Methods for dealing with debt are a popular topic of discussion on the internet. While some of these methods might be appropriate for a select group of people, they could be putting many others at risk for falling even deeper into debt than before. Home equity borrowing is especially troublesome as it can increase the risk of foreclosure for Connecticut homeowners.
As debt levels continue to grow, some people are struggling to repay their various debts. Household debt — including credit cards, student loans and mortgages — hit $13.54 trillion in 2018, an all-time high. Credit card balances are as high as they once were in 2008 and accounts over 90 days past due are growing. When faced with so much debt, personal loans can be a good method for consolidating debt, making it easier for consumers to make a single monthly payment. Unfortunately, it can also provide a false sense of zeroing out debt, leading some to increase their spending habits.
Another problematic form of debt management and relief is borrowing against home equity. While this form of borrowing is marketed as a smart way to address debt, there are significant drawbacks. These loans pull equity out of other important areas, such as funds that could be used in an emergency. Consumers who are using these loans to address unsecured debt should also be aware that the loans are considered secured debt, which cannot be discharged in bankruptcy and will not be protected from foreclosure. This means that a person taking out a home equity loan could be setting him or herself up for even more difficult financial hurdles.
Connecticut consumers usually have the best intentions when they try to manage their debt on their own. In general, most people just want to pay back what they borrowed and move on with their lives. Unfortunately, debt management is not an appropriate solution for everyone. Instead, personal bankruptcy could provide a more secure and proven path for relief from foreclosure and overwhelming amounts of debt.