Some homeowners are so riddled with debt that they have trouble sleeping at night. And only a third are taking a strategic approach to corralling their finances, according to a new study.
The survey from AmeriSave Mortgage found that owners' debt burden — not just from their mortgages but also car loans, student loans, medical expenses and credit card balances — is stretching household budgets thin.
One in four of the 1,250 owners queried reported feeling stressed about their monthly bills, and one in 10 are completely overwhelmed. Their largest source of strain is their credit cards. About one in three carried balances of $1,000 or more.
While roughly one in four carry relatively low balances of less than $1,000, one in 10 owes more than $15,000, an amount that can be overwhelming for any family.
Mortgages were named by slightly more than half the respondents as a key source of financial strain.
But the survey found an encouraging sign: Some owners are not backing down from their financial situations. Indeed, nearly half of the survey respondents said they aim to be completely debt free.
Just over half said they are prioritizing their bills, paying off the cards with the highest interest rates. That, AmeriSave pollsters said, suggests a high degree of financial literacy. Still others, about three in 10, are paying off their lower-rate cards first and working their way up.
At the same time, though, nearly one in 12 feel trapped by rising expenses, forcing them to take on more credit, not less. And one in 10 have essentially given up with tackling their monthly costs, admitting to pollsters they are not taking any steps because they feel overwhelmed or are not sure where to start.
Shockingly, less than one in 20 owners have used their home’s equity to consolidate their debt. While home equity loans and lines of credit can be an effective financial tool, one in three owners don’t even understand how to use them. Worse, perhaps, about the same number said nothing would motivate them to use their home’s equity for debt consolidation.
Home equity is not a magic elixir, AmeriSave points out. “Like any financial tool, you must use it strategically.” But the hesitancy to even consider using equity to help trim debt suggests that “misconceptions, fear of borrowing, or a lack of financial guidance may be holding homeowners back from an opportunity to simplify their finances.”
Overall, success with trimming debt loads isn’t just about having options, however. It’s about choosing the right strategy and sticking with it. When steps like borrowing against equity aren’t paired with a solid, long-term financial plan, things can go haywire, as one respondent reported.
“We paid off all our credit cards with a HELOC, then put money back on the credit cards and now have both the credit cards and the HELOC to pay off,” this person said.
