If you have a debt in the range of $50,000 to $100,000, you’re in good company.
But there’s one area of concern that might be less apparent to lenders and consumers: The amount of cash you can borrow.
According to Bankrate.com, personal loans can be a real drag on your credit score.
And while lenders and credit card companies are increasingly using a credit score as an indicator of creditworthiness, that may not be a good thing for many.
“There’s a very real risk that you’re going to default on your personal loans because you don’t have the proper credit history,” said Sarah Ritchie, president and CEO of the National Consumer Law Center.
“That can be very costly for a family.”
Ritchie said she’s heard from many consumers who have been left without the funds to pay bills and keep their home on a tight financial leash.
Ritchie says consumers can’t rely on the banks to make sure they have good credit histories, but if they have a bad credit score, they may have difficulty finding a lender.
“The problem is that banks don’t want to get into the personal loans space,” she said.
While the federal government has been making it easier for people to refinance their loans, many states and local governments have been limiting how much they can take out.
While that may sound reasonable, the financial implications for lenders and borrowers are also significant.
For one, if you’re already in a good credit position, you may not have enough money to repay your loans in a timely manner.
You also might not have a good way to repay any of your loans that are already paid off.
“I’ve had borrowers that don’t make payments for months or years because they don’t understand what they’re going into, and they just need to pay it off,” Ritchie said.
“It’s really hard to get people to understand how difficult it is to pay back the money that’s already been lent.”
Risk of defaultThe amount of time it takes for your credit to improve is another factor that could affect your chances of defaulting on your debt.
According to the Federal Reserve Bank of New York, the average loan is worth roughly $20,000 per month, and if you default on a $100 debt, you could be looking at a total of $180,000.
If you’re a borrower with a credit history, that means that if you have debt of $100 to $150,000 and you default, you’d have to pay $300,000 in interest, according to the National Association of Realtors.
“A $100 loan is very easy to pay off,” said Ritchie.
“But you could have a $150 loan and you’d still have to wait about two years for the money to come in.”
Lenders often don’t keep track of how much cash you have available, so it’s impossible to know exactly how much money you have in your checking account.
It’s also important to keep in mind that if your debt is in the $150-200,000 range, you can’t take out a personal loan.
The good news is that it’s relatively easy to get money into your checking accounts, especially if you can show that you have adequate credit.
According the National Credit Union Administration, more than two-thirds of borrowers who apply for credit have at least $200, and more than a third have $250,000 or more in their checking accounts.
But if you fall short, Ritchie warns that it could have an even greater impact on your ability to refloat your debt and your ability.
“That could cause you to lose your ability and ability to take on a personal mortgage,” she added.
“This could potentially make it very difficult for you to refinancing, especially because you can only refinance with a fixed monthly payment.”
While you may be able to refactor your debt to a smaller amount of debt, Riggs said that the risk is greater.
“When you refinance, you’ll need to have a very specific plan to ensure that the balance of your loan is not affected, that you can maintain a good debt-to-income ratio, and that you don.t owe any other creditors,” she explained.
“You’re going out and making a decision that could lead to a financial catastrophe, and I’m not willing to let that happen.”
You may also want to take a look at what your options are in the mortgage lending industry.
According with Zillow, the median income for homebuyers in the U.S. is $57,000 a year.
While this may not sound like a lot of money to many, Riggins said the mortgage market is a relatively safe bet for many people.
“Mortgage rates are very low,” she noted.
“So, if it’s a $50-a-month mortgage,