Florida Pays Debts in Anticipation for Another Recession
Though several news reports suggest that the United States will be able to pick itself up, some will not just take them at face value. They’d rather be prepared for another recession than to rely their hopes on the news.
These include the people of Florida. Based on a study conducted by a nonprofit debt management organization called Credit Karma, the Floridians have been paying their credit card debt and mortgage.
The figure is still high, considering they’ve been borrowing and spending for so many years, but the drop is still noticeable and significant. According to Credit Karma, there’s a difference of more than a thousand dollars between July 2011 and July 2012 on average credit card balances. The average mortgage also dipped from $174,309 to $161, 785. However, loans taken up by students considerably increased as education has become more expensive.
The Downsides of These Reduced Debts
The reduction in home loans and credit card debts should be a source of joy for the Floridians, and perhaps for the rest of the Americans. However, they cannot fully do so for a number of reasons.
First a number of these Floridians have tapped on their 401(k) plans to pay off their credit card and mortgage debts, especially those who are currently unemployed. However, this may also mean that by the time they’re already on retirement, they may no longer have enough left for sustenance. In the end, they’ll be forced to continue working. They may also sacrifice their health needs once they get old.
Second, the worth of homes still remains very low. It doesn’t then stop homeowners from asking, “Am I paying more than I should?” For others, the answer to this question is a resounding yes. Their total loan may turn out to be much higher than the value of their property. Thus, many prefer to hold off buying new homes and opting for refinancing instead.
Third, in spite of their repayments on credit card and mortgage, many are still bound to lose their homes by means of foreclosures or repossessions. Some, it turns out, prioritize their credit card debts over their mortgage. They’d rather lose their home than to have nothing to pay for their basic needs, such as food.
What Can You Do to Improve Your Debt Repayments?
The hardest thing for some Floridians is to choose one over the other: to pay off debts now over retirement, or to pay credit card dues over mortgage.
Surely, you’d like to know how you can avoid these types of choices as much as possible. The following ideas may be helpful:
Consider a modification program. Some states already have them in place. A modification plan may write off or greatly reduce your principal debt especially if you have an underwater loan. It may also restructure your mortgage program so it appears more affordable to you.
Think about balance transfers. If you have two or more credit cards, you can choose to transfer your balance to one that bears the smallest interest rate. You can also take advantage of a balance-transfer card with 0 percent interest for 18 months.