The average Tennessee household had over $6,200 in credit card debt in 2018. If you live in The Volunteer State and are overwhelmed by credit card and other debt, you’re not alone. Although the knowledge of others being in the same situation as you probably offers little consolation, since being in debt is probably wreaking havoc over your lives.
If you want to get out from under your debt without pursuing bankruptcy, debt consolidation may be the answer. Every year, Tennessee debt consolidation companies help thousands of people like you reclaim control over their finances. To find out if debt consolidation is right for you, review the facts below:
1. How Tennessee Debt Consolidation Works
The process of debt consolidation is pretty easy to understand. As the term “consolidation” implies, it involves combining several separate debts—typically unsecured ones, like credit card debt—into a single, new loan. This may be accomplished by opening a new, low-interest credit card and transferring balances from other cards and loans onto it, or it may be done by taking out a new secured or unsecured loan. Once the debts are consolidated, you are left with a single monthly payment and, in many cases, reduced or waived fees and a more manageable interest rate.
2. Debt Consolidation Loans vs Debt Consolidation Programs
When most people seek debt consolidation, they are thinking of debt consolidation loans, which are described briefly above. In Tennessee and elsewhere across the country, debt consolidation programs are also available. However, Tennessee debt consolidation programs are not interchangeable with debt consolidation loans. Debt consolidation programs collect a single monthly payment from clients and then disperse the funds to the client’s creditors. At the same time, they typically negotiate reduced or waived fees and reduced interest rates.
3. Wage Protection in Tennessee
As a resident of Tennessee, you are protected not only by federal consumer laws but by state-level consumer laws. For example, by state law, 75 percent of your disposable weekly earnings, or 30 times the federal hourly minimum wage–whichever is greater—are protected from garnishment by debt collectors. This is great news for those who wish to seek Tennessee debt consolidation relief because it means that they can typically complete the consolidation process without fear of being garnished and unable to keep making payments. It should also be noted that the statute of limitations on pursuing payment for a debt in Tennessee is six years, so it is generally best to be proactive by pursuing consolidation than to try to run out the clock.
4. Be Careful with Teaser Credit Card Rates
Many credit cards are billed as being ideal for things like debt consolidation because they offer competitive interest rates and other perks. However, such cards often offer low introductory rates that skyrocket later on. Typically, if you fail to pay off the entire balance within that time-frame, the higher rate is applied to whatever you still owe. Needless to say, this can put a wrench in the works when trying to consolidate debts, so choose credit cards wisely when pursuing debt consolidation.
5. A Lower Interest Rate Isn’t Always Enough
One of the chief goals of debt consolidation is moving debts from cards and loans with higher interest rates to a card or loan with a lower one. Even if you are able to do so, however, it may not help you in any appreciable way if certain factors apply. In particular, if the loan that you take will be extended out over a very long period of time, you could still end up paying about as much with interest accumulating—and it will take you that much longer to become debt-free.
6. Your Credit Will Improve But May Take a Hit at First
Those who pursue Tennessee debt consolidation are often promised that their credit will improve right away after moving their debts to a single credit card or loan, but you should take such promises with a grain of salt. Debt consolidation can indeed help you to improve your credit, but your score will likely take a small hit at first. This may be from closing old accounts, which reduces the overall age of your credit. However, it should also lower your utilization rate, and this will help your score to improve before too long.
7. You Must Stop Accumulating New Debt For It to Work
Finally, even the best debt consolidation service in the world won’t matter if you continue to accumulate debt. Therefore, it is crucial to get to the bottom of how your debt spiraled out of control in the first time and to then correct the associated behaviors. Many debt consolidation companies include debt counseling with their services, and it can go a long way toward helping you to improve your overall financial literacy. With your new money-management skills, you will have an easier time avoiding debt in the future.
Even if you are considerably in debt, bankruptcy isn’t a foregone conclusion. Through Tennessee debt consolidation, you may be able to reduce and eliminate your debt without taking such a drastic measure. It’s easier than you probably think, so check into debt consolidation services that suit your needs today.