California Debt Relief and Debt Consolidation Resources

June 27, 2022

Updated: June 30, 2022 

Key Takeaways:

  • Californians owe an average of $3,300 in credit card debt, slightly higher than the national average.

  • Auto and student loan debt, however, is lower than the national average. 

  • California debt relief or debt consolidation resources can help you reduce your debt and save money.

California is an expensive place to live. It’s not hard to find yourself slipping deeper and deeper into debt, especially if you’ve had some kind of financial setback. Based on Freedom Debt Relief’s May 2022 Credit Card Utilization Data, the average credit card utilization of people looking for debt relief in California is 76%. By comparison, per Experian, the average credit card utilization in the US in 2021 was 25%. High credit card utilization, in general, implies a greater likelihood of needing debt relief services. Fortunately, help is available for California residents who want to break the cycle of debt.

This article will cover two types of help you can get: debt relief and debt consolidation. It will explain the pros and cons of each, how to tell whether one of these might be a good option for you, and how to get the help you need. 

The goal is to guide people toward getting the right kind of help so they can take control of their finances.

Here’s what this article will cover:

  • Debt and debt statistics in California

  • Why debt is getting tougher to handle

  • Debt relief and debt consolidation options in California

  • Signs that you might need debt relief or debt consolidation

  • What kinds of debt might be eligible

  • Testimonial - debt relief in California

  • Avoid debt consolidation and debt relief scams in California

  • Hardship help: Government and non-profit debt relief help in California

  • Freedom Debt Relief in California

  • California Debt Relief and Debt Consolidation FAQs

Debt and Debt Statistics in California

There are good reasons many California residents need help handling their debts. The average household in the state has over $20,000 more debt than the average U.S. household. Credit card delinquency rates in California are also running ahead of the national average.

How debt in California stacks up

The charts below detail how the debt situation in California compares to national averages. 

All the data shown is from the following source: State Level Household Debt Statistics 2003-2021, Federal Reserve Bank of New York, February 2022.  Consumer Debt Levels: California vs. the U.S. (Household averages as of 12/31/2021)

Type of DebtCaliforniaUnited States
Total$78,320$55,480
Mortgage$62,840$38,830
Auto Loan$4,940$5,210
Student Loan$4,710$5,640
Credit Card$3,330$3,060

The data in the above chart shows that Californians carry significantly more household debt than the national average. This is driven primarily by a higher level of mortgage debt, though credit card debt is also higher than the U.S. average.

Despite their higher overall debt levels, Californians are doing a better than average job of keeping up with most of their payments.

Delinquency rates measure the percentage of payments that are more than 90 days late. The higher the delinquency rate, the more payments are late. 

The chart below shows that Californians have lower delinquency rates than the national averages for mortgage, auto loan, and student loan debt. However, California has a higher delinquency rate for credit card debt.

Signs of Debt Trouble: Consumer Payment Delinquencies (Percent of Payments 90+ Days Late)

Type of DebtCaliforniaUnited States
Mortgage0.24%0.42%
Auto Loan3.83%4.04%
Student Loan4.36%5.00%
Credit Card9.07%8.22%
Credit Card$3,330$3,060

Credit card debt is a particular area of concern for Californians

California’s higher delinquency rate for credit card debt is concerning for a few reasons:

  1. Late credit card payments are often the first sign of financial trouble. Unlike mortgage and auto loan debt, credit card debt is unsecured. That means there is no collateral to guarantee payment. When people have trouble making all their payments, they’ll often miss their credit card payments first. That’s preferable to risking having their home foreclosed or car repossessed.

  2. Credit card interest rates are much higher than auto loan or mortgage rates. That makes this an especially expensive form of debt, and if people are missing payments, they’ll add to that expense with late fees.

  3. Credit cards are especially sensitive to rising interest rates. Student loans, auto loans, and mortgages all usually have fixed interest rates. Because credit card interest rates are usually variable, that debt is quicker to feel the cost of rising interest rates. With rates rising this year, more households could have trouble keeping up with their credit card payments. 

Those characteristics can make credit card debt hard to handle no matter where you live, but they threaten to be an especially big problem for people in California. 

As you can see by the graph below, while credit card delinquencies in California eased a little last year, they are still above their pre-pandemic levels:

Credit card delinquencies in California
Credit card delinquencies in California eased a little last year, they are still above their pre-pandemic levels:

Those delinquencies are an especially big problem because households in California generally carry more credit card debt. The charts below show that California has both more credit card debt and higher delinquency rates than the national average:

California Credit Card Debt
California has both more credit card debt than the national average:
California Creit Card Delinquency Rates
California has a higher delinquency rate than the national average:

Financial conditions in California contribute to debt problems

Why are Californians having so much trouble with debt?

A major reason is simply that California is a very expensive place to live. Among the 50 states, only Hawaii has higher median rents or home prices than California.  

On top of the high cost of living, it doesn’t help that unemployment in the state is higher than the national average. According to the Bureau of Labor Statistics, as of April 2022, California had an unemployment rate of 4.6%, compared with a national average of 3.6%.

Why California Debt Is Getting Tougher to Handle

If it seems like California’s high cost of living has been getting even tougher to handle lately, you aren’t imagining things. 

While inflation had been very tame for over a decade, last year the inflation rate took a sharp upward turn. This trend continued in 2022. 

The pattern is similar with interest rates. After several years of low and stable interest rates, they’ve been rising rapidly. 

If you add up these trends, it means not only are prices of goods and services getting higher – if you borrow to pay for those things your borrowing costs are also getting more expensive.

Debt Consolidation and Debt Relief Options in California

With making ends meet becoming more challenging, this is a good time to understand some options that can help you deal with debt. This article will focus on two of those options: debt consolidation and debt relief. 

What is California debt consolidation?

One option Californians can consider to manage their debt payments is debt consolidation. Debt consolidation can both lower your payments and make it easier to organize those payments.

Debt consolidation means combining multiple debts into one. This involves borrowing money from one source and using that money to pay off other debts.

Combining multiple payments into one can make it easier to keep track of what you owe and when payments are due. An even bigger benefit of debt consolidation comes if you can lower your interest rate in the process. 

The key is to find a new source of credit with a lower interest rate than your existing debt. For example, since personal loans generally have lower rates than credit cards, a personal loan can consolidate credit card debt and lower the interest rate.

You can also use zero-interest credit cards to consolidate other credit card debt. However, the 0% rate on these cards is temporary. That means they are most effective if you can pay off your consolidated debt before that 0% rate runs out.

What is California debt relief?

If your debt has gotten to the point where there is just no way you can pay it all, you may have to consider debt relief.

Debt relief means that a debt relief firm negotiates with your creditors to reduce the amount you owe. (You can also negotiate on your own behalf if you’re comfortable doing so.) If it’s clear that you won’t be able to pay the full amount of your debt, a creditor might be willing to accept less to avoid a long collection process that isn’t likely to succeed.

Firms that specialize in debt relief understand how creditors work and know how to make the best case for reducing the amount you owe. 

As they say, there’s no such thing as a free lunch. Debt relief can reduce the amount you owe, but that’s likely to hurt your credit score. Missed payments and reduced or forgiven debts stay on your credit record for up to seven years. 

However, if you’ve reached the point of needing debt relief, your credit score is probably already damaged. In that case, you’ll need to rebuild your credit over time. Starting out with a reduced amount of debt can help you eventually succeed in doing that.

Debt consolidation vs. debt relief in California

Here’s a comparison of what debt consolidation and debt relief may do:

Potential ImpactDebt ConsolidationDebt Relief
Reduce monthly paymentsYesYes
Reduce interest expenseYesYes
Reduce the amount you oweNoYes
May significantly hurt your credit scoreNot usuallyYes

Signs that You Might Need Debt Relief or Debt Consolidation

Struggling to make ends meet from week-to-week and regularly missing payment deadlines can seem like an endless battle. If that’s the situation you’re in, it may be time to do something to break the cycle. 

Here are some signs that it might be time for you to try debt consolidation or debt relief:

  • You’ve tried, but can’t come up with a budget that allows you to make all your minimum payments on time.

  • You haven’t been able to negotiate more affordable payment terms from your creditors.

  • Creditors or collection agencies are regularly after you for payments.

  • Your credit score has plunged because of missed payments.

  • Late payment penalties are adding to your debt costs.

  • You have lots of high-interest debt like credit card debt.

  • You have variable-rate debt that’s getting more expensive.

These are examples of problems that aren’t just going to go away by themselves. If any or all of the above describe what you’re experiencing, it may be time to try something different. Debt consolidation or debt relief may be the answer. 

What Kinds of Debt Can You Consolidate or Settle?

What kind of debts might you be able to handle with debt consolidation or debt relief?

In general, unsecured debt like credit card debt gives you the best chance of debt relief. Since secured debt is backed by collateral, creditors have less incentive to reduce your debt rather than simply repossess your home, car, or another asset.

Unsecured debt also typically has higher interest rates than secured debt, so it brings greater potential savings through debt consolidation. 

Besides credit card debt, unsecured personal loans, medical debts, and department store credit lines are debts that might be eligible for debt consolidation or debt relief.

Debt relief services can’t generally help with federal student loan debt, mortgages, auto loans, utility bills, taxes, or legal judgments. However, if you are able to get relief on just some of your debts, you might find these others easier to pay. 

Testimonial - Debt Relief in California

If you want a real-life example of how debt relief can work, check out this short video for a personal testimonial from a California resident.

Avoid Debt Consolidation and Debt Relief Scams in California

Unfortunately, people who are under financial stress are often targets for scams offering easy answers to their problems. Here are some tips for avoiding debt consolidation and debt relief scams:

  • Be wary of anyone who cold calls your phone or sends an out-of-the-blue solicitation about these programs. You are better off researching a debt relief firm first and reaching out to them yourself.

  • Never allow anyone to pressure you into giving out sensitive personal or financial information until you have verified that they represent a legitimate organization.

  • Don’t pay for any debt relief service upfront. It is illegal to charge for this kind of service before the work is done.

  • Avoid any firm that isn’t transparent about its fees. 

  • Don’t work with a firm that guarantees to “stop all collection calls” or settle your debt for “pennies on the dollar.” Creditors are not required to participate in debt settlement, so no one can make that promise.

California’s Department of Financial Protection and Innovation is a good source if you have questions about a possible scam or want information about a debt relief provider. 

Hardship Help: Government and Non-Profit Debt Relief Help in California

Besides debt consolidation and debt relief, there are other forms of financial help for Californians who are struggling. Here are some examples:

  • Food stamps. Besides the federal food stamp program, the California Food Assistance Program offers state-funded food stamps for certain non-citizens who don’t qualify for federal food stamps. 

  • Housing assistance. The high cost of housing in California has contributed to a serious homelessness problem in the state. To fight this, the state’s Department of Social Services offers a variety of housing programs. These can provide everything from temporary shelter to financial assistance.

  • Charitable aid and loans. Most people need some kind of assistance every now and then. In addition to local charitable organizations and food banks, on a statewide level, the California Department of Housing and Community Development can provide financial assistance and advice. Their grant and loan programs can help you afford your rent or find a pathway to home ownership. 

  • Legal help. If you need legal help because of your financial situation, the last thing you want is expensive legal bills adding to your troubles. The State Bar of California might be able to help you out. They fund a variety of legal aid organizations throughout the state that provide legal services to people with low or moderate incomes. 

Freedom Debt Relief in California

If debt relief seems like the best solution for your situation, consider the services that Freedom Debt Relief provides. 

At no upfront cost to you, Freedom Debt Relief can significantly reduce what you owe. They can tailor a debt payment program to fit your budget and put you on track to be debt-free in as little as 24 to 48 months.

To find out more, you can get a free debt evaluation on Freedom Debt Relief’s website. This will help you learn how their program can help with your situation.

Whatever you decide, take action to get control of your debt situation. The economic environment is getting tougher for borrowers, and debt problems get worse the longer they are neglected. 

California Debt Relief and Debt Consolidation FAQs

Will debt relief save me money?

That’s the whole idea. The goal is to negotiate settlements that allow you to pay your creditors less than the full amount that you owe. A legitimate debt relief program should not require you to pay anything until it has been able to negotiate debt reductions on your behalf.

What kind of loans can I use to consolidate debts?

The goal is to find loans that have lower interest rates than your current debts. Personal loans, zero-interest credit cards, and home equity financing are all examples of tools you can use to consolidate your debts. 

How will debt relief affect my credit score?

If you miss payments to your creditors or any portion of your debt is forgiven, it usually appears on your credit report for seven years. This is likely to lower your credit score at first. However, it can also help rebuild your credit once unmanageable debt problems go away.

End Your Debt

Find out how our program could help.

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    One low monthly program deposit
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    Settlements for less than owed
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    Debt could be resolved in 24-48 months