It’s no secret that it’s quite expensive to live in California. In fact, residents of the Golden State pay the most for rent in the nation and rank third in home prices. It follows, then, that many Californians also draw above-average wages. However, even with such incomes, plus a generally thriving economy, scores of residents are dealing with loads of debt. These residents need help. To that end, here’s a California debt relief guide.
The Issue
Three years ago, the median household income in California was $75,315 – some $11,627 higher than the U.S. median. However, residents also have nearly $70,000 in household debt, including from student and vehicle loans, mortgages, and credit cards. The latter is an especially big burden: on their plastic, residents recently owed, on average, some $8,971. Moreover, 8.37 percent of those residents were behind in monthly payments.
What is Debt Relief?
This refers to multiple solutions that aim to lower your payment(s) with the ultimate goal of becoming debt free. Such relief can be through debt renegotiation or by supplanting existing debt with a new loan with different terms that can include a lower interest rate, reduced balance, waived fees, or different pay schedule. Here, we discuss debt consolidation and debt settlement.
Debt Consolidation
California debt consolidation is a strategy allows you to roll your debts, with all their disparate payments and due dates, into a single new loan with a better rate. It removes much of the bill-paying hassle, helps you erase your debt faster, and saves you money, to boot.
To get a debt consolidation loan, though, Californians, and anyone else for that matter, will need a good credit history and score, sufficient income, and a workable debt-to-income ratio (DTI) – the percentage of your monthly income that goes toward your obligations. While a good DTI is no more than 36 percent, loans are possible with ratios as high as 50 percent.
Note that while some California debt consolidation companies will give you a loan with less than good credit, if you don’t qualify for a better rate, consolidation may not be worth it. You should also understand that consolidation does not decrease the amount you owe.
Am I a Good Debt Consolidation Candidate?
You may be if:
- Your credit is at least good
- Your spending is under control, and you won’t run up debt with your new loan
- Your debt load is substantial and growing
- Your credit cards have high interest rates
Debt Settlement
With this form of debt relief, you hire a company to go to your creditors to see if they’d be willing to have your debts marked as “settled” in exchange for a one-time payment in full for less than what you owe. You have a good chance for success since creditors realize that, otherwise, they may get nothing, especially if you file bankruptcy.
How it works is, rather than pay your creditors directly, you save up your payments until you have a certain amount. Your negotiators will then use your saving as leverage. Once each negotiation is reached, and approved by you, the creditor will be paid from the funds. Then, and only then, do you pay your debt settlement company.
Am I a Good Debt Settlement Candidate?
You may be if:
- You have at least $10,000 in unsecured debt
- You’re often late on payments
- You’re having difficulties making your minimum payments each month.
Use this California debt relief guide to help return you to solid financial ground. Assess your situation wisely then choose the solution that’s right for you. We do suggest Freedom Debt Relief for its breadth of experience and accreditation.
