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Over the past year, credit card debt According to the New York Fed, government debt rose 5.8% to $1.14 trillion, and 9.1% of credit card balances went delinquent. The increase in debt can be partly attributed to rising inflation and rising prices for everyday purchases. pay off credit card debt The situation has not changed, with average interest rates rising from 16.45% in 2021 to 22.76%, according to the most recent data from the Federal Reserve.
It’s difficult, if not impossible, for some to build a solid financial foundation for the future when most of your money has to go toward bills and debt.
Fortunately, Americans burdened by debt are likely to receive some good news this week, as the Federal Reserve is expected to lower interest rates. This move could translate into lower credit card rates, which could provide some relief to cardholders struggling to keep up with high interest payments.
For those considering Debt relief To ease their budget, the question arises: is it still worth it if interest rates fall? We asked some experts for their opinion.
Learn more about how debt relief can help you here now.
Is Debt Relief Worth It As Interest Rates Fall?
Here are cases where debt relief is (and is not) sought as interest rates fall, according to some experts:
When Debt Relief Is Worth It as Interest Rates Fall
Yes, debt relief services This can be helpful for those struggling with debt, even though interest rates are falling, says financial attorney and author of “Life and Debt” Leslie H. Tayne, Esq.
“Some credit cards have annual interest rates as high as 30%, so even if interest rates go down, those who are struggling to repay their debt will remain stuck in a cycle of not being able to repay it. Everyone’s situation is different when it comes to debt and their ability to repay it, but a debt relief service may be able to help with budgeting and managing finances, especially if credit card debt is spiraling out of control.”
Any interest rate cuts by the Fed are likely to be modest, at least initially.
“The potential for a Federal Reserve rate cut in September — estimated at nearly 75 percent — of 25 basis points will likely result in only a few percent reduction in consumer credit card rates,” said Corey Voorman, president and founder of Voorman Investment Counsel. “For people who have been struggling with debt for years, this will provide little relief.”
Voorman says debtors have to face up to their debts and quantify them, which is not an enjoyable task. “Many people never face up to their debts and avoid looking at their statements and calculating the exact extent of what they owe. They then have to develop a plan to pay them off. That plan often includes consulting a debt relief company or bankruptcy attorney.”
Start exploring the best debt relief options available to you here today.
When Debt Relief Isn’t Worth It as Interest Rates Fall
Decide whether seek debt relief It’s a personal decision. As Anna Sergunina, CEO of Main Street Planning, points out, debt relief can be helpful for some, while others might benefit more from alternative options.
“For someone struggling with debt, a debt relief service can help create a structure and plan to pay off the debt first, as well as potentially negotiate terms (interest rate and timeline).” Sergunina explains that those who are able to manage their debt on their own may not need debt relief services, which can charge fees and impact your credit score“They might benefit more from debt consolidation, refinancing or strict budgeting, especially if they can take advantage of lower interest rates in the future,” Sergunina says.
Should we wait for interest rates to fall further before asking for debt relief?
Tayne advises consumers not to wait for interest rates to drop before seeking debt relief services. “Rates are expected to drop, but only by a quarter of a point, and it will take time for consumers to benefit. If you are currently struggling, it is always wise to seek appropriate help as soon as possible. Clients often tell me they wish they had started sooner,” Tayne says.
The essentials
Keep in mind that the requirements for obtaining debt relief may vary depending on the type of relief you are seeking. For example, you may need to prove that you are experiencing financial hardship to obtain debt relief. debt settlement although you will likely need good credit and a reliable income to qualify for a debt consolidation loan.
If you’re considering using a debt relief service, check the reputation and track record of any company you’re considering. Along the same lines, the Consumer Financial Protection Bureau (CFPB) advises checking with your state attorney’s office or regulator to check for company complaints. Also, look for some of the best debt relief companies in different categories to see which one suits you best.
