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Use debt consolidation wisely when tackling credit card debt

According to recent studies, personal loans are becoming more common among consumers in Florida and in other states around the country. In fact, over the past five years, there has been a 64 percent increase in the number of people in the country who have one. Many individuals are applying for these loans in an effort to do a debt consolidation to reduce credit card debt. A considerable number of these loans are obtained from online financial companies and other peer-to-peer (P2P) lenders.

The interest rate is likely lower on a personal loan than that of a credit card. Thus, if someone were to use a debt consolidation loan to pay off credit card balances, he or she can potentially save some money. Examples are given of people who saw quick credit score increases once credit card balances were reduced or eliminated.

However, financial experts are concerned that some individuals may end up in further debt after getting a personal loan. A study by the Federal Reserve Bank of Cleveland revealed that roughly one third of consumers increased their credit card balances after obtaining a personal loan from a P2P lender. The study authors have called for stricter regulations for these types of lenders.

When someone is encountering financial difficulties, it is natural to seek help. However, it is critical that the assistance be from a credible source. An experienced Florida bankruptcy attorney will evaluate the situation and determine if a debt consolidation loan is the best course of action or if another solution would be better. A knowledgeable lawyer will provide guidance to their clients to help get them back on track financially.

Source: credible.com, "Study suggests many borrowers bungle credit card debt consolidation", Matt Carter, Nov. 16, 2017

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