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CBS News
13-05-2025
- Business
- CBS News
These are the most effective debt relief strategies to use right now, experts say
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. There are a few debt relief strategies that could be the financial life preserver you're looking for now, experts say. Getty Images Economic factors, like inflation and potential tariffs, have put financial pressure on Americans, forcing many to turn to credit cards for help. Credit card balances are now at record highs, and with average credit card interest rates nearing 22%, that debt comes with costly consequences. As a result, this type of debt can be overwhelming, to say the least, and even making the minimum monthly payments can leave you stuck in a pricey cycle of debt for years to come. Fortunately, there are debt relief tools that can help. "If there's any silver lining to this economic rollercoaster ride, it's the renewed focus on debt solutions companies. When the economy is roaring, these powerful services tend to get ignored. Now Americans are rediscovering their value," Howard Dvorkin, chairman of says. But not all debt relief options are created equal. If you want to make sure you tackle your debts in the most effective way possible, it's important to know which debt relief strategies make the most sense in today's unique economic climate. Find out how to get help with your high-rate debt today. The most effective debt relief strategies to use now, experts say These are the best routes to explore right now, according to the pros: Debt consolidation Financial pros say that debt consolidation is likely your best option these days, as long as you choose the consolidation product carefully. "With debt consolidation, you consolidate all of your loans into one loan, preferably with a lower interest rate," says Laura Sterling, vice president of marketing at Georgia's Own Credit Union. "Rather than pay multiple loans, you focus on paying one loan, saving money on interest, and streamlining the repayment process." Some lenders offer designated debt consolidation loans you can use for this purpose or, if you're a homeowner, you can use a home equity loan or home equity line of credit (HELOC). HELOCs are one of the best options right now, according to Patti Brennan, president and CEO of Key Financial, as the "interest rates are much lower than credit cards," she says. The average HELOC rate right now is just below 8%. Keep in mind that a new loan will require an application and credit check, so these aren't the best options if you have bad credit. "These can be a good fit if the consumer's credit is fair-to-good, and if they can qualify for decent loan terms," says Natalia Brown, chief compliance officer at National Debt Relief. "The only downside is that it might require collateral and could stretch out the repayment timeline." Explore your debt relief options and start tackling your debt problems today. Balance transfer cards Another option is a balance transfer card. Similar to debt consolidation loans, this strategy involves taking out a new card, paying off your debts and rolling it all into one balance. The new card would ideally be one with a 0% or very low promotional interest rate, allowing you to save money on interest and pay off your debts faster. "If the customer has good credit and can pay off the debt quickly, a balance transfer credit card might help," Brown says. "The catch is that it needs to be paid off before the introductory period ends, or you'll be left dealing with high interest and fees." Debt management plan Debt management plans are another effective option these days. This involves handing your debts over to a debt relief professional or a credit counselor. They will then negotiate with your creditors to try and lower interest rates and fees and come up with a plan for repaying your debts over a specific time period. You'll pay them a monthly fee for this service. "A debt management plan can help the customer stay organized and on track with monthly payments," Brown says. "However, it doesn't actually reduce the total amount owed and usually takes about four to five years to complete." Note, though, that debt management plans typically require you to close out any open credit lines. This ensures you don't rack up more debt while paying down your existing balances. Debt settlement Another option you might explore right now is debt forgiveness, also known as debt settlement. This requires negotiating with your creditors to pay them less than you owe to close out the debt. "Debt settlement is one of the most effective solutions for individuals with $7,500 or more in unsecured debt — such as credit card balances, medical bills, or personal loans," Brown says. The big downside is that debt settlement requires you to stop making payments while your debts are being negotiated. This can put a big dent in your credit score and hurt your financial options moving forward. You should make sure to consider the costs, too. "They charge a high fee for this service," Sterling says. "You will also likely pay taxes on any debt that is forgiven." The bottom line At the end of the day, good financial planning is key if you want to get out of debt. "Create a budget and track your expenses," says Doug Roller, investment advisor representative and owner of Crossroads Financial Group. "You can also call your creditors and see if they can do anything to help you not fall behind on your payments." There are also debt payoff methods you can try, like the avalanche or snowball. With the former, you focus on paying off your highest-interest debt first, making minimum payments on the rest. Once that's paid off, move on to your next highest-interest debt. The snowball method is similar, only it focuses on the smaller-balance debts first. "This method makes the minimum payments to larger debts and puts more money towards the small debt to pay that off faster," Roller says.
Yahoo
17-04-2025
- Business
- Yahoo
What is a fixed-rate HELOC and how does it work?
The interest rate on fixed-rate HELOCs stays the same, as opposed to fluctuating as it does with traditional HELOCs. Some lenders let you convert part of a traditional variable-rate HELOC balance to a fixed rate. Fixed-rate HELOCs may charge higher fees and come with higher interest rates. You might know how a home equity line of credit (HELOC) works — a revolving line of credit with a variable interest rate, sort of like a credit card. That's your standard HELOC. But there's a less common variety: a fixed-rate HELOC, whose interest rate can be locked in — so your payments won't vary. Here's how a fixed-rate HELOC works and how it differs from a traditional home equity line of credit. If a regular HELOC is akin to a big credit card, a fixed-rate HELOC is similar to a second mortgage. Actually, it's a hybrid of a home equity loan (which gives you a lump sum at a fixed rate) and a home equity line of credit. It allows you to freeze a portion or all of your balance at a fixed interest rate, protecting you against market fluctuations that impact rates. With a fixed-rate HELOC, you can withdraw as much or as little of your credit line as needed, just as with a variable-rate HELOC. Unlike the variable variety, though, the interest rate on a fixed-rate balance won't change for the length of the term. If your HELOC lender offers a fixed-rate option, you can usually do the conversion at closing or during the draw period, says Laura Sterling, vice president of Marketing at Georgia's Own Credit Union. Locking in a fixed interest rate can provide the stability of predictable monthly payments. The fixed-rate portion of the HELOC can be locked in for terms ranging from five years to 30 years, during which time the loan is paid back like a typical mortgage, says Joe Perveiler, home lending product executive at PNC Bank. Like any home equity loan or line of credit, the interest rate on your fixed-rate HELOC will depend on your credit score and current market rates. Typically, lenders will let you freeze some or all of the balance on your HELOC at any point during the draw period. They might limit how many times you can lock in a fixed interest rate on your HELOC (for example, U.S. Bank allows customers to have up to three fixed-rate balances at any time, while Regions Bank offers the option to convert part of its HELOC into a fixed-rate loan, up to 10 times). Also, some lenders require a minimum balance to switch to a fixed interest rate. Depending on your lender, you might be able to lock the rate yourself through your online account, or you may need to contact a representative to do so. As with any financial product, there are both benefits and drawbacks associated with a fixed-rate HELOC. Here are some of the considerations to keep in mind. Avoid interest-rate fluctuations: Regular, variable-rate HELOCs' rates can change as often as monthly, following fluctuations in the prime rate or whatever index your loan follows. But if your HELOC is fixed, you won't have to worry about interest-rate trends. Stable, predictable repayments: When you have a consistent interest rate, you know exactly how much your monthly payment will be. This can help with budgeting and planning for other expenses. Potential to lock future low rates: HELOCs can be very long-term debt, as long as 30 years. A lot can happen to interest rates in that time. But with a fixed-rate HELOC, you can grab a good rate and hang onto it. Even if interest rates go up, the payment on your HELOC won't increase – you're guaranteed a low rate for the duration. Higher interest rates and fees: The interest rates on fixed-rate HELOCs are often higher than the initial rates on traditional HELOCs. Plus, many lenders charge a fee when you lock a rate. Other closing costs and fees — such as the origination and account maintenance fees — may also be higher with a fixed HELOC. Harder to find: Fixed-rate HELOCs are becoming more popular, but they still aren't as widely available as their traditional counterparts. If your lender does offer them, you might be required to have a minimum balance on the HELOC before converting to a fixed rate, or the lender might mandate a minimum or maximum amount whose interest rate you can freeze. More complex bookkeeping: If you convert only part of your balance or take out additional funds after your rate lock, you'll have to keep track of the amount you're paying back at a fixed rate plus how much you're paying back at a variable rate. (Your statement should delineate the amounts, but it's still a bit complicated.) A variable-rate HELOC translates to some uncertainty when planning your monthly household budget. A fixed-interest HELOC's payment can't fluctuate. So, what's the downside? For starters, HELOCs with a fixed rate typically have higher initial interest rates than traditional HELOCs, says Sterling. You're paying for the privilege of that potential rate freeze, in other words. Fixed-rate HELOCs might charge higher origination and maintenance fees than comparable traditional HELOCs, too. Generally, the terms — length of draw period and repayment period — are the same on both types of HELOCs. However, the fixed-rate variety might impose parameters on borrowing that you won't have with a variable-rate HELOC. If you fear inflation, a fixed-rate HELOC might be the smarter move. That's because, regardless of what happens with the economy and interest rates, you'll still have the security of a fixed rate. Remember, a regular HELOC's rate will fluctuate, so if interest rates decline, you'll get the benefit. So the-switching-to-a fixed-HELOC strategy works best if you think rates have bottomed out, and that they'll soon be on the upswing again. If prevailing market rates drop, however, you might not be able to easily convert back to a variable rate and reduce your payments. A fixed rate can be especially beneficial if you're using the HELOC to make home improvements. It relieves you of any rush to draw funds and begin remodeling before the rate increases. 'Establishing a fixed-rate lock on a HELOC can often make sense when a customer has a planned expense they need to finance, such as a home renovation project,' says Perveiler. 'In that scenario, the customer will have full certainty about the cost of their financing.' A fixed-rate HELOC might also come in handy in an emergency, such as an unforeseen medical bill, or to consolidate debt. Depending on your lender and loan terms, fixed-rate HELOCs may come with several fees, including: Origination fee Conversion or rate lock fee Annual or maintenance fee Prepayment penalty Also, while a fixed-rate HELOC lends certainty to your budget, there's no telling how interest rates might change in the future. If rates fall, you might find you were better off with a variable-rate line of credit. There might also be hidden fees, such as penalties for paying the line off early or a fee for exercising the conversion option. For example, Bank of America charges an early closure fee of $450 if you shut down your HELOC within 36 months of opening it. Meanwhile, U.S. Bank's prepayment penalty applies if you close and pay off a HELOC within the first 30 months. It equals 1 percent of the original line amount (up to $500). 'Borrowers may want to look out for annual fees and rate locks,' says Sterling. 'Some lenders cap the number of fixed-rate locks that a borrower can do annually and may charge a fee for each rate lock. Borrowers should also be aware of minimum withdrawal amounts' (at Bank of America, it's $5,000, for example). Something else to consider: The fixed rate you lock in will likely be a few percentage points higher than your HELOC's current rate. This increases the cost of borrowing and requires you to pay more in interest. Lenders sometimes require a minimum outstanding balance on the line of credit before you can get the fixed rate. This might not work well for you if you're trying to stay within a certain budget, forcing you to borrow funds you don't really need. 'Some lenders may mandate a minimum amount to be converted to a fixed rate, often starting around $5,000,' says Alexander Suslov, head of capital markets for A&D Mortgage. They might also restrict how many times you can switch from a variable rate to a fixed one. The traditional, variable-rate HELOCs have long been the predominant type of HELOC, and it continues to be the most widely offered. The interest rate on traditional HELOCs changes with the fluctuations in other interest rates, based on the benchmark rate set by the Federal Reserve. However, fixed-rate offerings are becoming more common: Lenders began adding them amid the soaring-interest-rate environment of the last two years. Fixed-rate HELOCs offer protection in such climates. That was mortgage lender Rate's thinking in adding a fixed-rate HELOC to its product line in 2022. Even though HELOC rates have been softening since late 2024, lenders are continuing to offer the option, figuring it's a feature that appeals to borrowers. When interest rates drop, a variable-rate HELOC might be tempting — and indeed, more financially beneficial than a fixed-rate one. If you've already converted your variable rate to fixed, 'some lenders may allow the borrower to convert back to a variable rate' later on, says Sterling. The ability to switch back and forth between variable and fixed rates allows you to take advantage of lower interest rates when they become available. If not, plan B could be a refinance of the HELOC (see FAQ). Whether it's a home renovation project or a large unexpected expense, it's a good idea to examine both variable-rate and fixed-rate HELOC options carefully to determine which one makes sense for you. Both have their benefits; it's just a matter of your needs. Here are some questions to ask: What's the interest rate environment? 'If you are in a rising rate market, a fixed-rate HELOC could be a good option,' says Sterling. 'If you anticipate rates remaining low, you may save more with a traditional HELOC.' Is there a set amount you need to borrow? Are you paying off a student loan or financing a large or ongoing home improvement project? Fixed-rate HELOCs might give you more flexibility; however, some lenders require that you borrow a minimum amount to lock in the rate. Are you comfortable with payments that could change over time? 'If the answer is no, a fixed-rate HELOC could be a good choice,' says Sterling. If it's yes, a traditional variable-rate HELOC will work just fine — just be sure to budget for big jumps, especially when your repayment period begins. How does a fixed-rate HELOC compare to a home equity loan? Actually, they're pretty similar. Both are secured by the equity of your property and can be used for similar purposes, such as home improvements or debt consolidation. Both also typically offer lower interest rates compared to unsecured loans, says Suslov. However, a fixed-rate HELOC starts as a revolving line of credit with a variable interest rate that can later be converted to a fixed rate for all or a portion of the current balance. A home equity loan, on the other hand, provides a lump sum of money that's repaid in installments with a fixed interest rate from the beginning. Another way to think about it: When you fix the rate on a HELOC, you're essentially turning it — or at least a portion of it — into a home equity loan. The main difference is that, with the HELOC, you can continue to withdraw funds as needed. And repaying them replenishes your credit line. Can I convert an existing HELOC to a fixed rate? Yes, many lenders will allow you to convert a variable-rate HELOC to a fixed rate during the draw period. To do so, you should contact your lender to express interest in a conversion, says Suslov. 'The lender will then assess eligibility based on factors such as the current balance, loan-to-value ratio, and credit score,' says Suslov. On the other hand, if you're in the repayment period and want to convert to a fixed-rate HELOC, there are a couple ways to go about it: • Open a new HELOC. The simplest way to get a fixed-rate HELOC is to take out a new HELOC altogether — a fixed-rate one or a hybrid that lets you convert. • Refinance your old HELOC. If you open up a new hybrid HELOC, you can use it to refinance your existing HELOC — you'll simply pay off the balance of your old HELOC using funds from your new line of credit. This strategy will also give you a new draw period. Or, instead of a new credit line, you could refinance with a home equity loan. For example, FourLeaf Federal Credit Union offers the unique option to convert some or all of a variable-rate HELOC to a fixed-rate loan without a fee; you can choose between five-, 10- and 20- year repayment terms. Can you pay off a HELOC early? Yes, you can pay off and close a HELOC early — during the draw period or at the beginning of the repayment period. But before you do, check if your lender charges an early closure or termination fee, aka a prepayment penalty. Not all lenders impose these charges (it's more common with banks), but if yours does, it could come in the form of a flat fee or a percentage of your HELOC amount. Additional reporting by Taylor Freitas Sign in to access your portfolio
Yahoo
26-03-2025
- Business
- Yahoo
Today is Giving Day at the American Red Cross
Today is Giving Day at the American Red Cross. The nonprofit asks for donors to help those facing crises by contributing and assisting them in providing shelter, food, relief items, emotional support, and other assistance. On their website, you can choose a particular focus for your donation: stock an emergency response vehicle, supply a full day at an emergency shelter, provide a health or mental health worker, provide families with clean-up kits, or provide financial assistance. In downtown Atlanta, Georgia's Own Credit Union is amplifying the Red Cross' reach by featuring Giving Day on their sign that stretches across their building, 450 feet into the Atlanta skyline. The sign will be displayed until the rest of Giving Day at 11:59 p.m. tonight. Plus, your donation could go even further thanks to Ford Philanthropy, which is matching all gives, dollar for dollar, up to $200,000. Visit their website to donate. [DOWNLOAD: Free WSB-TV News app for alerts as news breaks] TRENDING STORIES: Atlanta bagpiper killed while scuba diving; son who vanished 4 years ago found dead at home GA Law enforcement makes biggest fentanyl bust in state history, enough to kill 2.5 million people Eviction turns into major drug bust in Atlanta [SIGN UP: WSB-TV Daily Headlines Newsletter]
CBS News
03-03-2025
- Business
- CBS News
How does inflation impact credit card debt? Experts weigh in
Inflation has been steadily rising for the past few months, jumping from 2.4% last September to the 3% rate seen in January. Unfortunately, that inflation leads to rising prices — and, often, more money spent on credit cards. It can also lead to higher interest rates, too. "It can further push borrowers into a continued cycle of ongoing debt," explains Kim Chambers, credit card product manager at Georgia's Own Credit Union. If inflation keeps rising, it will undoubtedly impact credit card debt across the country. Below, we'll explain how you might see that play out (and what to do about it). Start tackling your credit card debt here today. How does inflation impact credit card debt? Rising inflation trickles down to consumers by forcing more into using credit cards and other borrowing products on everyday expenses. In fact, in the fourth quarter of 2024, when inflation started reversing course, credit card balances grew by $45 billion. "While some discretionary spending may be delayed, essential expenses like gas, groceries, and utilities can't be avoided," says Jennifer Oliver, president/CEO of Rize Credit Union. "When inflation outpaces income growth, many people turn to credit cards to cover the gap, resulting in balances creeping up month after month." The problem compounds when inflation remains high and you have to put necessary items on credit cards for an extended period of time. "It can quickly spiral out of control, creating more debt," says Cynthia Campos Delgado, a financial advisor and founder of Campos Wealth Management. "It becomes a never-ending cycle." Get help with your rising credit card debt now. Credit card rates could increase What makes inflation even worse — at least when it comes to credit cards — is that it often leads to higher interest rates as well. "Inflation doesn't just raise prices; it hikes interest rates, too," says Howard Dvorkin, chairman of "That credit card that once charged 18% interest might now be up to 22%. That's because inflation eats into the profits of credit card issuers just like it eats into your household budget." David Johnston, managing partner of Amwell Ridge Wealth Management, calls it a "perfect storm" — one where you're forced to charge more to credit cards, but also pay more in interest on top of that. "It leaves more consumers struggling to pay off their balances each month," Johnston says. "Carrying a balance accrues steep interest charges, driving up minimum payments and making it even harder to break free from the cycle of debt." Alternatives and solutions Fortunately, if inflation is hitting your household hard, you have options. For one, you can switch cards before charging that next purchase. "Research lower-interest rate credit cards," Chambers advises, "Or transfer balances to 0% offers." You can also look to alternative card issuers — like credit unions or online banks, which may offer lower rates, or explore other borrowing options. "There are better alternatives than relying on high-interest credit cards," Oliver says. "A lower-rate credit union credit card, a fixed-term signature loan, or a home equity line of credit can provide more affordable borrowing options." The best option is to use cash, though, so if you don't have a solid emergency fund saved up, start stowing away cash now just in case inflation keeps rising. Use debt relief if needed And if you do find yourself in a vicious cycle of credit card debt due to high inflation, there are ways to get out. Consulting a financial advisor or credit counselor is a good place to start, or you can seek debt relief. This includes things like debt consolidation, debt settlement, debt negotiation, and even debt forgiveness in certain circumstances. "If your personal debt starts soaring because of inflation, you need a debt professional to help you," Dvorkin says. "This isn't something you can DIY. It's akin to your physical health. If you're keeping your blood pressure in check with diet and exercise, then no need to worry. But if it jumps 50 points, you probably need a prescription to bring that back down."
