Debt Consolidation Is A Strategy That Many Turn To After New Year’s Day As A Result of Overspending
January is a month that Americans frequently use to clean up their holiday overspending with debt consolidation. After a review of Credit9, it appears that the company has been aggressively targeting consumers with unrealistic direct mail unrealistic low rates through direct mail and internet advertisements.
The holiday season between November and December has always been a time to celebrate. It has also always been time to spend. Unfortunately, some celebrate and spend too much. There is something about Thanksgiving, Christmas, and New Years that turn many of us into impulse shoppers. Unfortunately, anything borrowed needs to be repaid. With credit card interest rates averaging around 17%, it isn’t always easy or convenient to pay down those balances.
When is Debt Consolidation A Good Idea?
Debt consolidation is about reorganizing your debts. It is about lowering your monthly payments, lowering your interest rates and, extending the term so you are able to afford to make one low monthly payment. This can be achieved through a variety of different strategies. If you qualify, a low-interest debt consolidation loan can be the answer. Sometimes you won’t qualify for a loan, so your next options are debt settlement and credit counseling. The key is to do the research and explore different options and what you think makes the best sense for you and your family.
When Is Debt Consolidation A Bad Idea?
Debt consolidation works but only if you follow through. It isn’t easy and it doesn’t solve your problems instantly. If you are looking for instant gratification and you have become completely overwhelmed by your debts, you can simply give up and announce that you are declaring bankruptcy. However, if you don’t want bankruptcy on your record and you are serious about paying off your debt – even with reduced payments – then you must commit to following through with a plan.
How Does Debt Consolidation Affect Credit Score?
It can help but it can also hurt. If you qualify for a loan and you pay off your credit card debt with a lower interest rate, it is likely that your debt to income ratio will decrease. Credit bureaus like that. You may very well immediately end up with a better score. However, if you enter into a debt settlement or credit counseling plan, it will have a negative effect on your credit score.
Credit Card Debt Before The Holidays
According to Experian’s State of Credit Report, the American consumer has become a bit more aggressive when it comes to carrying credit card balances over the last three years. Even before the holidays arrived, Americans were carrying 5% larger credit balances than two years before.
Average Credit Card and Retail Credit Card Balances in 2019
$6,629 and $1,942
Average Credit Card and Retail Credit Card Balances in 2018
$6,506 and $1,901
Average Credit Card and Retail Credit Card Balances in 2017
$6,354 and $1,841