67% of Those in Debt Won’t Refinance or Consolidate — Is That Wise in Today’s Economy?

A young man sitting at home stressed by his mounting debts.
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With interest rates poised to move higher this year as part of the Federal Reserve’s plan to slow inflation, it’s a good time for consumers to refinance or consolidate their debt to lock in current low rates. Yet the vast majority of those in debt aren’t considering these options, according to a new survey from D.A. Davidson.

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The survey of 1,041 U.S. adults, conducted in January and released last week, found that two-thirds (67%) of people with debt are not planning to refinance or consolidate in the next year, meaning they could miss out on a chance to save money with lower rates.

Despite that statistic, nearly three-quarters of respondents (72%) said they “fully understand” the impact that rising rates and inflation can have on their personal finances. That percentage rises as people get older: 79% of baby boomers feel they fully understand the impact, followed by Gen X (70%), millennials (69%) and Gen Z (62%).

Andrew Crowell, vice chairman of Wealth Management at D.A. Davidson, said that while the survey results were “surprising” — especially the percentage of respondents with no plans to refinance or consolidate their debt — he also noted that the percentage is lower for those who work with a financial advisor.

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“We learned that half of those 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 full financial picture.”

The D.A. Davidson survey didn’t delve into the reasons why more Americans aren’t considering debt consolidation or refinance. Crowell found in “anecdotal conversations” with borrowers, however, that some might simply avoid doing so because it reminds them of their debt loads.

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

Another potential problem is a lack of awareness about loan terms.

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“Often consumers are not even aware whether the interest rates they are paying are fixed or adjustable,” Crowell said. “Fixed rates remain unchanged throughout the life of the loan while adjustable rates are subject to change. Individuals also might not know how quickly they would see an increase in their personal interest rates — and what that would mean for them on a monthly basis — after the Federal Reserve raises interest rates.”

Read: 10 Ways To Bounce Back From a Heavy Spending Month on Your Credit Card
See: What Not To Do While Trying To Get Out of Debt

This is another area where financial consultants can come in handy, he added, by educating clients on looming interest rate hikes and offering advice on various consolidation and refinancing options.

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About the Author

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