Can Debt Relief Programs Help California Residents?

John Hsu
Expert Contributor
Last Updated:
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  • Similar to residents of other states, Californians carry significant amounts of debt.
  • While its average credit card debt is close to the national average, California has a higher average mortgage debt than any other state.
  • California has one of the strongest consumer protection frameworks in the country.

California is often depicted in the media as a vibrant, affluent, and glamorous place. However, many people are unaware that The Golden State has a grim debt problem, just like the rest of the country. You may be surprised by the overwhelming amount of debt the average person in the state carries around. Discover the truth about consumer debt in California.

Overview of California’s Economy

As a whole, California has been experiencing strong economic growth over the past decade or so. During the recession, its unemployment rate climbed to more than 12 percent. Numerous homes were foreclosed as many residents were unable to make their mortgage payments. The dire economic situation also caused some people to rack up debt in an effort to make ends meet.

Currently, the outlook for California’s economy is much better than before. Nonetheless, many residents have yet to see a substantial improvement in their personal finances. Some of them are simply unable to bounce back financially and continue to struggle to keep up with their debt payments. The need for debt relief programs and credit counseling is still acute.

Credit Card Debt in California

The average credit card debt in California is roughly the same as the national average. On average, Californians carry slightly more than $5,000 worth of credit card debt. Many of them accumulate credit card debts as a way to cover their living expenses. This isn’t surprising at all, considering the state has a comparatively high cost of living.

Can Debt Relief Programs Help California Residents?

San Francisco has the highest average credit card debt because it’s one of the most expensive cities in the country. Its residents have an average of over $7,000 worth of credit card debt. San Diego, on the other hand, has an average credit card debt of $4,673, which is significantly lower than the national average.

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Mortgages

Besides credit card debt, people in California carry a variety of other types of debt, with the largest being mortgages. The average mortgage debt in the state is $334,925, which is the highest in the country. In comparison, the national average is only $192,749. Home prices in California are higher than those in most other states, and they’re expected to keep rising in many parts of the state.

Auto Loans

California’s auto loan debt is almost on par with the national average. Its average auto loan balance is $18,324, while its delinquency rate on auto loans is 0.82 percent. Nationwide, the average car loan balance is $18,177, and the delinquency rate is 1.11 percent.

Student Loans

California is home to some of the finest universities and colleges in the United States. These institutions supply talent to Silicon Valley and other places that are at the forefront of technological innovation. Therefore, the average cost of higher education in the state is high.

Surprisingly, California has a lower average student loan debt than most other states. One of the main reasons for this is the wide availability of state funding programs. Additionally, Californian college graduates generally get higher-paying jobs than their counterparts in many other states. As such, they’re able to pay off their student loans more quickly.

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In California, the average student loan balance amounts to $22,744. The national average, on the other hand, stands at about $38,000.

Consumer Protection in California

Protection for Credit Card Holders

While they may take it for granted, Californians have the protection of some of the most favorable credit card regulations in the United States. For instance, they can refuse to make a payment for a credit card bill if they’re able to prove there’s a billing error. If they have already paid the bill, they can claim the billing error and get a refund.

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Statute of Limitations

Similar to other states, California has a statute of limitations to impose a time limit for the collection of unsecured debts. The time limit is four years for all kinds of debts, except those incurred through oral contracts. The statute of limitations for oral contracts is two years. In other words, if your credit card debt is more than four years old, your creditor doesn’t have the legal right to collect payment from you.

California’s four-year statute of limitations is one of the shortest in the country. While several states have a shorter time limit, some states allow lenders to collect debts that are up to 15 years old.

California/Rosenthal Fair Debt Collection Practices Act

California also has laws to prevent debt collectors from misleading and harassing debtors. Its California/Rosenthal Fair Debt Collection Practices Act is similar to the federal Fair Debt Collection Practices Act in many ways. However, unlike the federal law, which only applies to hired debt collectors, California’s law applies to any party attempting to collect debts, including the original creditors.

Credit Scores in California

Californians have some of the highest credit scores in the country. With an average score of 661, they rank in the top third of all states. Nonetheless, their creditworthiness is slightly lower than the national average of 669.

Credit scores in the state vary from one city to another. The area around Riverside in Southern California has an average credit score of only 624, which is the third lowest among metropolitan areas in the country. With overall better credit scores, Californian residents have the following advantages over the average American:

  • More easily obtainable loans
  • Higher loan amounts
  • Better loan rates

If you’re one of the many people who have accumulated debt in California, you should take advantage of the many debt relief programs available in the states. With the right debt management strategies and enough discipline, you’ll have a better chance of achieving financial freedom.

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What do you think of the debt situation in California? Let us know in the comments section.

 

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John Hsu
Expert Contributor
Last Updated: