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Consolidating Your Debt – Why it’s Important and When to Consider It

by Roberta Pescow 9. September 2014

Credit Cards

Unfortunately, debt has become a way of life in the United States, with American consumers owing an overwhelming total of $11.68 trillion as of April 2014. That debt comes from multiple sources, including credit cards, mortgages and student loans. If you’re struggling to manage your multiple debt payments, you may want to consider debt consolidation.

Why debt consolidation is important

Managing debt from several sources can get complicated quickly. With so many bills due at different times of the month, even the most careful borrower may accidentally miss a payment. In addition, you may struggle to pay off multiple high-interest debts and high monthly payments.

Debt consolidation involves taking out a single loan to pay off your various debts so you only have one easy-to-manage monthly bill to pay. Ideally, you’d also lower your interest rate and monthly payments in the process. If you can reduce your interest rate and total monthly payment, you can pay off your debt more quickly and consistently, lowering the risk of additional interest charges, late fees and a damaged credit score.

When to consider debt consolidation

Debt consolidation is worth considering if it can help you eliminate debt faster or pay bills on time. Keep in mind that debt consolidation won’t make your debt disappear, so it’s important to have a regular income and stick to a budget that gives you a financial cushion to make your payments.

Consolidating your debt is also beneficial if you need to lower your monthly payments. But because that requires that you extend the term of your loan, you’ll also want to assess whether you can contribute more than the monthly minimum to ensure you don’t end up paying significantly more in interest over time.

If you have high interest rates on multiple debts, you may also benefit from loan consolidation. But before you apply, you should check your credit score. If you have a low credit score, you may not be able to lock in a low interest rate that will make your debt consolidation worthwhile.

You’ll need to have enough cash saved to offset any fees that come with your new loan agreement. Fees may include balance transfer fees, closing fees and origination fees.

It’s important to do research before settling on a debt consolidation strategy. An amortization tool is an easy way to compare scenarios with various loan terms and and interest rates. As you research your options, use the tool to figure out what works best for your situation.

How to consolidate your debt

There are many ways to consolidate your debt. The following are a few options worth considering:

Credit card balance transfers

Some credit cards allow balance transfers with 0% interest for an introductory period, usually anywhere from six to 18 months. You can expect to be charged a balance transfer fee of 1% to 5% of the amount transferred. Your card may or may not have a maximum amount allowed for balance transfers, but usually you can only transfer debt within your credit limit, and that total should include your transfer fee.

Home equity loans

Mortgage rates are holding at near historic lows, but as the economy improves, those rates will rise. That means you may not have much time to take advantage of this window of opportunity and let your home equity work for you. Be aware that home equity loans aren’t for everyone, though. You’ll need a steady income, because defaulting on your payments can lead to foreclosure on your home.

Roberta Pescow writes about personal finance, insurance and banking for NerdWallet. She previously was a home and garden writer for IdealHomeGarden.com and has articles syndicated on over 200 websites nationwide.

If you found this article useful, be sure to check out these related articles:

Using Home Equity Loans and Lines of Credit to Your Advantage

5 Actions That Hurt Your Credit Score

5 Ways to Reduce Your Credit Card Debt

Where’s the Football Going to Land Next?

by Stacy Tharp 3. September 2014

Flacco Hunt

Joe Flacco has been busy. Besides gearing up for the Ravens season, he's been throwing footballs all over Baltimore, helping us get the word out about how you can negotiate your signing bonus when you sign on with 1st Mariner Bank.

So where's the football going to land next? That's up to YOU to figure out. Between September 5th and September 12th, we will be giving out clues through Facebook, Twitter, YouTube, Instagram and our eNewsletter to let you know where Joe’s next football will land.

So what’s so special about this football? It just happens to be autographed by Joe Cool himself. It will be “landing” on Friday, September 12th at 5:30 p.m. In order to attempt to receive the ball, you must register to join the Flacco Hunt.

Once you’re registered, follow our social media pages and watch for clues. Use your noggin to put all the clues together so you can figure out where to meet us! Be at this location on Friday, September 12th at 5:30 p.m. for a chance to take home your Joe Flacco autographed football.

When you arrive at the location, if it turns out that others are as smart as you and have figured out the location as well, we will play a tiebreaker 1st Mariner trivia game. Even if you don’t come home with the football, we’ll have other great prizes and giveaways as well.

Happy hunting!

#FlaccoHunt

Start the Hunt

Economy Still Recovering from Frigid Winter

by Anirban Basu 8. August 2014

Anirban Basu

The winter of 2013/14 was brutal. Construction starts were delayed. Merchandise sat idly at ports. Consumers stayed indoors and local government budgets were hammered by snow removal costs. For roughly three months, forward economic momentum was stymied. According to the Bureau of Economic Analysis, the U.S. economy contracted at a 2.9 percent pace during the year’s initial quarter.

For a time, economists debated whether or not first quarter weakness was attributable to the weather or to economic fundamentals. We can now say with some degree of confidence that atmospheric conditions are largely to blame. Consumer spending began to trend higher as early as March. According to the Bureau of Labor Statistic’s initial estimate, the nation added 288,000 jobs in June and has now added more than 200,000 jobs for five consecutive months, the first time that’s occurred since the late-1990s. While the quality of jobs being added to the economy is generally quite poor, more Americans enjoy employment opportunities and the unemployment rate (6.1 percent) is now at its lowest level since September 2008.

That said, the first quarter was so bad from an output perspective that it has altered the forecast for 2014. As of March, the Federal Reserve’s forecast for growth was in the 2.8 to 3.0 percent rate. It has now been revised to a range of 2.1 to 2.3 percent.

A key implication pertains to interest rates. With growth continuing to remain at or below America’s long-term potential, the Federal Reserve is likely to remain accommodative. Even though its QE3 program is being wound down, investors probably don’t have to worry about increases in short-term rates until very late in 2014 or next year, though this view is certainly not universal.

A bright spot is the apparent health of capital markets. The first half of 2014 saw a record number of IPOs. While U.S. companies accounted for six of the top ten performing initial stock offerings, Europe—now recovering from its debt crisis—recorded the most IPOs of any region in absolute terms. The total value of initial public offerings was up 54 percent during the first half of 2014 compared to the same period one year prior. Life sciences companies raised more money through initial public offerings during the first half of 2014 than they did during all of last year.

America’s energy production renaissance arguably represents an even brighter spot. A recent report by the U.S. Energy Information Administration indicates that U.S. energy production met 84 percent of the nation’s demand in 2013. The fraction of U.S. energy consumption satisfied domestically has been rising since 2005, when it stood at 65 percent. Job growth remains strong in many of the nation’s energy-intensive markets, including Texas, Oklahoma, Louisiana and North Dakota. Last year’s rise in natural gas prices has even helped to support a resurgence of demand for coal.

That does not suggest, however, that it will be smooth sailing for equity investors. The run-up in stock prices has stretched P/E ratios in many industry segments. To justify those and higher valuations, corporate profits need to bounce back in the second half of 2014. Profits from current production fell from $198.3 billion during the first quarter of 2014 after rising $47.1 billion during the prior quarter. Equity prices continued to expand nonetheless. Correspondingly, the Dow Jones Industrial Average’s P/E ratio rose from 15.0 at the end of 2013 to 16.5 as of July 1st. As the market creeps higher, weak earnings reports stand to become more impactful and market performance could become less stable. If the Federal Reserve begins raising short-term interest rates sooner than expected, the need for more impressive earnings growth becomes even more urgent.

Economic Winter in Maryland

Maryland's job growth continues to underwhelm. The Free State added 22,100 jobs between May 2013 and May 2014. That translates to 0.9 percent growth, ranking 37th among all states over that period. Month by month job growth has remained incredibly inconsistent; the State lost 1,300 jobs in May after adding 10,600 jobs in April. While weather was a convenient scapegoat for the subpar job growth in the first quarter, recent data reflect a lingering malaise.

To the extent that there has been job growth in Maryland, it has been primarily in the Baltimore metropolitan area. Suburban Maryland has been hammered by sequestration and most rural Maryland economies continue to underperform by both national and statewide standards. Development momentum, meanwhile, has been building in the Baltimore area, including in hotspots like Baltimore’s waterfront, Owings Mills, Towson and Columbia.

The housing market, while slightly improved, continues to be at least partially responsible for Maryland’s lackluster performance. One in every 621 housing units in Maryland reported a foreclosure filing in May. That translates to 0.16 percent of total units being foreclosed, exactly double the national average according to RealtyTrac data. Home sales in Maryland were up 17 percent on a month-to-month basis in April, but are down 12 percent compared to one year ago.

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, Maryland. Basu is one of the Mid-Atlantic region's most recognizable economists, in part because of his consulting work on behalf of numerous clients, including prominent developers, bankers, brokerage houses, energy suppliers and law firms. On behalf of government agencies and non-profit organizations, Basu has written several high-profile economic development strategies, including co-authoring Baltimore City's economic growth strategy. His opinions do not necessarily reflect the opinions and beliefs of 1st Mariner Bank.



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