Washington debt consolidation could be a smart move for consumers drowning in debt. In addition to offering much-needed debt relief, consolidation can help you avoid bankruptcy. Before the Covid-19 pandemic shook the country’s economy, Washington residents had been experiencing unfavorable living conditions due to an increase in rental costs and home values.
Washington Credit Card Debt Statistics
The national average for credit cards per consumer is 5.6. Evidently, Americans love their credit cards. However, Washington has among the lowest number of credit cards per cardholder in the nation (4.6). Further, the average Washingtonian carries about $6,307 in credit card debt – slightly less than the national average ($6,569). However, that’s where the decent credit statistics end.
Credit cardholders in the country’s capital have the 12th highest credit card utilization rate – the amount of debt one has compared to their usable credit. With an average utilization rate of 41%, the FICO credit score of Washingtonians is likely to be negatively affected. In addition, 7.1% of Washingtonians have a maxed-out credit card, while 6.8% are at least 30 days late with their credit card payments. These are just examples of numbers indicating that D.C. residents are struggling with debt.
Washington Debt Consolidation: How it Works
Consumers who carry multiple credit cards in D.C. are likely to struggle to keep up with payments at some point in life. In that case, debt consolidation in Washington can be a viable financial solution. However, this process may not apply to everyone, and you must do some research before committing to consolidation.
In case consumer debt consolidation seems like a process worthy of consideration, then you have to learn the basics of how it works. Basically, consolidating debt means that you roll all your unsecured debt into one monthly payment. You can do this by taking out a new loan or credit card.
Washington debt consolidation isn’t a magic formula to solving your debt issues. So, how do you know that it is right for you? If you’re considering consolidation, ask yourself whether the process will reduce your
outstanding debt, monthly payments, and payment period. Also, find out whether you’ll incur consolidation fees and how
long interest will be charged.
The ideal Washington debt consolidation option will lower your monthly payments and decrease your payment period.
Consolidating Your Debts in Washington
With many debt relief solutions available, you’ll want to ensure that debt consolidation works for you and that you do it right. Here’s what to do before you start the process of consolidating debt.
Review the Details of Your Debts
If you haven’t kept up with the details about your debts for months, you need to get a copy of your credit report before you can begin consolidation. You won’t establish the effectiveness of debt consolidation if you don’t review all of your debts. Before starting the Washington debt consolidation process, know what you owe and how much you owe, and the interest rates on your personal loans.
Determine Your Net Monthly Income
To find out whether you can make reliable monthly payments on your debts, assess your monthly incomes and expenses. Preferably, note your reliable monthly incomes, such as fixed wages, as you can count on these to make monthly payments. You can hardly count on unreliable incomes for your Washington debt consolidation as you may experience difficulties making monthly payments.
Establish Your Budget
Do the math – get a detailed account of your incomes, expenses, and debts. If your income exceeds your monthly costs and minimum monthly payments on your debts, you can benefit from debt consolidation. When your monthly expenses and debt payment amounts exceed your income by a long way, you’re better off exploring other debt relief programs, such as debt settlement or filing for bankruptcy.
Evaluate Your Washington Debt Consolidation Options
If debt consolidation is a good fit, you go ahead and pick your preferred consolidation option. Below, we look at the most common consolidation options for consumers seeking credit card debt relief.
Debt Consolidation Loans
You can consolidate your debts into a single monthly payment by taking out a loan from a bank, credit union, online lender, family member, or friend. Personal loans from family members or friends are attractive as they often come with a low or no interest rate and favorable payment terms.
If you favor taking out a consolidation debt from a financial institution, beware of “teaser rates” – low interest rates that only apply for a limited period. Also, ensure that you find out if your consolidation loan includes fees and costs and how long the payment period will be. A Washington debt consolidation loan with a lower interest rate than your present debt can save you money in interest charges.
Credit Card Balance Transfer
A balance transfer refers to moving your debt from several credit cards to one card with a zero-percent or low-interest interest rate for a given period. Credit card companies that offer credit card transfers allow you to consolidate your debt interest-free only for a limited time. You can save a lot of money on interest charges by doing a credit card balance transfer and paying off all of your debt within the promotional period.
Consolidating debt with a balance transfer card may not always be as smooth as it sounds. Depending on your credit score, credit card companies may limit the transferrable balance, and transferring your entire balance may not be possible. Being delinquent on your monthly payments could also result in your credit card company introducing a penalty in your APR rate. What’s more, most credit card companies charge a fee for a balance transfer.
In Washington, you can find agencies that run government approved debt management programs. If you’re feeling overwhelmed with debt, you can consult with a not-for-profit agency for debt relief. A credit counselor will review your financial situation and help you create a personalized plan to pay off your debts.
Credit counselors can negotiate lower interest rates on your existing debt with your creditors. If you agree to the financial plan, you make monthly payments to your credit counseling agency, which in turn makes payments to your creditors. If you choose to consolidate your debt through credit counseling, be sure to find out the fees you’re likely to incur. The “nonprofit” label doesn’t always mean that these agencies offer free or affordable services.
Washington residents struggling in debt don’t always have to file for bankruptcy for debt relief. If your debt is manageable and you have good credit, you can consolidate and pay over a given period. While your credit score may take a hit, being consistent with your monthly payments and paying off all of your debt will improve your credit. Before committing to debt consolidation, be sure to work out your budget to establish reasonable minimum monthly payments on your debts.