account isn’t advisable as it can reduce your retirement fund. What’s more, fees and heavy penalties may accrue if you can’t repay the balance.
Whenever you’ve racked up huge amounts of credit card debt, you may not be able to put up with payments. If you’re in such a situation, it is important that you consider the various Texas debt consolidation options. For debt consolidation loans, be sure to choose one that offers a lower APR than your credit cards. Debt relief programs in Texas like credit counseling not only help you pay off your debt quickly but also educate you on how to manage your finances.