67% of people in debt will not refinance or consolidate – is that wise in today’s economy?

Fertnig/Getty Images

With interest rates set to rise this year as part of the Federal Reserve’s plan to curb inflation, now is a good time for consumers to refinance or consolidate debt to lock in current low rates. Yet the vast majority of people in debt aren’t considering these options, according to a new survey by DA Davidson.

Learn: 6 Painless Ways to Reduce Your Debt
Debt and Mental Health: The Hidden Ways You Ow Money Affect Your Life

The survey of 1,041 American adults, conducted in January and released last week, found that two-thirds (67%) of those in debt do not plan to refinance or consolidate in the next year, which means they could miss a chance to save. money with lower rates.

Despite this statistic, nearly three-quarters of respondents (72%) said they “fully understand” the impact rising rates and inflation can have on their personal finances. This percentage increases as people age: 79% of Baby Boomers believe they fully understand the impact, followed by Gen X (70%), Millennials (69%) and Gen Z ( 62%).

Andrew Crowell, vice president of Wealth Management at DA Davidson, said while the survey results were “surprising” – particularly the percentage of respondents with no intention of refinancing or consolidating debt – he also noted that the percentage is lower for those who work with a financial advisor.

“We learned that half of borrowers who work with a financial advisor are [considering refinancing or consolidating]”Crowell said in an email to GOBankingRates. “This underscores the importance of working with a financial advisor and having conversations about your complete financial situation.

DA Davidson’s survey did not dig into the reasons why more Americans are not considering consolidating or refinancing their debts. However, Crowell found in “anecdotal conversations” with borrowers that some might simply avoid doing so because it reminds them of their debt.

“As humans, we’re hardwired to avoid pain, so we tend to focus on the things that bring us happiness and joy rather than worry and worry,” he said. . “Another possibility is that these borrowers just don’t know how to go about consolidating/refinancing. Lenders make it easier to get credit, but consolidation and refinancing are less transparent. I encourage borrowers to research online or seek help from a financial advisor to learn about their options.

Another potential problem is lack of knowledge about loan terms.

“Often consumers don’t even know if the interest rates they’re paying are fixed or adjustable,” Crowell said. “Fixed rates remain unchanged for the duration of the loan while adjustable rates are subject to change. Individuals also might not know how quickly they would see a rise in their personal interest rates — and what that would mean for them on a monthly basis — after the Federal Reserve raised interest rates.

Read: 10 ways to bounce back from spending a month on your credit card
See: What not to do when trying to get out of debt

This is another area where financial advisers can be helpful, he added, by educating clients about impending interest rate hikes and offering advice on various consolidation and refinancing options.

More from GOBankingRates

About the Author

Vance Cariaga is a London-based writer, editor and journalist who has previously held positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal, and Business North Carolina magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has earned him awards from the North Carolina Press Association, Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A North Carolina native who also writes fiction, Vance’s short story “Saint Christopher” placed second in the 2019 Writer’s Digest short story competition. Two of her short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. Her first novel, Voodoo Hideaway, is published in 2021 by Atmosphere Press.

About Joan Ferguson

Check Also

Paying Off Credit Card Debt With Help From Student Loan Forgiveness

I was a senior in high school and preparing to attend the University of Texas …