As Interest Rates and Credit Card Debt Climb, Consumers Turn to Debt Consolidation Loans

Climbing inflation and rising interest rates is a double whammy that has taken the wind out of the sails of the economy. More importantly, that whammy has taken a bite out of every consumers’ wallet. Surging consumer prices increased by 9.1% through the summer, according to the most recent U.S. Labor Department report. That figure is a 40-year high, and it translates to ten percent less spending power for every single American.

Less spending power means less savings. Today, American households are saving just 4.4 percent of their after-tax income, which is a steep reversal from savings rates in early COVID days. Back in 2020 and 2021, Americans were saving an incredible (and unprecedented) 35% of their income. But now many Americans are dipping into their savings just to pay their monthly bills.

Many Americans are then forced to turn to credit card borrowing, just to make ends meet. This can lead to a serious squeeze if you were already carrying credit card debt of any kind. Credit card interest rates rise with every interest rate bump from the Fed. With potential additional interest rate hikes on the horizon, debt consolidation loans may play an important part in offering some consumers financial stability.

Credit Card Debt is Surging Along with Climbing Inflation

During 2020 and 2021, consumer credit card debt dropped dramatically, to levels not seen in decades, due to stay-at-home orders and government stimulus checks. But credit card debt is rising rapidly once again and the reversal has been fast and furious. The Washington Post reported that, compared to a year ago, credit card debt has “increased at the fastest clip in 20 years.”

Research shows that many Americans are spending on their credit cards to offset inflation’s impact on their budget. With must-buy items like food and gas up in price by as much as 13.1% and 44% from last year, many US consumers have had no other option available than turning to their credit cards.

Debt Consolidation Loans Offer Relief

This particular environment — rising prices, rising interest rates — creates a prime opportunity for consumers. Consider debt consolidation loans as a way to get out from under variable and rising interest rates. Debt consolidation loans lighten the impact of compounding interest by locking in your debt at a specific interest rate and a specific payoff timeline. If you don’t continue to use credit cards to pay your monthly bills, you will know exactly when you will be free of your debt, based on the term of your loan.

What kind of rate you can expect from a debt consolidation loan is dependent on your credit history and your income. Not all consumers will qualify for the lowest interest rates, but since the average American’s credit score went up several points due to the enforced savings of the pandemic, most consumers are in a great position to benefit from good rates.

No one — not even the Fed — can be sure how long inflation will last, but the window of opportunity for smart consumers to transfer high-interest rate credit card debt to a debt consolidation loan is definitely right now. If you are carrying credit card debt, reach out and talk to a debt consolidation loan expert today to learn how much you can save. 

 

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