So one big question: how much and how quickly will that trickle down to ordinary consumer debt?
A lot of people would like to avoid bankruptcy. I get it. The Wall Street Journal published an article yesterday that while consumer credit debt is up 11% over last year, other sources of credit are drying up and no reasonable alternatives exist.
- Personal loans which are just under a 12% interest rate,
- Credit card rates of interest average 22% per the Federal Reserve,
- Heloc loans average 9%
Not only are rates a problem, but approval is as well. Originations of Helocs have been “overwhelmingly skewed” toward borrowers with very high credit scores per New York Fed data cited by the WSJ. So borrowers in trouble won’t be eligible.
Normally, it takes awhile for deposit funded banks to offer new reduced terms to its customers. But nowadays, fintech firms can act much quicker as much of their funding is dependent upon the government’s rate. Places like Affirm that service the buy-now-pay-later group may be able to approve more loans quickly.
Simply discharging the debt and then rebuilding your credit is probably the most overlooked option. Most people don’t realize that with their high debt to income levels, they’ve essentially maxed their credit making it unusable anyway. Why not see what options exist to get rid of that debt now?
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