The American economy has taken a striking blow due to the COVID-19 pandemic. The shutdown of business across numerous industries has been felt across the spectrum. Unemployment rates are reaching astronomical highs with over 30 million Americans having to register for unemployment compensation within the past few weeks alone. With financial devastation at such alarming levels, relief efforts such as the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act” (aka the “CARES Act”) stimulus package have not proven adequate in keeping most Americans afloat. The current financial climate has left most people with very few options for basic necessities like paying rent and mortgage, purchasing food and just plain surviving. Recognizing filing for bankruptcy is a last resort, many Americans have turned to debt consolidation.
The Benefits of Debt Consolidation in Media, PA
A recent CreditCards.com survey found that 59% of credit card holders entered the coronavirus pandemic with credit card debt. Most of them had been carrying the debt for a least a year. If this is a dilemma you currently find yourself in, one way to improve your financial situation during these troubling times is debt consolidation. Many Media, Pennsylvania residents have turned to debt consolidation loans and low-interest credit card balance transfers to make it through the coronavirus pandemic’s economic downturn.
Debt consolidation is sometimes the only way to escape financial quicksand without facing bankruptcy, but it requires serious commitment and often a major change in lifestyle. Any smart financial advisor or credit counselor will tell you in order to be successful with debt consolidation, one must change the habits that placed you in debt in the first place. For example, using your CARES Act stimulus check to make additional and unnecessary purchases is not a sign you are trying to put debt behind you. This practice will only further run up your debt amounts and place you further into a the very home from which you are trying to escape! Further, using your CARES Act stimulus check to pay off debt when you and your family desperately need cash on hand may not be the way to go either. You will certainly be better off asking your debtors for leniency and forgiveness while keeping food on your table and shelter over your head. Through the CARES Act, eligible taxpayers are receiving up to $1,200 for individuals or $2,400 for married couples. Parents are also receiving $500 for each qualifying child. This is money that can prove extremely useful if used wisely.
If you decide debt consolidation is the way to go for you and your family, the initial step is to determine how much you owe and to which types of institutions. A financial advisor, credit counselor or bankruptcy lawyer can assist you with intelligent advice on how to make the best of debt consolidation. Each will give you plenty of insight and help you keep Chapters 7 and 13 bankruptcy as last resorts. In determining what types of debt you have incurred, you will be able to clearly define which is secured debt versus which is unsecured debt. Secured debt is attached to something you own. If you own a house, failure to make payments can lead to foreclosure. If you owe money on a car and don’t pay, the lender will repossess the vehicle. This is key to know as these are items your family may need to survive during these scary and uncertain times. Unsecured debt is what you owe on credit cards, personal loans and student loans. This type of debt does not use collateral so there is nothing for the lender to repossess or foreclose. The lending institution might, however, sue and try to garnish your wages if you default on the loan or credit card you have acquired. The downside of unsecured debt is the interest rate which can be extremely high since a loan without collateral represents a bigger risk to lenders than one with collateral. The lending institution is taking on most of the risks so the interest rate is almost always higher.
Debt Consolidation Strategies During the Coronavirus Economic Downturn
A financial advisor, credit counselor or bankruptcy lawyer in Media can all give you sound advice on how to make the best and get the most out of debt consolidation. There are certainly several proven strategies proving there is no cookie cutter, one size fits all solution. A few possible ways ahead can include:
- Arrange a Debt Management Payment Plan / Nonprofit Credit Counseling Agency
- Transfer unpaid balances to a single credit card with a lower interest rate
- Take out a personal loan
- Use a home equity loan or a home equity line of credit (HELOC)
- Borrow from a retirement savings plan like a 401(k) or a Roth IRA
Of course, your ability to make use of loans and credit card balance transfer solutions leans heavily on your previously obtained credit history and FICO (originally Fair, Isaac and Company) score. A FICO score is a measure of consumer credit risk and has become a fixture of consumer lending in the United States. It is important in determining if you can get a loan or a credit line large enough to consolidate your debts at an interest rate that makes sense. Every strategy requires that you have the income to cover the monthly payment and all your other expenses. If you miss a payment, the deal could easily unravel. If you use a home equity loan or HELOC, you might even face foreclosure.
The Law Offices of Michael Siddons is a Media, PA based bankruptcy firm. In addition, the law firm specializes in personal injury, real estate law, business law, commercial litigation and taxation. Lead attorney Michael Siddons, with 10 years of legal experience, is well versed in all facets of collections practice, from dunning through execution, on judgement and garnishment. If you find yourself in need of debt consolidation counseling during the coronavirus pandemic, please do not hesitate to give the Siddons Law Firm a call at (610) 255-7500. We will make certain you are set on the right path to success.